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Project Management Project Management Presentation Transcript

  • Sourabh JainMBA 2010 - 2012National Institute of Technology KarnatakaSurathkal, India 12/10/2011 Sourabh Jain 1
  • Preface• This is a PowerPoint file I created in order to help me in my studies.• The material in these slides are a distilled version of the literature from many sources, including e-books and papers.12/10/2011 Sourabh Jain 2
  • Home (1-10) Project Idea Generation Portfolio Planning Feasibility Capacity Planning Global Sourcing Environmental Clearance Investment Appraisal Cost Estimation Methods Work Breakdown Working Capital Structure12/10/2011 Sourabh Jain 3
  • Home (11-20) Projected Balance Sheet Project Appraisal Social Cost Benefit Project Scheduling Analysis Resource Allocation Project Control Budget Management Milestone Trend Analysis Standard Costs Project Abandonment12/10/2011 Sourabh Jain 4
  • Project Idea Generation12/10/2011 Sourabh Jain 5
  • Project• An unique undertaking for essentially a single purpose which is defined by scope, quality, time, and cost objectives.• It is the art and science of directing human and material resources to achieve stated objectives within the constraints of time, budget, and quality and to the satisfaction of everyone involved• Five Features of a Project1. Defined beginning, end, schedule, and approach2. Use resources specifically allocated to the work3. End results have specific goals4. Follows planned, organized approach5. Usually involves a team Sourabh Jain12/10/2011 of people 6
  • Project Life Cycle12/10/2011 Sourabh Jain 7
  • Phases in Project Management Monitor External/Internal Environment Scout for new ideas Preliminary Screening (PRI/NPV) Detailed Market and Demand analysis Feasibility/Appraisal Planning, Scheduling,12/10/2011 Sourabh Jain Controlling 8
  • Monitoring the environment• Economic• Governmental• Technological• Socio-Demographic• Competitive• Supplier12/10/2011 Sourabh Jain 9
  • Corporate appraisal• Marketing and Distribution• Research and Development• Production and Operations• Corporate Resources and Personnel• Financial and Accounting12/10/2011 Sourabh Jain 10
  • Scouting for new ideas1. Analyze the Performance of Existing Industries2. Examine the Inputs and Outputs of Various Industries3. Review Imports and Exports4. Study Plan Outlays and Governmental Guidelines5. Look at the Suggestions of Financial Institutions and Development Agencies6. Investigate Local MaterialsJain Resources12/10/2011 Sourabh and 11
  • Scouting for new ideas7. Analyze Economic and Social Trends8. Study New Technological Developments9. Draw Clues for Consumption Abroad10. Explore the Possibilities of Reviving Sick Units11. Identify Unfulfilled Psychological Needs12. Attend Trade Fairs13. Stimulate Creativity for Generating New Product Ideas12/10/2011 Sourabh Jain 12
  • Preliminary Screening (either Project Rating Index or NPV)• Compatibility with the promoter• Consistency with Govt priorities• Availability of inputs• Adequacy of market• Reasonableness of cost• Acceptability of Risk level12/10/2011 Sourabh Jain 13
  • Sources of +ve NPV• Economies of Scale• Product Differentiation• Cost advantages• Market reach• Technological edge• Govt policy12/10/2011 Sourabh Jain 14
  • Market and Demand analysis12/10/2011 Sourabh Jain 15
  • Sources of Secondary Info1. Economic Survey2. Basic Facts3. Annual Reports and Accounts of the Companies Listed on the Stock Exchange4. Annual Reports of the Various Associations of Manufacturers12/10/2011 Sourabh Jain 16
  • Characterization of Market1. Effective demand in the past and now2. Demographics3. Methods of distribution and sales promotion4. Supply and competition5. Govt policy12/10/2011 Sourabh Jain 17
  • Demand Forecasting characteristics• Forecasts are always wrong. Should include expected value and measure of error.• Long-term forecasts are less accurate than short-term forecasts• Aggregate forecasts are more accurate than disaggregate forecasts12/10/2011 Sourabh Jain 18
  • Demand Forecasting• Qualitative: primarily subjective; rely on judgment and opinion• Time Series: use historical demand only Forecast = (level + trend)X seasonal factor – Static – Adaptive – moving average, exponential smoothing, Holt , Winter• Causal: use the relationship between demand and some other factor to develop forecast• Simulation – Imitate consumer choices that give rise to demand – Can combine time series and causal methods12/10/2011 Sourabh Jain 19
