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The Ultimate Guide to Project Cost Management with Templates

By Kate Eby | April 25, 2017

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Your organization’s projects are critical to its future. Sound cost management enables you to make optimal use of your resources (time, personnel, equipment, and materials), make data-driven decisions about projects and their risks, measure financial performance, and provide key metrics to senior management.   This definitive guide to project cost management includes templates for key activities like cost estimating and creating a cost management plan. You’ll learn important terms, best practices, and subtle distinctions (such as the difference between cost management and strategic cost management), as well as how cost management works in specialized cases, like construction and IT projects.

What Is Project Cost Management?

Whether you are developing a new product, designing a facility, or changing a key process, it’s challenging to forecast and manage project costs effectively.   In fact, the job is so challenging that half of all large IT projects massively blow their budgets , running on average 45 percent over budget and seven percent over time, according to consultants McKinsey & Co. and the University of Oxford. For projects in other sectors, the news is no better. The Project Management Institute (PMI) reported in 2016 that companies were completing only 53 percent of projects within their original budget. However, strong cost management helps you avoid that fate. So what exactly is cost management?   Cost management refers to the activities concerning planning and controlling a project’s budget. Effective cost management ensures that a project is completed on budget and according to its planned scope. Since you assess the success of a project at least in part by its cost performance, cost management is a prime determinant of project outcome.   Cost management activities are conducted throughout the project life cycle, from planning and budget allocation to controlling costs during project execution and assessing a project’s cost performance upon completion.   Although cost management includes a whole ensemble of activities, it is sometimes referred to in terms of more specific functions, such as spend management, cost accounting, and cost transparency. Cost managers sometimes use these terms as loose synonyms for the broad cost management function.

Cost Management: Four Major Steps

The Project Management Body of Knowledge (PMBOK), the bible of project management theory, says cost management is made up of four processes. These generally adhere to the sequence that follows — as a project goes from the planning board to reality.

• Resource Planning: Part of the initiation stage of a project, resource planning uses a work breakdown structure — a hierarchical representation of all project deliverables and the work required to complete them — to calculate the full cost of resources needed to complete a project successfully. Managers typically determine required resources for each work breakdown structure component and then add them to create a total resource cost estimate for all project deliverables.
• Cost Estimating: Cost estimating is an iterative process that uses a variety of estimating techniques to determine the total cost of completing a project. Cost estimating techniques vary widely in their approaches to computing project costs, and stretch from conceptual techniques that draw mainly from historical experience and expert judgment to determinative techniques that estimate costs on a component-by-component basis. We will discuss these techniques in detail later, as they vary in their levels of accuracy. Determinative techniques are the most accurate; however, while the estimator’s job is always to create the most accurate estimate possible, determinative estimating techniques are only an option if you’ve reasonably finalized a project’s scope and deliverables. As such, you use the less accurate estimating techniques during the earliest stages of project planning, and then revise and update estimates as the project continues to be defined. To learn more about cost estimating, read The Ultimate Guide to Project Cost Estimating . 
• Cost Budgeting: Once you’ve created satisfactory estimates, you can finalize and approve the project’s budget. Cost managers typically release budgeted amounts in stages according to the level of a project’s progress. These allocations include contingencies and reserves.
• Cost Control: Cost control is the practice of measuring a project’s cost performance according to cost and schedule baselines that provide points of comparison throughout the project life cycle. The specific requirements for effective cost control are set out in the project management plan. The individual in charge of cost management investigates the reasons for cost variations - if they deem cost variations unacceptable, corrective action is likely. Cost control also includes other related responsibilities, such as ensuring that updated project budgets reflect changes to a project’s scope.

