cost management
DESCRIPTION
created by Ms. Deepika - Engineer Business Support, PPMTRANSCRIPT
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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.
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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
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4Principles
• Direct cost (Directly related to project)SalaryPurchase of software
• Indirect cost (Not directly related to project)Electricity billTelephone bill
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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
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6What does it include?
• Budget • Benefit• Spending• Expenses• Funding• ROI
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7How is it done in project?
• Cost Management Plan• Cost Baseline• Activity Cost estimates• Performance Measurements
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8Cost in Project Management
Estimate Cost
Determine Budget
Control Cost
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9Estimating Cost
• Projected cost of a project.• Analogous Estimating• Parametric Estimating• Bottom-up Estimating• Three-point Estimates• Cost of quality
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10Determine Budget
• Cost Aggregation• Reserve Analysis• Historical Data• Funding Limit Reconciliation
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11Control Cost
• Earned Value Management
• Forecasting• To-Complete Performance
Index (TCPI)• Variance Analysis• Performance Reviews
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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
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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.
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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
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15What are the benefits?
• Meeting budget goals.• Realistic project estimates.• Earned value Management• Cost accounts• Rate of performance
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16What are the benefits?
• Project is completed within an approved budget.
• Accurate cost estimates and realistic budget.• Return on investment (ROI)
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17How does Primavera help?
• Budgeting• Labor cost• Earned Value Report• Cost Variance• Total Project Costing
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18How does Primavera help?
• Cost Account• Project Expenses• Manage Currency• Budget Summary• Funding Details
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19How Does MSP help?
• Earned Value management• Planned and Actual value• Manage currency• Project expenses
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20Pearl river tower
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Thank You