  • Coping with uncertainties in forecasting• Conduct analysis with data based on uniform and standard definitions.• Ignore the abnormal or out-of-ordinary observations.• Critically evaluate the assumptions• Adjust the projections.• Monitor the environment.• Consider likely alternative scenarios.• Conduct sensitivity analysis12/10/2011 Sourabh Jain 20
  • Portfolio Planning12/10/2011 Sourabh Jain 21
  • Portfolio Planning12/10/2011 Sourabh Jain 22
  • Portfolio Planning Models• Markowitz Mean-Variance• Mean Absolute Deviation – check volatility• Weighted Goal Programming – assign high weights to serious risk factors• Minimax – maximize minimum return12/10/2011 Sourabh Jain 23
  • Markowitz Model• For an investor, the returns (for a given portfolio) and the stability or its absence (volatility) of the returns are the crucial aspects in the choice of portfolio.• Markowitz uses the statistical measurements of mean and variance of return to describe, respectively, the benefit and risk associated with an investment.• The objective is either to minimize the risk of the portfolio for a given level of return, or, to maximize the expected level of return for a given level of risk.12/10/2011 Sourabh Jain 24
  • Feasibility12/10/2011 Sourabh Jain 25
  • Feasibility report1. General info – purpose, scope, contacts2. Management Summary – Objectives, environment, methodology, measures, evaluation criteria3. Proposed system – Description, Technical & Financial Feasibility, Impacts, SCBA, Conclusion4. Alternatives - Description12/10/2011 Sourabh Jain 26
  • Technical Feasibility• System performance, interfaces and security• Development processes• Staff assessment• Failure Immunity12/10/2011 Sourabh Jain 27
  • Project Feasibility• Management Processes• Traceable WBS• Planned Reviews and Audits• Risk management12/10/2011 Sourabh Jain 28
  • Financial Feasibility• Development costs• Support costs• Time to implement• ROI, Payback and financial ratios12/10/2011 Sourabh Jain 29
  • Capacity Planning12/10/2011 Sourabh Jain 30
  • Capacity Planning• Capacity planning is the process of determining the production capacity needed by an organization to meet changing demands for its products.• Capacity can be increased through1. Increase resources/equipment2. Process improvements3. technology12/10/2011 Sourabh Jain 31
  • Capacity Planning• Factors determining plant capacity1. Finance available2. Demand and Growth3. Economies of scale4. Cost of expansion vs. purchase12/10/2011 Sourabh Jain 32
  • Capacity Strategies• Lead - proactive• Lag - reactive• Match – moderate adjustments• Capacity Required vs. Available• Capacity is calculated: (number of machines or workers) × (number of shifts) × (utilization) × (efficiency).12/10/2011 Sourabh Jain 33
  • Plant Location determinants1. Raw material availability.2. Location (with respect to the marketing area.)3. Availability of suitable land.4. Transport facilities.5. Availability of labor.6. Availability of utilities (Water, Electricity).7. Environmental impact and effluent disposal.8. Local community considerations.9. Climate.10. Political strategic considerations.11. Taxations and legal restrictions12/10/2011 Sourabh Jain 34
  • Plant Layout determinants1. Economic considerations: construction and operating costs.2. Process requirements.3. Convenience of operation.4. Convenience of maintenance.5. Health and Safety considerations.6. Future plant expansion.7. Modular construction.8. Waste disposal requirements12/10/2011 Sourabh Jain 35
  • ‘Functional’ Plant Layout• Common for a large variety of L L M Mproducts in batch volumes.• Similar processes are grouped L L M Mtogether. Material 1• Inefficient: Long material transportroutes from dept. to dept. Work in Material 2progress is high. Tracking of orders can D D ASSEMBLYbe difficult. 1 D D• Advantages: Specialist labour andsupervision. Flexibility as material can Product 1be rerouted in any sequence. Product 2 G G ASSEMBLY 2 G G 12/10/2011 Sourabh Jain 36
