Which index indicates whether a project is over or under budget based on the earned value?

The Cost Performance Index (CPI) is a critical metric in project management that measures the cost efficiency of a project. It is calculated by dividing the earned value (EV) by the actual cost (AC). Essentially, it provides insights into how much value is being generated for every dollar spent.

When the CPI is greater than 1, it indicates that the project is under budget, meaning the earned value exceeds the actual costs. Conversely, a CPI of less than 1 indicates that the project is over budget, as the actual costs are exceeding the earned value.

Using CPI allows project managers to assess the financial health of a project in real-time, making it an essential tool for identifying and addressing budget-related issues promptly. This focus on cost performance is crucial for maintaining control over project expenditures, and it directly informs decision-making regarding resource allocation, modifications to project scope, or adjustments in timelines.

In contrast, other indices such as the Schedule Performance Index (SPI) focus on schedule adherence, the To Complete Performance Index (TCPI) evaluates the cost performance required to complete the project within budget, and Estimate at Completion (EAC) provides a forecast of total project costs based on current performance metrics. While each of these indices provides valuable insights, it is