The Cost Performance Index (CPI) is an important tool used by businesses to measure their overall cost performance. It measures the efficiency with which costs are converted into output, allowing a company to assess its past performance in order to accurately predict future results. In essence, CPI is a ratio – it compares the total costs incurred in producing a product or service to the planned budget for that project. By calculating the index of a specific project, businesses can gain an understanding of how well they are managing expenses on a project-by-project basis. With this information, they can make better decisions about how to allocate resources and manage expenses more efficiently in the future.