Cost management
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Transcript of Cost management
COST MANAGEMENT
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2What is Cost Management?
• Process of planning and controlling the budget of the project.
• Cost management predicts the expenditure and reduce the project from going over budget.
3Principles• Cash Flow Analysis (Estimated project cost and
benefit of project organization).• Tangible Cost (Can be measured)
A task that was allocated ₹150,000 but actually costs ₹100,000 would have a tangible benefit of ₹50,000.
• Intangible Cost (Monetary cost) Research related areas
4Principles
• Direct cost (Directly related to project)SalaryPurchase of software
• Indirect cost (Not directly related to project)Electricity billTelephone bill
5Why is it important?
• Identify each of the costs within your project• Ensure that expenses are approved before
purchasing• Keep a central record of all costs incurred• Control the overall cost of your project• Keep your project and financial plans up-to-date
6What does it include?
• Budget • Benefit• Spending• Expenses• Funding• ROI
7How is it done in project?
• Cost Management Plan• Cost Baseline• Activity Cost estimates• Performance Measurements
8Cost in Project Management
Estimate Cost
Determine Budget
Control Cost
9Estimating Cost
• Projected cost of a project.• Analogous Estimating• Parametric Estimating• Bottom-up Estimating• Three-point Estimates• Cost of quality
10Determine Budget
• Cost Aggregation• Reserve Analysis• Historical Data• Funding Limit Reconciliation
11Control Cost
• Earned Value Management
• Forecasting• To-Complete Performance
Index (TCPI)• Variance Analysis• Performance Reviews
12Earned Value Analysis• Planned Value – Total cost estimate planned to be spent
on an activity during a given period• Earned Value– Estimate of the value of the physical
work actually completed• Actual Value– Total of direct and indirect costs
incurred in accomplishing work on an activity
13Rate of Performance• Ratio of actual work completed to the percentage of
work planned to have been completed at any given time.
• For example, suppose the server installation was halfway completed by the end of week 1; the rate of performance would be 50% because by the end of week 1, the planned schedule reflects that the task should be 100% complete and only 50% of that work has been completed.
14Cost Budgeting
• Allocating the project cost estimate to individual work items over time
• Provides info for project funding requirements• Estimating costs for each major project activity
over time• Used to measure and monitor cost performance
15What are the benefits?
• Meeting budget goals.• Realistic project estimates.• Earned value Management• Cost accounts• Rate of performance
16What are the benefits?
• Project is completed within an approved budget.
• Accurate cost estimates and realistic budget.• Return on investment (ROI)
17How does Primavera help?
• Budgeting• Labor cost• Earned Value Report• Cost Variance• Total Project Costing
18How does Primavera help?
• Cost Account• Project Expenses• Manage Currency• Budget Summary• Funding Details
19How Does MSP help?
• Earned Value management• Planned and Actual value• Manage currency• Project expenses
20Pearl river tower
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Thank You