task 1 completed.pdf - Assessment Task 1 Instructions Provide answers to all of the questions below 1 Discuss the key purpose and objectives of

task 1 completed.pdf - Assessment Task 1 Instructions...

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Assessment Task 1 Instructions Provide answers to all of the questions below: 1. Discuss the key purpose and objectives of budgeting in project management. Project budgeting is the process of quoting and estimating the costs of individual activities or work packages to built a finance plan. The key purpose of plan is to determine the cost baseline against which project performance can be monitored and controlled. Every project has an initial prediction of revenue and expenditure, so building a financial plan is important for any project development. This plan helps to control the finances and allocate financial resources, for example, resources allocated for staff. Determining the budget is vital for: estimating costs, controlling costs, and the plan cost management. 2. Outline the main steps in the budgeting process for a project. Determining the budget include outputs and inputs: Outputs: cost baseline, project funding requirements, project documents updates (risk register, activity cost estimates, and project schedule); Inputs: cost management plan, scope baseline (project scope statement, WBS), activity cost estimates, basis of estimates, project schedule, resource calendars, risk register, agreements, organizational process assets. 3. Discuss why key performance indicators are used in budgeting and provide three examples of financial key performance indicators that can be used to determine the effectiveness of a budget. Financial key performance indicators can be used to determine the effectiveness of a budget, some examples are: Variance analysis: it is a statistical method that is helpful to determine analysis of the cause, impact, and corrective actions. The cost variance is calculated through the measurements of activity cost against the actual activity cost. Trend analysis: it is analysed over time to evaluate if the performance has been effectively implemented or if it is deteriorating. Graphical analysis technics are used in this method; Earn value performance: it make a comparison to the cost management plan to the actual cost performance.
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