Key Components of the Cost Management Plan

The cost management plan guides these four processes. Created during the project planning phase, the cost management plan is a document that defines how you manage, control, and communicate a project’s costs in order to complete the project on budget.   Among other things, a cost management plan identifies the individual or group responsible for cost management, details how you will assess a project’s cost performance, and sets rules for how to communicate cost performance to project shareholders. It also establishes the methodologies by which you will control project cost variations.   While you can customize a cost management plan to fit your organization’s needs, they generally follow a standard format. Sections often include the cost variance plan, the cost management approach, information on cost estimation, the cost baseline, cost control, and reporting processes, the change control process, the project budget, and approvals. You may also want to include the spending authority levels for key project personnel, specifying which roles can approve costs up to specific thresholds.   Let’s look at the sections in greater depth:

• Cost Variance Plan: Cost variance is when the actual amount differs from the budgeted amount. In your cost management plan, you’ll need a section that details the actions you should take, including who is held responsible in the case of a cost variance. The size of the variance usually necessitates different action: a cost variance of less than five percent might result in an explanation of that variance, while a 95-percent-or-greater variance could force the project to be abandoned. To learn how to calculate cost variance, read Hacking the PMP: Studying Cost Variance . For a more detailed template on tracking schedule and budget variances, see this template:
• Cost Management Approach: This section outlines the approach a manager uses for cost management. The level of rigor can vary, but this describes how to establish a cost baseline and how to compare actual costs. You usually track and report costs through control accounts, where you roll up costs of subtasks. This often occurs at the third level of the work breakdown structure, a tool that breaks a project into small components or chunks of work to determine the resources needed to complete a job or project. However, the point at which you track and report depends on the scope of the project.
• Cost Estimation: Here you will define the methods used for estimating project costs, the levels of variation, and the expected precision, accuracy, and risk.
• Cost Baseline: This has a specialized meaning in project management and represents the authorized, time-phased spending plan against which you measure cost performance. It’s the sum of the estimated project cost and contingency reserves. 
• Cost Control and Reporting Process: This section establishes how you measure costs and their key metrics during the project. We’ll provide greater detail on this later.
• Change Control Process: This describes the process for making changes to the cost baseline and how to approve those proposed changes.
• Project Budget: The budget builds on the cost baseline by totalling the cost of executing the project (including contingencies for possible risks). It also adds in management reserves, which is an amount to cover unanticipated risks or unidentified events that may arise. An organization will usually set a policy for this, and the amount is often five to 15 percent of the total budget.

Cost Management Activities: Essential Functions at Each Phase

Cost management includes a number of activities conducted at different phases during the project life cycle. It’s important to include the cost management function while developing project plans so that you build solid financial controls into the project structure. Here are some key terms and stages relevant to cost management:   Planning: Using the work breakdown structure to determine the resources needed to complete a job or project.   Estimating: The act of calculating or predicting the expected total cost of completing a project.   Budgeting: The authorization of a budget based on a cost estimate to complete the project. You typically authorize budgets in tandem with schedules, so you can assess cost performance at specific points.   Financing and Funding: The process of requesting, authorizing, and receiving money for a project.   Cost Management: The general practice of overseeing project expenditures and making cost-related decisions throughout the project life cycle.   Controlling: Addressing cost variations to avoid cost overruns.   Job Control: Controlling project expenditure by comparing costs predicted by the cost estimate and costs actually being incurred.   Scheduling: You can determine a project’s cost performance by using a schedule that compares the expected expenditure to the actual costs the project is incurring at any point in time.   Accounting: The practice of recording expenditures and reconciling transactions.

How Accurate Project Cost Estimating Aids Cost Management Efforts

The first step towards robust cost management is having a clear idea of your project’s likely costs. However, it’s futile to track and control costs if you base your spending on unrealistic estimates.   Project estimating considers several variables, including the method you use to create the estimate, the stage at which you build your estimate, and the types of cost you include.     The first variable is the method you employ. You can produce cost estimates using a variety of estimating techniques, depending on the extent to which you define a project and the type of information you have access to. Here are some common estimation techniques:

Analogous Estimating: This uses historical data from similar past projects to create estimates for new projects. This method works if you have experience with projects of the same type.

Parametric Estimating: This method estimates time and cost by multiplying per unit or per task amounts by the total number expected in the project. The rates are often standard or publicly published rates and can be expressed in hours of work, amount of data entered, or the number of units of a product manufactured. This technique has a reputation for good reliability, but it’s less relevant when output isn’t uniform, such as when writing computer code. Some projects have widely varying or unprecedented tasks, so they do not lend themselves to this method.

