Types of Cost in Projects


Ricardo Viana Vargas, MSc, IPMA-B, PMP
ricardo.vargas@macrosolutions.com.br

                 ...
Ricardo Viana Vargas, MSc, IPMA-B, PMP
Ricardo Viana Vargas is a project, portfolio and risk management specialist. During...
Cost

       Cost can be described as

   • Direct and Indirect
   • Variable, Fixed and Semi-variable
   • Recurring and ...
Direct Costs



 Can be traced back             Are specifically               Include materials,
  to a product and      ...
Direct Costs - Examples


   Direct                                                         Direct work
                  ...
Indirect Costs



                                              Costs not directly related to
  Not directly identifiable
...
Variable Costs



   Vary as changes in the                         Can or cannot be
      production are                 ...
Fixed Costs

 Remain constant in the total, independently of the
 amount of work performed

 Remain the same even when the...
Recurring and non-recurring Costs

    Recurring Costs

    • Repetitive, directs or indirects, which vary
      depending...
Visit
   www.ricardo-vargas.com
to access other presentations,
podcasts, videos and technical
content about project , risk...
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Types of Cost in Projects

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In this presentation, Ricardo explains the types of costs that can be used in a project, and illustrates them.

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Types of Cost in Projects

  1. 1. Types of Cost in Projects Ricardo Viana Vargas, MSc, IPMA-B, PMP ricardo.vargas@macrosolutions.com.br © BY RICARDO VIANA VARGAS. TODOS OS DIREITOS RESERVADOS
  2. 2. Ricardo Viana Vargas, MSc, IPMA-B, PMP Ricardo Viana Vargas is a project, portfolio and risk management specialist. During the past 15 years, he has been responsible for over 80 major projects in various countries in the areas of petroleum, energy, infrastructure, telecommunications, information technology and finances, comprising an investment portfolio of over 18 billion dollars. He was the first Latin American volunteer to be elected Chairman of the Board for the Project Management Institute (PMI), the largest project management organization in the world with close to 500,000 members and certified professionals in 175 countries. Ricardo Vargas has written ten books on project management, published in Portuguese and English, which have sold over 200,000 copies throughout the world. In 2005 he received the PMI Distinguished Award for his contribution to the development of project management and the PMI Professional Development Product of the Year award for the PMDome® workshop, considered the best project management training solution in the world. He is a project management professor for various MBA courses, and actively participates on editorial boards for specialized journals in Brazil and the United States. Vargas is a recognized reviewer of the PMBOK Guide, the most important reference in the world for project management, and also chaired the official translation of PMBOK into Portuguese. He is a chemical engineer and holds a master’s degree in Industrial Engineering from UFMG (Federal University of Minas Gerais). Ricardo Vargas also holds a Master Certificate in Project Management from George Washington University and is certified both as a Project Management Professional (PMP) by PMI and as IPMA-B by the International Project Management Association. He attended the Program on Negotiation for Executives at Harvard Law School. Over an eleven year timeframe, which began in 1995, Ricardo, in conjunction with two partners, established one of the most solid Brazilian businesses in the area of technology, project management and outsourcing, which had a staff of 4,000 collaborators and an annual income of 50 million dollars in 2006, when Ricardo Vargas sold his share of the company to dedicate himself on a fulltime basis to the internationalization of his project management activities. He is a member of the Association for Advancement of Cost Engineering (AACE), the American Management Association (AMA), the International Project Management Association (IPMA), the Institute for Global Ethics and the Professional Risk Management International Association (PRMIA). 2 © BY MACROSOLUTIONS SA. TODOS OS DIREITOS RESERVADOS
  3. 3. Cost Cost can be described as • Direct and Indirect • Variable, Fixed and Semi-variable • Recurring and non-recurring © BY RICARDO VIANA VARGAS. TODOS OS DIREITOS RESERVADOS
  4. 4. Direct Costs Can be traced back Are specifically Include materials, to a product and identified by their labor and other can be measured objectives direct costs © BY RICARDO VIANA VARGAS. TODOS OS DIREITOS RESERVADOS
  5. 5. Direct Costs - Examples Direct Direct work Direct labor materials hours Use of Use of Number of equipments facilities employees Use of Consumption materials of services © BY RICARDO VIANA VARGAS. TODOS OS DIREITOS RESERVADOS
  6. 6. Indirect Costs Costs not directly related to Not directly identifiable the project product Include Belong to the core • Fringe benefits supporting business, but • Indirect manufacturing expenses cannot be directly assigned • General indirect expenses to projects or individual • General and administrative contracts expenses © BY RICARDO VIANA VARGAS. TODOS OS DIREITOS RESERVADOS
  7. 7. Variable Costs Vary as changes in the Can or cannot be production are proportional to these implemented production changes Include expenses with equipments and materials, If there’s no production, performance bonuses, there’s no variable cost freight and sales comissions, for example © BY RICARDO VIANA VARGAS. TODOS OS DIREITOS RESERVADOS
  8. 8. Fixed Costs Remain constant in the total, independently of the amount of work performed Remain the same even when the production line pauses or is null Include costs like rent, depreciation, administrative team salaries and general expenses © BY RICARDO VIANA VARGAS. TODOS OS DIREITOS RESERVADOS
  9. 9. Recurring and non-recurring Costs Recurring Costs • Repetitive, directs or indirects, which vary depending on the production • Daily/weekly/monthly/etc costs Non-recurring costs • One-time expense only • Development, investment and other costs that are paid only once © BY RICARDO VIANA VARGAS. TODOS OS DIREITOS RESERVADOS
  10. 10. Visit www.ricardo-vargas.com to access other presentations, podcasts, videos and technical content about project , risk and portfolio management. © BY MACROSOLUTIONS SA
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