Week 3 - Lecture

Week 3 - Lecture - Week 3: P roject Costs and Reducing Du...

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Week 3: Project Costs and Reducing Duration - Lecture Estimating Project Times and Costs Estimating Time & Costs | Developing Budgets | Reducing Project Duration | Rationale for Reducing Project Time | Study Guide Accurate cost estimates and budgets are the basis for cost control of a project. A project manager needs to have an on-going comparison of the actual project costs with the planned costs derived from the cost estimates and budget. The total project cost estimate is normally broken out into line items that include direct costs, project overhead (indirect) costs, and general and administrative overhead (fixed) costs. Project Cost Line Items Direct Costs - Costs clearly chargeable to a work package. Labor, materials, and equipment are included in direct costs. Project Overhead (Indirect) Costs - Costs that cannot be tied to a specific deliverable but serve the entire project. An example is time charges for the project manager or rent for project space. General and Administrative (Fixed) Overhead Costs - Organizational costs not directly linked to a project. These costs are normally allocated by the organization as a percent of the total direct costs. Examples are advertising, accounting, and senior management costs. Work Package Cost Estimates To get to the total project cost, the sum of all the project cost accounts represent the total direct cost of the project, to which the overheads must be added to get the total project cost. In turn, costs for the tasks at the cost account level are the rollup (or summing) of their component tasks at the lower work-package level. This type of cost-estimating procedure is called
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Week 3 - Lecture - Week 3: P roject Costs and Reducing Du...

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