Bottom-Up Estimating: This is a determinative estimating technique that estimates costs for work breakdown structure components and adds them together to create a cost estimate for an entire project. The project team members help create the estimate. Since the people who are going to be doing the work are engaged in estimating, professionals consider this method highly accurate, as well as a team commitment builder.

Three-Point Estimating: This is a PERT -related statistical method that uses the optimistic (lowest), pessimistic (highest), and most likely cost estimates to create expected values and standard deviations for project expenditures.

Software-Based Estimating: You can use software-based estimating techniques, such as Monte Carlo simulation, to model the effects of risk events on project costs.   Another factor influencing the cost estimating is the stage at which you build your cost estimate. As a project progresses, you discover more variables and actual costs, so project estimates become more refined. You can classify cost estimates based on how well you define the project scope at the time of estimation and on the type of estimation technique you use - the latter generally determines the accuracy of an estimate. In order of accuracy, the main classes of cost estimates are:   Order of Magnitude Estimates: These are very rough cost estimates based on expert judgment and on adjusting the costs of the current project to reflect the costs of similar, past projects. Created before fully defining projects, they are only used in high-level project screening.   Preliminary Estimates: A preliminary estimate uses somewhat-detailed scope information to form estimates based on unit costs. These estimates are accurate enough to use as the basis for budgeting.   Definitive Estimates: Created when you’ve fully defined a project’s scope, a definitive estimate uses deterministic estimating techniques, such as bottom-up estimating. Experts agree that definitive estimates are the most accurate and reliable.   The final variable affecting project estimation is the type of cost included. Of course, your project budget must include all the relevant costs for labor and materials, but whether you include a portion of your organization’s indirect costs depends on the policies of your organization and the type of project. Here are the terms experts use to distinguish between various types of costs:   Direct Costs: Direct costs are those which you can directly associate with a specific cost object. They are billable to specific projects.

Indirect Costs: You cannot associate indirect costs with a specific cost object, and you typically incur indirect costs by a number of projects at the same time. They are not billable to specific projects.

Fixed Costs: Fixed costs are costs you incur during manufacturing that are not associated with the volume of produced output.

Variable Costs: Variable costs are costs you incur during manufacturing that are directly associated with the volume of produced output.

Sunk Cost: A sunk cost is an expense you cannot recoup once it is incurred.

Opportunity Cost: When selecting a course of action, its opportunity cost is the loss of potential benefits from all alternative courses of action.

Costing Techniques Determine How to Account for Project Costs

A costing technique is the way in which you compute the total cost of producing a product or performing a task. Depending on the activity or activities being costed, you may use a variety of techniques. Here are some commons ones:   Job Costing: Managers use job costing, also called job-order costing, to determine the cost of a product that is unique or dissimilar to other products. In industries such as construction, it’s extremely rare for two jobs to be identical. Job-order costing uses a unique job-cost record that compiles total labor and resource costs, as well as applicable overheads, for each task or activity completed as part of a task to determine total expenditures for the job. The job-cost record includes both direct and indirect costs.   Process Costing: You use process costing to determine costs for products or tasks that are identical. Unlike job costing, it does not compute the total cost of a product by summing up the costs of all tasks and activities that go into creating the product. Instead, process costing looks at the processes included in the mass production that creates products. By dividing the total cost of a process by the number of units output, it is possible to determine the cost per unit of each process. After this, you may total the costs per unit of every process involved in the eventual manufacturing of the product. In this way, you compute the cost per unit of each product on a process-by-process basis.   Activity-Based Costing: Activity-based costing (ABC) is an approach to assigning overhead costs to products. Since overhead cost allocation based simply on the number of machine hours needed may be misleading, this costing technique looks at the activities focused on creating a product — testing, machine setup, etc. — and then assigns portions of their costs to all products created using these activities. Products that were not created via these activities do not have shares of these activities’ costs added on.   Direct Costing: Direct costing, also called contribution costing or variable costing, is a technique that only assigns variable manufacturing costs to the cost of a product. You do not add fixed manufacturing costs to the cost of creating a product but instead associate those costs with the time period during which you incur them.   Life-Cycle Costing: Life-cycle costing is a comparative analysis technique that involves summing the total costs incurred during the life cycles of project options in order to choose the best option. Since starting capital costs may not be an accurate representation of how much a project will eventually cost, life-cycle costing includes all costs associated with ownership — including maintenance and disposal costs — to enable better decision making. 