  • ‘Product’ Plant Layout• Mass production where variety is small andproduction volumes are very high. L M D G• AKA ‘flow’ or ‘line’ layout.• More efficient, but less flexible than‘functional’ layout. A S• Work in progress is minimised, and jobs are Seasily tracked. E L M D G• Investment in specialised capital equipment Mis high, so a reliable and steady demand is Brequired. LY• Very sensitive to machine breakdown ordisruption to material supply. L M D G 12/10/2011 Sourabh Jain 37
  • ‘Cellular’ Plant Layout• AKA ‘Group Technology’• Each cell manufactures products belonging L M ASSEMBLYto a single family. D G CELL 1• Cells are autonomous manufacturing unitswhich can produce finished parts.• Commonly applied to machined parts.• Often single operators supervising CNC M M ASSEMBLYmachines in a cell, with robots for materialshandling. D G CELL 2• Productivity and quality maximised.Throughput times and work in progress keptto a minimum.• Flexible. L L ASSEMBLY• Suited to products in batches and where CELL 3 L Gdesign changes often occur. 12/10/2011 Sourabh Jain 38
  • Economic Order Quantity CO D CH QTotal cost per year, T T Q 2 Holding costs alone Q 12/10/2011 Sourabh Jain 39
  • Global Sourcing12/10/2011 Sourabh Jain 40
  • Sourcing Process• Sourcing is the entire set of business processes required to purchase goods and services.1.Supplier Scoring and Assessment2.Selection of suppliers – Auctions and Negotiations3.Design and execution of suppliers contract4.Product Design Collaboration5. Procurement of material or services6.Sourcing Planning, Analysis and Risk Management7. Evaluation of supplier performance12/10/2011 Sourabh Jain 41
  • Supplier Scoring and Assessment :1. Replenishment Lead time2. On-time performance3. Supply Flexibility4. Supply Quality5. Inbound Transportation cost6. Pricing Terms12/10/2011 Sourabh Jain 42
  • Supplier Selection• Sealed-bid price auctions – lowest bidder wins• English Auctions – dynamic unlike sealed-bid• Dutch Auctions – raise bids• Second-price (Vickery) Auctions – lowest bidder, but at price quoted by second lowest12/10/2011 Sourabh Jain 43
  • Procurement• Direct and Indirect materials• Aggregation helps achieve economies of scale – capacity, information, transport, relationship• Multiple suppliers with different strengths is desirable12/10/2011 Sourabh Jain 44
  • Risks of outsourcing1. The Process is broken2. Underestimation of cost of coordination3. Reduced customer / supplier contact4. Loss of internal capability and growth in third party power5. Leakage of sensitive data and information6. Ineffective Contracts12/10/2011 Sourabh Jain 45
  • Issues• Offshoring production to low-cost nations is good, but watch out for costs like transportation and coordination.• Offshoring to low cost nations reduces domestic employment of parent country.• Costs of raw materials are rising.12/10/2011 Sourabh Jain 46
  • Environmental Clearance12/10/2011 Sourabh Jain 47
  • EC Process• Screening – For state level projects - B• Scoping – For both National Level (A) and B• Public Consultation• Appraisal12/10/2011 Sourabh Jain 48
  • Investment Appraisal Methods1. Net Present Value2. Internal Rate of Return3. Discounted Payback Period4. Performance Index5. Accounting Rate of Return Click Here for a detailed PowerPoint file12/10/2011 Sourabh Jain 49
  • Cost Estimation12/10/2011 Sourabh Jain 50
  • Types1. Capital costs LIFE CYCLE COSTS2. Operational and Maintenance costs• With scaling costs can escalate1. Linearly2. Exponentially12/10/2011 Sourabh Jain 51
  • Costing Methodologies1. Expert Opinion – Delphi2. Analogy – Compare with similar project3. Parametric – relate cost to some parameters (cost estimating relationships)4. Engineering – cost from bottom up; includes all aspects5. Actual – base on historical costs. Most preferred method12/10/2011 Sourabh Jain 52
  • Commercially Available Costing Models• COCOMO – cost = no of person months X loaded labor rate Other rates are based on this cost• COSTXPERT – COCOMO + database of actual projects• SEER – Software/Hardware estimation• SLIM – Software Life Cycle Model• REVIC – Updated parameters of COCOMO• COSTAR – Based on COCOMO12/10/2011 Sourabh Jain 53
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  • Work Breakdown Structure12/10/2011 Sourabh Jain 55
