Cost management

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Information about Cost management

Published on February 15, 2013

Author: AbhinyaKalyan



created by Ms. Deepika - Engineer Business Support, PPM


What is Cost Management? 2• Process of planning and controlling the budget of the project.• Cost management predicts the expenditure and reduce the project from going over budget.

Principles 3• 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

Principles 4• Direct cost (Directly related to project)  Salary  Purchase of software• Indirect cost (Not directly related to project)  Electricity bill  Telephone bill

Why is it important? 5• 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

What does it include? 6• Budget• Benefit• Spending• Expenses• Funding• ROI

How is it done in project? 7• Cost Management Plan• Cost Baseline• Activity Cost estimates• Performance Measurements

Cost in Project Management 8 Estimate Cost Determine Budget Control Cost

Estimating Cost 9• Projected cost of a project.• Analogous Estimating• Parametric Estimating• Bottom-up Estimating• Three-point Estimates• Cost of quality

Determine Budget 10• Cost Aggregation• Reserve Analysis• Historical Data• Funding Limit Reconciliation

Control Cost 11• Earned Value Management• Forecasting• To-Complete Performance Index (TCPI)• Variance Analysis• Performance Reviews

Earned Value Analysis 12• 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

Rate of Performance 13• 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.

Cost Budgeting 14• 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

What are the benefits? 15• Meeting budget goals.• Realistic project estimates.• Earned value Management• Cost accounts• Rate of performance

What are the benefits? 16• Project is completed within an approved budget.• Accurate cost estimates and realistic budget.• Return on investment (ROI)

How does Primavera help? 17• Budgeting• Labor cost• Earned Value Report• Cost Variance• Total Project Costing

How does Primavera help? 18• Cost Account• Project Expenses• Manage Currency• Budget Summary• Funding Details

How Does MSP help? 19• Earned Value management• Planned and Actual value• Manage currency• Project expenses

Pearl river tower 20

21Thank You

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