Measuring Project Performance With Cost Management KPIs

Once your budget is approved and your project is under way, you’ll want to benchmark your progress relative to your cost management plan. First, there are some key metrics and performance indicators to understand:     Project Cost Performance: A project’s cost performance is an assessment of how actual expenditure on a project compares with planned expenditure as detailed in the project budget. The project manager communicates a project’s cost performance to the project stakeholders, and it may serve as the basis for preventative or corrective actions to avoid cost overruns.   Earned Value: Earned value is a method of measuring project cost performance. It is based on the use of planned value (where you allot specific portions of a project’s budget to the project tasks), and earned value (where you measure progress in terms of the planned value that is earned upon completion of tasks). You may contrast the earned value with the actual cost -  the expenditure you actually incur up to a certain point in the project schedule - to see how actual project costs compare to expected project costs.   Cost Performance Index (CPI): This is a measurement of how earned value compares to actual cost. This ratio measures a project’s cost efficiency at a given point in time by expressing earned value in proportion to actual cost. To calculate CPI, divide earned value by actual cost. A result of 1 means the project is exactly on budget; a number above 1 means it is under budget.

To learn more about KPIs in project management, read All About KPI Dashboards .

How to Control Costs

Effective cost control means performing a number of related activities that all begin by monitoring costs — since you can’t know if costs are greater than planned unless you are tracking actual expenses. Then, project managers need to decide how to respond to cost variances. Here are some key steps and concepts that inform the cost control process:   Monitoring Cost Performance: A project manager routinely monitors a project’s cost performance by creating performance reports that summarize current performance and forecast whether you will complete the project on budget. You provide project stakeholders with information about a project’s cost performance.   Reviewing Changes: You must amend the cost baseline to reflect all cost-related changes, and you should inform the project shareholders about all changes.   Actual Costs versus Budgeted Costs: Upon milestone and entire project completion, you examine the variances between actual costs and budgeted costs. Responses to the cost management plan will depend on the magnitude of the variance and the stage of the plan - this could range from a discussion to changes in the project scope that reduce costs.   Reserve Analysis: Use reserve analyses to allocate contingency reserves to projects based on the likelihoods and magnitudes of risk.   Cash-Flow Analysis: Used in financial reporting, cash-flow analyses detail cash inflows and outflows over a given period of time, and provide starting and ending balances.   Learning-Curve Theory: The learning-curve theory applies to the relationship between the time spent producing a unit and the number of units produced. According to the theory, the time spent on each unit should decrease as workers gain experience and therefore produce units faster.   

