Question

Given a project with the following characteristics, answer the following questions:

You are the project manager of a project to upgrade the generators at cell phone towers.
Your project is scheduled to last for 12 months.
It is the beginning of month 4.
Your crews are to upgrade 8 cell phone towers per month for 12 months.
Each generator is planned to cost $40,000 which includes equipment, labor, and fueling costs.
You have upgraded 30 cell phone towers and your CPI is 0.96.

Using the project’s budget at completion, what is the project’s TCPI?

a. .5
b. 1
c. 1.5
d. 1.02

What is your reasoning? ________________________________________________________

Answer 1

solution:-

BAC(Budget at completion)= (8 towers per month * 12 * 40000)

BAC= 3,840,000

Estimate to complete= (BAC/CPI)-AC where AC(Actual cost)

ETC= (3,840,000/.96)-1,250,000= 2,750,000

Estimated cost at completion = cost incurred so far+ cost to be incurred

CPI = EV / AC where EV(Earned value)

EV = 30 x40000 =1200000

AC = EV / CPI = 1200000 /0.96 =1250000

TCPI = (BAC – EV) ÷ (BAC – AC)

TCPI = (3840000 – 1200000) ÷ (3840000 – 1250000)

TCIP(To Complete Performance Index) = 1.019 or 1.02

So option D is correct.

The cost performance index (CPI) : is a ratio that measures the financial effectiveness of a project by dividing the budgeted cost of work performed by the actual cost of work performed. If the result is more than 1, as in 1.25, then the project is under budget, which is the best result. A CPI of 1 means the project is on budget, which is also a good result. A CPI of less than 1 means the project is over budget. This represents a risk in that the project may run out of money before it is completed.

Hence, as the CPI is 0.96 which is lower than 1 indicates project is ‘Over budget