  • WBS• A (WBS) is a deliverable oriented decomposition of a project into smaller components.• 100 % rule: WBS includes 100 % of deliverables as defined by project scope. Focus on outcomes.• Each WBS element must contain1. Scope of work2. Begin and End of scope of work3. Budget allotted for work4. Responsibility12/10/2011 Sourabh Jain 56
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  • Misconceptions• A WBS is not an exhaustive list of work. It is instead a comprehensive classification of project scope.• A WBS is neither a project plan, a schedule, nor a chronological listing. It specifies what will be done, not how or when.• A WBS is not an organizational hierarchy, although it may be used when assigning responsibilities12/10/2011 Sourabh Jain 58
  • Working Capital12/10/2011 Sourabh Jain 59
  • Working Capital• Working capital is a financial metric which represents operating liquidity available to a business, organization, or other entity, including governmental entity• Net WC = Current Assets – Current Liabilities• Current Assets = acc receivable + inventory• Current Liabilities = acc payable12/10/2011 Sourabh Jain 60
  • WC Management• Cash management• Inventory management• Debtors management• Short term financing12/10/2011 Sourabh Jain 61
  • Projected Balance Sheet12/10/2011 Sourabh Jain 62
  • Creation1. Collect the company’s financial records. Separate them into income and expenses.2. Prepare an estimate of current assets.3. List the current value of real property, land, machinery and equipment owned by the business.4. Identify intangible assets, their value and any associated costs.5. Create a summary of the company’s liabilities.6. Make a separate list of expenses that are not due within 12 months, like bank loans.7. Finish the balance sheet by calculating the owner’s equity, sometimes referred to as the company’s net worth.12/10/2011 Sourabh Jain 63
  • Cash Flow statements• The purpose of the cash flow statement is to report the sources and uses of cash during the reporting period.• 3 sections:1. cash flows from operating activities2. cash flows from investing activities3. cash flows from financing activities12/10/2011 Sourabh Jain 64
  • Cash Flow statements methods• Direct method – analyze cash and bank accounts1. Cash receipts from customers2. Cash payments for inventory3. Cash paid to employees4. Cash paid for operating expenses5. Taxes paid6. Interest paid7. Equals net cash provided by (used in) operating activities12/10/2011 Sourabh Jain 65
  • Cash Flow statements methods• Indirect method – analyze income and expense accounts and working capital1. Net income per the income statement2. Minus entries to income accounts that do not represent cash flows3. Plus entries to expense accounts that do not represent cash flows4. Equals cash flows before movements in working capital5. Plus or minus the change in working capital, as follows: – An increase in current assets = negative figure because cash was spent – A decrease in current assets = positive figure – An increase in current liabilities = positive figure – A decrease in current liabilitiesJain negative figure12/10/2011 Sourabh = 66
  • Project Appraisal12/10/2011 Sourabh Jain 67
  • Appraisals/Planning1. PERT/CPM2. SWOT3. Problem Tree Analysis4. Stakeholder Analysis5. Logical Framework Analysis12/10/2011 Sourabh Jain 68
  • Social Costs Benefit Analysis12/10/2011 Sourabh Jain 69
  • SCBA• A methodology developed for evaluating investment projects from the point of view of the society (or economy) as a whole.• Used primarily for public investment12/10/2011 Sourabh Jain 70
  • Problems Solvable by SCBA -1• Principle sources of discrepancy:1. Market Imperfection – FOREX regulation2. Externalities – external benefits/ unintended3. Taxes and Subsidies - Taxes reduce benefits4. Concern for Savings – Saving benefit is better5. Concern for redistribution – focus on poor6. Merit Wants – larger interest12/10/2011 Sourabh Jain 71
  • Problems Solvable by SCBA -2• With UNIDO approach, we can evaluate net benefit from any project12/10/2011 Sourabh Jain 72
  • Problems Solvable by SCBA -3• With shadow price, we know the effect of using one more unit of resources on the social cost and benefits.• Shadow pricing is relating to decision of project manager.• Sources of Shadow Prices1. Increase or decrease the total consumption in the economy2. Decrease or increase production in the economy3. Increase or decrease export or import12/10/2011 Sourabh Jain 73
