Cost Estimating

Various documents such as a project scope statement, one-time cost or recurring cost worksheet can be created to list costs associated with the project. Other methods include the time value of money, which refers to comparing present cash outlays to future expended returns, and a break-even analysis in order to determine economic feasibility.

1.1. Review principles of estimating project cash flows. Suggested reading: Ch. 9 “Capital Budgeting and Cash Flow Analysis” in “Contemporary Financial Management”, 11th ed. by Moyer, McGuigan, and Kretlow.

3. Explain two methods that can be used in order to identify realistic estimations when developing a budget. [2.2]

Project A: This project is new to your company. You do not feel confident in estimating the project costs using internal resources. There are other companies that have done this type of work. Yet you still want the most accurate estimates possible.

3. Explain two methods that can be used in order to identify realistic estimations when developing a budget. [2.2]

592 Week 1 DQ 1 WBS Construction PROJ 592 Week 1 DQ 2 Project Cost Estimates and Assumptions PROJ 592 Week 2 DQ 1 Cost Components PROJ 592 Week 2 DQ 2 Estimating Processes PROJ 592 Week 3 DQ 1 Project Schedules PROJ 592 Week 3 DQ 2 Sensitivity Analysis PROJ 592 Week 4 DQ 1 Resource Allocation and Leveling PROJ 592 Week 4 DQ 2 Advanced Schedule Techniques PROJ 592 Week 5 DQ 1 Earned Value Calculation PROJ 592 Week 5 DQ 2 Project Monitoring and Control & EV PROJ 592 Week 6 DQ 1 Forecasting Project Completion Cost PROJ 592 Week 6 DQ 2 Project Control PROJ 592

1.1 This report will provide guidance for the procedure of preparing an estimate for building works. It will include the factors that affect the overall cost of the project explaining them in general as well as explaining them on the example provided.

Assume that some of the costs are simply not knowable, by anyone, however skilled they are, at the time if the analysis. A good example is the cost of adapting PRIDE software to changes in healthcare law. Did you include any such costs in

This falls into the comparative estimation method that the book calls parametric estimation. We would start by finding the most similar projects and to define the cost estimation based on what we historically has been our cost values. Most of our products are made out of about 10 different materials we use regularly so we are able to easily estimate our material costs as well as lead times for acquiring material. Since we use this parametric estimation we are able to also estimate our cost times for production, inspection and any assembly requirements by comparing to similar products. If we are comparing though to a product that has not been produced recently we will estimate costs based on inflation to ensure that we are accounting for changes in economic times.

budget. As the project evolves, additional information is discovered and further estimates are produced. This is an extremely important process and we cannot emphasize enough the need for this re‐estimation or re‐budgeting process at each phase of the project. In any case, for the purpose of this article, we will call the revised budget the "actual budget." Another standard activity is to provide management with an expected cash flow. From a financial perspective this is an important activity, but it also can be used as your cost expectation.

We used PV (planned Value), AC (actual cost), and EV (earned value) to calculate SPI (schedule performance index), SV (schedule variance), CPI (cost performance index), and CV (cost variance). Among these indicators, SPI and SV show whether a project is behind schedule or not, and CPI and CV indicate whether a project is under budget. Therefore, the statuses of the schedule and cost of technical infrastructure, software customization, and combined projects can be easily and clearly checked, respectively.

The cost planning is one of important phases for project management. It will goes through whole project’s life cycle. It is foundation of project and it will tell the project are measured, reported and controlled in every process. Estimating is the process of forecasting or approximating the time and cost of completing project deliverables.

7.0 Budget Estimate and Financial AnalysisA preliminary estimate of the cost for the entire project is $200,000. This includes the hire of a temporary project manager, and the hours used by current employees to work on the project. Project savings comes in the form of reduced health insurance cost due to a healthier workforce that makes fewer claims.

For instance, the concept of cost estimation which assists in estimating future expenditure as the expenditure depends on the cost of the respective activities can be applied in the setting of a budget which is simply an estimate and schedule of all costs required to be assigned to an activity. One can make an estimation of the resources required for an activity by applying the cost estimation techniques. Since there are limiting factors to each activity such as scarcity of resources for activities, the concept of constraints can be applied together with the concept of cost volume profit analysis to ensure that maximum benefits are driven from the scarce resources and the number of activities that are available. This facilitates the allocation of resources that most equitable and profitable. The theory of constraints is also applicable in the process of setting up budgets. In setting up budget one considers the amount of resources that are available and cannot therefore set a budget plan that exceeds the amount of resources that are available. This implies that the budget is constrained by the amount of

* Many IT professionals think that preparing cost estimates is a job for accountants when in fact, it is a very demanding and important skill that project managers need