Slide 2: Dept Management Studies Introduction to Project Cost Cost estimation: is the process of calculating the cost of the identified resources needed to complete the project work More and more companies are requiring the PM to calculate the project cost and then factor of the ROI, and other benefit models, into the project product Goal is to see the value of the project
Slide 3: Dept Management Studies Actual Profit Margin Project duration Project Cost Organization may do a cost estimate to see how much the project is going to cost to complete.
Slide 4: Dept Management Studies Project cost estimation inputs It relies on several project components from Initiation to Planning process groups.
Policies from the performing organization.
Using Work Breakdown Structure (WBS)
Relying on Resource Requirement
Calculating Resource Rates
Indirect Cost Cost should be in some unit of time or measure Cost/hr, cost/use, cost/ metric ton
Slide 5: Dept Management Studies Length of the activities will help the performing org to calculate the cost of the project in the future Recall the formula of the present value PV = FV(1+R)n R= interest rate
n = number of time periods
Slide 6: Dept Management Studies Recall various discounting methods… Applying EVM
Earned Value Method is used to measure the Project performance
BAC = Our predicted budget at completion
EV = %Complete X BAC
PV = here a planned value (*present value)
AC = actual costs of the project work to date
CPI = EV/AC (Cost Performance Index)
EAC = BAC/CPI (Estimate at completion)
ETC = EAC – AC (Estimate to Complete)