  • Project Scheduling12/10/2011 Sourabh Jain 74
  • Project Scheduling• Scheduling is carried out in advance of the project commencing and involves:1. identifying the tasks that need to be carried out2. estimating how long they will take3. allocating resources (mainly personnel)4. scheduling when the tasks will occur12/10/2011 Sourabh Jain 75
  • Tools1. Milestone Charts2. Gantt Charts3. Activity Networks4. Critical Path Method/PERT5. Critical Chain Scheduling6. Monte Carlo Simulation12/10/2011 Sourabh Jain 76
  • Resource Allocation12/10/2011 Sourabh Jain 77
  • Resource Allocation Process1. Define your mission2. Inventory you resources3. Inventory your projects4. Reallocate resources using Resource Allocation Matrix12/10/2011 Sourabh Jain 78
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  • The Key to Effective Project Resource Allocation1. Determine quickly what resource you will need2. Determine who the best people are in that are3. Approach their line manager and check on their availability4. Assuming they are available put their name down against the relevant tasks in your project plan5. Get your project plan into the PMO and get it baselined as soon as possible12/10/2011 Sourabh Jain 80
  • Issues• Check out project.net for awesome resource allocation and diagnostic software• Overcommitment• Overallocation12/10/2011 Sourabh Jain 81
  • More issues1. Project Silos – no checks to see allocation2. Failure of resource pools – overallocation3. Prioritized Projects – to counter overallocation4. Building a culture of decision making5. Creating change from bottom up6. Risk Management12/10/2011 Sourabh Jain 82
  • Project Control12/10/2011 Sourabh Jain 83
  • Project Control• Control – process and activities needed to correct deviations from plan• Control the triple constraints 1. time (schedule) 2. cost (budget, expenses, etc) 3. performance (specifications, testing results, etc.)12/10/2011 Sourabh Jain 84
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  • Technique for control – Earned Value Analysis• Measures overall performance• Earned value of task = % of task completed X planned cost for task• Methods1. 50-50 – 50 % assumed at start, rest 50 % at end2. 0-100 – Not considered 100 % until finished3. Critical Input rule – How much critical input used4. Proportional Rule – time to date/ scheduled time12/10/2011 Sourabh Jain 86
  • Earned Value Analysis• Baseline (planned) cost to completion – referred to as budget at completion (BAC)• Actual cost to date – referred to as estimated cost at completion (EAC)• Identify several variances according to two guidelines 1. A negative variance is ‘bad’ 2. Cost and schedule variances are calculated as earned value minus some other measure12/10/2011 Sourabh Jain 87
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  • Variances• 4 types of variances;• Cost (spending) variance (CV) – difference between budgeted cost of work performed (earned value) (BCWP) and actual cost of that work (ACWP)• Schedule variance (SV) – difference between earned value (BCWP) and cost of work we scheduled to perform to date (BCWS)• Time variance (TV) –difference between time scheduled for work performed (STWP) and actual time to perform it (ATWP)12/10/2011 Sourabh Jain 89
  • Problem A project to develop a country park has an actual cost in month 17 of $350,000, a planned cost of $475,000, and a value completed of $300,000. Find the cost and schedule variances and the three indexes. BCWS = 475,000 BCWP = 300,000 ACWP = 350,000 CV = 300,000 – 350,000 = -50,000 (negative value - cost overrun) SV = 300,000 – 475,000 = -175,000 (negative value - behind schedule) Cost Performance Index (CPI) = BCWP/ACWP = 300/350 = 0.86 Schedule Performance Index (SPI) = BCWP/BCWS = 300/475 = 0.63 Time Performance Index (TPI) = STWP/ATWP Scheduled Time Work Performed (STWP) can be estimated Time t = Schedule Variance/Slope of Planned costs = -175,000/ (475,000/17) = - 6.26 months Time Difference= 17- 6.26 = 10.74 TV = 10.74/17 = 0.6312/10/2011 Sourabh Jain 90
  • Critical Ratio• The critical ratio is actual progress x budgeted cost scheduled progress actual cost• If ratio is 1 everything is probably on target• The further away form 1 the ratio is, the more we may need to investigate12/10/2011 Sourabh Jain 91
  • Budget Management12/10/2011 Sourabh Jain 92
