TOPIC: Formulas...need help with TCPI

Hello,

Here is the question from PMP Exam Prep app:

You're managing a construction project to install several hundred air conditioner panels in a new office building. You have completed 350 panels out of a total 900 panels, but according to your schedule you should have completed 400 of them. Your company's contract states that you'll be paid a fixed price of $75 per panel. You've spent $45,000 so far on the project. Which of the following BEST describes your situation?

a) The CPI is .813, which means your project is currently over your budget
b) the CV is -$4,350, which means your project is currently over your budget
c) the TCPI is 1.833, which is the minimum CPI you need to stay within budget
d) the SPI is .84, which means your project is behind schedule

C is considered to be a correct answer. But why? And how it is possible to calculate TCPI based on the information provided? And why 1.833 is the minimum CPI you need...? Pls advise!

Hi Tatiana,
The formula for CPI is
CPI = Earned Value / Actual Cost
Earned Value = Completed Panels * Fixed Price per panel
Earned Value = 350 * 75 = $26,250
Actual Cost = $45,000
CPI = 26250 / 45000 = 0.583

So this eliminates the first option (a).
Similarly, you would realise that we can also eliminate option (b) by calculation.
Now coming to option (c)
The formula for TCPI is
TCPI = Work Remaining / Funds Remaining
Work Remaining = Total Work - Work Done
Work Remaining = Total Panels - Completed Panels
Work Remaining = 900 - 350
Work Remaining = 550 panels
Work Remaining in $ terms = 550 * 75 = $41,250

Funds Remaining = Total Funds - Already Spent
Funds Remaining = (900*75) - 45000
Funds Remaining = 67500 - 45000
Funds Remaining = $22,500

Therefore TCPI = 41250 / 22500
TCPI = 1.833

TCPI basically means projecting what cost performance project needs to achieve in order to active the budget targets. In other words, what should be our projected CPI to ensure that the project work is completed within the original budget (which in this case is 900 * 75 = $67,500)

Hope this helps.

Thank you Rahul for the detailed explanation! That helps:)