Cost concept of accounting states that all acquisition of items (such as assets or things needed for expending) should be recorded and retained in books at cost. Thus, if a balance sheet shows an asset at a certain value it should be assumed that this is its cost unless it is categorically stated otherwise.
Cost concept of accounting states that all acquisition of items (such as assets or things needed for expending) should be recorded and retained in books at cost. Thus, if a balance sheet shows an asset at a certain value it should be assumed that this is its cost unless it is categorically stated otherwise.
MGT 3302, Introduction to Project Management 1 Cou.docxmadlynplamondon
MGT 3302, Introduction to Project Management 1
Course Learning Outcomes for Unit VI
Upon completion of this unit, students should be able to:
5. Analyze factors impacting control of project costs.
5.1 Discuss creating a budget for a project.
Course/Unit
Learning Outcomes
Learning Activity
5.1
Unit Lesson
Chapter 7, pp. 242–269
Unit VI Course Project
Required Unit Resources
Chapter 7: Determining Costs, Budget, and Earned Value, pp. 242–269
Unit Lesson
In the previous unit, we discussed resource planning, resource utilization, and creating and managing a Gantt
chart. If you remember from Unit I, the three main constraints of the project are scope, time, and budget.
Activities and resources fit under the scope component. However, resources also fit under the budget
component. One of our biggest expenses for a project involves the resources we use. Regardless, we have to
calculate our total project cost.
Estimating Activity Cost
Estimating activity cost is a very important part of the budgeting process. Once we have identified our specific
activities, then we can estimate the resources needed and the cost for those activities. Until now, we have
referred to employees who will perform the activities as resources. However, for the purpose of budgeting,
resources could be people, materials, equipment, facilities, or licenses. Any activity could have multiple costs
associated with it. For example, painting a room would have labor costs, material costs, and equipment costs.
Other types of costs are facility costs, travel costs, or contingency costs. As another example, let’s suppose
we need to send an information technology (IT) professional to training. The cost associated with this
resource’s activities would be labor costs and travel costs.
Let’s discuss some of the details of these different costs.
Labor costs: As mentioned, labor cost can be one of the highest costs in a budget. How many people will we
need to work on this project? How many hours will each person need for the project? How much will we pay
each individual person? How will we account for technical experts or skilled workers versus administrative
personnel? Will we have overhead? Overhead costs are those costs that are not specifically attributed to work
performed. For example, how will we account for health benefits or 401(k) donations? What about training
costs?
Materials costs: In our fair project, the cost of materials might be fairly high. But let’s suppose we were
undertaking an IT project. The cost of materials might be fairly low. If our project involved building a house,
the cost materials would definitely be high.
UNIT VI STUDY GUIDE
The Project Budget
MGT 3302, Introduction to Project Management 2
UNIT x STUDY GUIDE
Title
Equipment costs: What if we have to rent some machinery in order to complete our project? For example,
what if some of the activities in our project required t.
Project cost management ,cost estimation cost control and evm for large epc projects and is essential for knowing the cost parameters for all construction engineers.
The triple constraint is sometimes referred to as the project management triangle or the iron triangle. In the typical triangular model, scope, schedule and cost are constraints that form the sides of the triangle, with quality as the central theme. (An alternative to the triangle, the project management diamond, adds quality as the fourth side of the model and changes the central theme to customer expectations.)
UNIT - IV: COST CONCEPTS: Classification of costs - Direct and Indirect expenses- Cost
Sheet - Unit Costing - Job Costing - Mechanics & Application of Marginal Costing in terms of
cost control - Profit Planning - concept of CVP relationship; BEP and their applications.
- Cost is one of 3 Triple constraints of the project. Managing costs of the project is very crucial and hardest part of the project. It spans across all phases of the project right from conception to closure of the project.
- Cost Management is not just controlling “Costs”; it involves definitive planning and preparing budgets. Collecting cost associated data. Comparing the data to prepared budgets and taking appropriate actions when needed.
- The process involved in estimating, budgeting, and controlling cost so that the project can be completed within approved budget.
