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Project Cost Management

Common Sources of Project Cost. Labor cost:SkilledSemiskilledUnskilledIncludes salaries, hourly rates, overtime, health care etc.Material:Raw material, software

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Project Cost Management

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    1. Project Cost Management 4th Knowledge Area of PMBOK

    2. Common Sources of Project Cost Labor cost: Skilled Semiskilled Unskilled Includes salaries, hourly rates, overtime, health care etc. Material: Raw material, software & operating systems etc. Subcontractors: Guess? Equipment & Facilities: Guess? Travels: Business travel (car rental, airfare, hotels, meals etc)

    3. Direct & Indirect Cost Direct Cost: Labor Material & Machinery It is easy to calculate Indirect Cost: Overhead Cost Utilities, taxes, insurance, transportation of material, medical aid / facilities, General Administration Advertising, shipping, secretarial support etc There are different ways to calculate indirect cost. Mostly organizations use a percentage of direct cost as indirect cost.

    4. Other Costs Recurring Cost Nonrecurring Cost Fixed Cost Variable Cost Normal Cost It is the project cost according to original, planned schedule agreed by all stakeholders at the beginning of the project. Expedited Cost This s the unplanned cost when steps are taken to speed up the project completion. What could be this cost?

    5. Expedited Cost It is the unplanned cost incurred when steps are take to speed up the project completion. If the project has fallen behind schedule and decision is made to “crash” certain activities to recover lost time. This is also called CRASHING. This can be done by giving overtime, employing more labor, outsourcing, incurring higher cost for logistic activities.

    6. Problems with Cost Estimation Low Initial Estimates Unexpected Technical Difficulties Lack of Definition Poor planning, initial scope definition etc Specification Changes External Factors Shortage of raw material Financial crisis Inflation New tax policy Increase of indirect cost

    7. Project Budget The project budget is a plan that identifies the allocated resources, the project goals and the schedule that allows the organization to achieve these goals. Top-down Budgeting Bottom-up Budgeting Activity Based Costing: Methods used Analogous Estimates (estimates taken from previous such projects) Parametric Estimates (square footage in construction) Bottom-up estimates Three point estimates Reserve Analysis Cost of Quality

    8. Thank you, all Best of Luck for your Exams & Project!!! Please visit my office from 11am Friday to check your third hourly paper and result

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