What is the Cost Performance Index and what does it tell you?

The Cost Performance Index, or CPI, measures cost efficiency by dividing Earned Value by Actual Cost. CPI equals EV divided by AC. A CPI of 1.0 means the project is exactly on budget. A CPI greater than 1.0 means the project is under budget, getting more value for each dollar spent. A CPI less than 1.0 means the project is over budget, spending more than planned for the work accomplished. For example, a CPI of 0.9 means the project is getting only 90 cents of value for every dollar spent.