- Value analysis (value engineering)
• Looking at less costly way to do the same work within the same scope
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The empire's roots lie in the city of Rome, founded, according to legend, by Romulus in 753 BCE. Over centuries, Rome evolved from a small settlement to a formidable republic, characterized by a complex political system with elected officials and checks on power. However, internal strife, class conflicts, and military ambitions paved the way for the end of the Republic. Julius Caesar’s dictatorship and subsequent assassination in 44 BCE created a power vacuum, leading to a civil war. Octavian, later Augustus, emerged victorious, heralding the Roman Empire’s birth.
Under Augustus, the empire experienced the Pax Romana, a 200-year period of relative peace and stability. Augustus reformed the military, established efficient administrative systems, and initiated grand construction projects. The empire's borders expanded, encompassing territories from Britain to Egypt and from Spain to the Euphrates. Roman legions, renowned for their discipline and engineering prowess, secured and maintained these vast territories, building roads, fortifications, and cities that facilitated control and integration.
The Roman Empire’s society was hierarchical, with a rigid class system. At the top were the patricians, wealthy elites who held significant political power. Below them were the plebeians, free citizens with limited political influence, and the vast numbers of slaves who formed the backbone of the economy. The family unit was central, governed by the paterfamilias, the male head who held absolute authority.
Culturally, the Romans were eclectic, absorbing and adapting elements from the civilizations they encountered, particularly the Greeks. Roman art, literature, and philosophy reflected this synthesis, creating a rich cultural tapestry. Latin, the Roman language, became the lingua franca of the Western world, influencing numerous modern languages.
Roman architecture and engineering achievements were monumental. They perfected the arch, vault, and dome, constructing enduring structures like the Colosseum, Pantheon, and aqueducts. These engineering marvels not only showcased Roman ingenuity but also served practical purposes, from public entertainment to water supply.
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2. Fixed Costs
Fixed costs are those that do not change throughout the life-cycle of a project. For example, if you are
constructing a road, the excavators and bulldozers are fixed costs. For software development projects, the physical
development space and development computers are fixed costs to the project.
While in practice, all costs vary over time and no cost is a purely fixed cost, the concept of fixed costs is necessary in
short term cost accounting. Organizations with high fixed costs are significantly different from those with high
variable costs.
Examples:
Rent. This is a periodic charge for the use of real
estate owned by a landlord.
Salaries. This is a fixed compensation amount paid
to employees, irrespective of their hours worked.
Utilities. This is the cost of electricity, gas, phones,
and so forth. This cost has a variable element, but
is largely fixed.
3. Variable Costs
Variable costs, as the name suggests, are costs that change during the project life-cycle. Construction projects usually
have a long duration and can easily span several years.
A periodic cost that varies in step with the output or the sales revenue of a company.
Variable costs include raw material, energy usage, labor, distribution costs, etc. Companies with high variable costs are
significantly different from those with high fixed costs.
A variable cost is a corporate expense that changes in proportion with production output. Variable costs increase or
decrease depending on a company's production volume; they rise as production increases and fall as production
decreases.
4. Direct Costs
Direct costs are expenses that come out of the project budget directly. For example, if you have outsourced some of
your development work, the developers are expected to put in a specific amount of time, which is then billed for.
The developer salaries are direct costs.
A direct cost is a price that can be completely attributed
to the production of specific goods or services. Some
costs, such as depreciation or administrative expenses,
are more difficult to assign to a specific product and
therefore are considered to be indirect costs.
A direct cost can be considered a variable cost if it is
inconsistent and changes amounts often.
Examples:
Direct materials
Consumable supplies
Freight in and out
Sales commissions
5. Indirect Costs
Indirect costs are those that are shared across multiple projects. Indirect costs are sometimes also referred to as
oversight costs.
For example, in software development projects, it is common for a project manager or an architect to be partially
allocated across several projects. Hence, the cost of the project manager or architect will be shared among the
projects they are allocated to.
An indirect cost is any cost not directly identified with a
single, final cost objective, but identified with two or more
final cost objectives or an intermediate cost objective. It is
not subject to treatment as a direct cost.
After direct costs have been determined and charged
directly to the contract or other work, indirect costs are
those remaining to be allocated to the several cost
objectives.