  • Budget• It is a financial and /or quantitative statement, prepared and approved prior to a defined Period of time of the policy to be pursued during that period for the purpose of attaining a given objective.• It may include income, expenditure and employment of capital.12/10/2011 Sourabh Jain 93
  • Key reasons for overspending…1. Bad Luck2. Overly optimistic initial estimates3. Poor communication4. Poor cost/time estimating practices12/10/2011 Sourabh Jain 94
  • Types1. Time period – short term < 1yr (cash budget) / > 1yr long term (R&D budget)2. Conditions – basic – forever /current – for now3. Capacity – fixed (rigid)/flexible4. Coverage – functional/master12/10/2011 Sourabh Jain 95
  • Objectives of Budgeting1. Definition of Goals2. Defining Responsibilities3. Basis for Performance Evaluation4. Optimum use of Resources5. Co-ordination6. Planned action12/10/2011 Sourabh Jain 96
  • Steps in budgeting1. Define objectives2. Locate budget factor – main driver of budget3. Allocate a controller4. Budget period5. Standard of activity12/10/2011 Sourabh Jain 97
  • Metrics• Capacity Ratio = Actual hours/Budgeted hours• Efficiency Ratio = Actual Output in Std hours/ Actual Hours• Activity Ratio = Actual Output in STd hours/ Budgeted Output in STd hours12/10/2011 Sourabh Jain 98
  • Disadvantages of budgeting1. Estimates2. Rigidity3. False Sense of Security4. Lack of co-ordination5. Time and Cost12/10/2011 Sourabh Jain 99
  • Milestone Trend Analysis12/10/2011 Sourabh Jain 100
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  • Standard Costs12/10/2011 Sourabh Jain 102
  • Standard cost• Refers to the cost that management believes should be incurred to produce a good or service under anticipated conditions.Standard costs are developed in a variety of ways. They are1. specified by formulas or recipes.2. developed from price lists provided by suppliers.3. determined time and motion studies conducted by industrial engineers.4. developed from analyses of past data.12/10/2011 Sourabh Jain 103
  • Material Price VarianceThe material price variance is expressed as(AP – SP)AQp where:(AP) = actual price per unit of material.(SP) = standard price per unit of directmaterial.(AQp) = actual quantity of materialpurchased.If actual price > standard price, then thevariance is unfavorable.12/10/2011 Sourabh Jain 104
  • Material Quantity VarianceThe material quantity variance isexpressed as (AQu – SQ)SP where:(AQu) = actual quantity of material used.(SQ) = standard quantity of materialallowed.(SP) = standard price of material.If actual quantity > standard quantity,then the variance is unfavorable.12/10/2011 Sourabh Jain 105
  • Labor Rate VarianceThe labor rate (price) variance isexpressed as (AR – SR)AH where:(AR) = actual wage rate (price).(SR) = standard wage rate (price).(AH) = actual number(quantity) of laborhours.If actual rate > standard rate, then thevariance is unfavorable.12/10/2011 Sourabh Jain 106
  • Labor Efficiency VarianceThe labor efficiency (quantity) variance isexpressed as (AH – SH)SR where:(AH) = actual number of hours worked.(SH) = standard number of hoursworked.(SR) = standard labor wage rate.If actual hours > standard hours, then thevariance is unfavorable.12/10/2011 Sourabh Jain 107
  • Overheads variances• The controllable overhead variance is expressed as (actual overhead - flexible budget level of overhead) for actual level of production.• The overhead volume variance is expressed as (flexible budget level of overhead for actual level of production - overhead applied to production using standard overhead rate).12/10/2011 Sourabh Jain 108
  • Project Abandonment12/10/2011 Sourabh Jain 109
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  • Purposeful abandonment• Purposeful abandonment is the cessation of something that you or your company have been doing for months or years but no longer gaining the results or traction you originally hoped for.• The few causes of project abandonment as inadequate project planning; inadequate fund, inflation, bankruptcy of Contractor, variation of project scope, political factor, death of client, incompetent project manager, wrong estimate, inadequate cost control, faulty design and delayed payment.12/10/2011 Sourabh Jain 111
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