The document presents a comprehensive overview of Project Cost Management (PCM), focusing on its importance in keeping projects within budget through various processes such as cost estimation, budget determination, and cost control. It also outlines different types of costs—sunk, fixed, variable, direct, indirect, and opportunity costs—along with their definitions. The presentation aims to enhance participants' understanding and skills in managing project costs effectively.

1. Topic: Project Cost Managment
Presented by
Muhammad Hanif (12PG142)
Under the supervision of
Sir Khalil Rehman Memon

2. Contents
©Objectives of Presentation
©Introduction
©What is PCM
©Cost Management Process
©Cost Types

3. Objectives of Presentation
Through this interaction, participants
will enhance their:
Level of Knowledge and
Skills of project cost management

4. Introduction
• Cost Management(CM): Includes processes
required to ensure that the project is
completed within the approved budget.
• CM is a form of Management accounting that
allows a business to predict impending
expenditures to help reduce the chance of
going over budget.

5. Project Cost Management (PCM)
 What is PCM?
 You might think that PCM is managing the
"costs" on your project.
 The reality is that you must manage
everything else that incurs cost .
 Because if you don't, the costs will just keep
on climbing.
 Whether you like it or not!

6. What is PCM?
Project Cost Management is
o Placing of responsibility on those in charge of any aspect of the
project.
• E.g. the managers, designers and implementers
o To perform their respective roles and responsibilities within
prescribed limits.
• Specifically, agreed cost allowances or budgets
o Then collecting cost data and comparing it to the corresponding
allowances.
o And taking appropriate management action.
o To contain the final results.

7. Cost Management Process
Estimate cost
Determine budget
Control cost

8. Estimate cost
• The Process of developing an approximation (estimate)
for the cost of the resources (material and human)
necessary to complete the project activities.

9. Determine budget
1. It is useful to first understand where we are in the planning
process.
2. An activity list was created and sequenced into a simple
network diagram..
3. The amount of resources and the duration of each activity was
then estimated to produce the project schedule baseline.
4. It is from this baseline that cost estimates for each activity was
determined,
5. and it is determine budget that converts those individuals
activity cost estimates into the budget itself.

10. Control cost
• The practice of managing and/or reducing business expenses.
• Cost controls starts by the businesses identifying what their
costs are and evaluate whether those costs are reasonable and
affordable.
• Then, if necessary, they can look for ways to cut costs through
methods such as cutting back, moving to a less expensive plan
or changing service providers.
• The cost-control process seeks to manage expenses ranging
from phone, internet and utility bills to employee payroll and
outside professional services.

11. Cost Types
Sunk Costs:
Fixed Costs:
Variable Costs:
Direct Costs:
Indirect Costs:
Opportunity Costs:

12. SUNK COST
• A cost that has already been incurred and cannot
be recovered.

13. Fixed Cost
• Expenses that do not change as a function of
the activity of a business, within the relevant
period.

14. Variable Cost
• Cost that vary depending on a company's
production volume; they rise as production
increases and fall as production decreases.

15. Direct Cost
• Direct costs refer to materials, labor and
expenses related to the production of a product.

16. Indirect Costs:
• Costs that are not directly accountable to a cost object (such
as a particular project, facility, function or product).

17. Opportunity Costs:
• When choosing between two options, it can be helpful to
determine the opportunity cost of picking one option over
the other to see which would be the most beneficial option.