12/15/2023 0 Comments Project costing management![]() ![]() The cost should be directly linked with WBS and objective of the SME should be to minimize the cost certainly not at the expense of Scope, Time and Quality. To estimate costs, you must consider the project schedule to see which activities require what resources. While estimating cost, it’s important to know whether you are estimating the direct project costs or indirect costs. It’s a prediction of how much activity will cost upon accomplishment given the information. The key benefit of the process is that it determines the amount of money required to complete project work. The Estimate Costs refer to establishing an approximate monetary value to each project activity. This knowledge area in no way deals with pricing, something a buyer/supplier/contractor charges to customer for the services, material or time procured. It establishes the units of measure, level of precision and accuracy, control thresholds, reporting formats, organizational procedures links, and rules of performance measurement. The plan describes how project costs are prearranged, assessed, and controlled. This is the component of the Project Management Plan that shows how cost management processes should be carried out. The process provides guidance on how costs are managed from project beginning to closure. The Plan Cost Management creates the framework, strategies, and procedures for how to estimate, manage and control costs. Project Cost Management Processes Plan Cost Management (Planning) Project Manager or Project Management teams basic responsibility is to complete the project within a specific time and approved budget and this where this knowledge area plays a vital role. While working on cost, we need to review cost in multiple ways Fixed vs Variable, Direct vs Indirect, Depreciations, Sunk Cost and etc. The process includes scheduling, estimating, budgeting, sponsoring, funding, handling, and monitoring costs so the project can be successfully completed within the approved budget. It cannot happen in isolation – the project manager needs input from the project team and key stakeholders. This knowledge area is related to the management of the expenses and the budget of the project. There are multiple activities involve in a project that requires a budget to be allocated. All activities require a budget to be allocated to purchase tools, materials, and to cover human resource cost. The Cost Management is among the most crucial project management knowledge areas and strongly connected with the Project Schedule Management as we will be using the same estimation techniques we have used there to estimate the cost and eventually budget.Ĭost management should happen as early as possible in the project as it sets the policies for may other areas which deals with the costing on the project. ![]()
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