Cost Management vs. Strategic Cost Management

While cost management reduces expenses regardless of their cause or purpose, strategic cost management is a sub-discipline that strives to manage cost while also making the organization stronger.    Robin Cooper, Professor of Management at Claremont’s Peter F. Drucker Graduate Management Center and Regine Slagmulder, Professor of Management Accounting at Tilberg University in the Netherlands, define strategic cost management as the “application of cost management techniques so that they simultaneously improve the strategic position of a firm and reduce costs.”   Strategic cost management centers on the idea that cost reduction initiatives can affect an organization’s strategic position. Strategic cost management emphasizes considering the strategic and financial impact of cost management techniques.   Cooper and Slagmulder classify cost management initiatives as one of three types based on how the initiative affects the organization:   Strengthen: An example of an initiative that strengthens competitive positioning is a taxi service that replaces its phone booking system and team of booking agents with an app that allows people to book taxis using their mobile devices. An initiative like this both reduces costs and gives a company a strategic advantage, as it makes it easier to book taxis on short notice.   No effect: An initiative that has no effect on competitiveness might concern a publishing house that outsources proofreading tasks to international freelancers who accept lower wages. While this increases the company’s profitability, it does not affect its strategic positioning.   Weaken: Finally, an initiative that actively harms competitive positioning might involve the taxi company decreasing the frequency of regular vehicle maintenance, a move which, while saving costs initially, will result in cars breaking down more often.   Strategic cost management also comprises a number of important strategies:   Relevant Cost Strategies: Use relevant cost strategies to compare and decide between alternative courses of action. Relevant costs are costs you can reduce by adopting a particular course of action. They are different from sunk costs (which you cannot recoup once spent) and fixed overhead costs (which are the same for all potential courses of action). When you make decisions, a relevant costs strategy focuses only on costs that vary among options.   Evaluating Opportunity Costs: Evaluating opportunity costs is a more holistic approach to decision making that considers not only all the monetary aspects of alternative courses of action, but also all the intangible aspects. For example, a company providing vehicle repair services might have to decide between two qualities of engine oil, taking into account both that one is more expensive than the other and that the more expensive engine oil also preserves engine health in the long term.   Balanced Scorecard Strategy: A balanced scorecard strategy allows businesses to assess the impact of cost management initiatives across four key areas: financial results, customer impact, internal business processes, and employee growth and development. It provides a framework for thorough consideration of the impacts of cost management initiatives. 

Getting Into the Details: Cost Accounting in Project Cost Management

Cost accounting involves the recording and classification of costs associated with a project. It is an internal practice that supports managerial decision making and is a primary discipline concerning cost management.

Cost accounting is different than general financial accounting. Financial accounting concerns  reporting an organization’s past financial performance and does not delve into extensive detail. Since you carry out cost accounting for a specific area of activity within a company — such as a particular project or geographical region — it focuses on more granular aspects and may include projections of future costs.   Cost accounting involves preparing reports for an organization’s management (these reports are not distributed externally). By contrast, financial accounting deals with standardized reports that may be distributed to a variety of stakeholders and regulators.   As such, you typically perform cost accounting on an as-needed basis, such as during a strategic project, and it does not follow a mandated format. Financial accounting, on the other hand, is a mandated and regulated formal process, and you must create financial reports according to international financial reporting standards.   There are a few commonly used cost accounting approaches:   Standard Cost Accounting: This is based on the concept of efficiencies , or ratios that compare the time and resource costs of actually completing an activity with the costs of completing the activity under standard conditions. Variance analysis is a core element of standard cost accounting. However, since the idea of efficiencies is based on a paradigm in which labor costs contribute substantially to manufacturing — which is no longer the case — standard cost accounting is somewhat outdated.   Activity-Based Costing: This is an approach to assigning overhead costs that examines activities that provide a service, execute a task, or create a product, and then assigns portions of their costs to output.   Resource Consumption Accounting (RCA): This approach emerged around 2000, and assigns costs based on the consumption of resources. It uses a German cost management system known as GPK and activity-based costing, a cost allocation method.     Throughput Accounting: This is an accounting approach that aims to maximize profitability by increasing the rate of production of goal units and minimizing operating expenses and investment costs.   Life-Cycle Costing: This is a method of analyzing project alternatives that focuses on total costs of ownership and selecting the most cost-effective option based on more than simple capital costs.   Environmental Accounting: Reporting the environmental costs incurred by a company or project’s activities.   Target Costing: This uses a predetermined market price and preferred profit margin to determine how much money can be used to create a product or service. The target cost is the maximum amount you can spend on production without affecting the profit margin.    Cost Coding: To make cost accounting easier, most organizations have adopted a method of identifying costs with a code, usually a number. The root of the code usually represents the type of expense, cost center, or business unit involved. This makes it easier to group and find related expenses in financial reports. Individual projects may be assigned their own code.   A common structure in an enterprise or very large organization is a top-level, four-digit code that relates to the accounting entity (for example, a subsidiary company). The next numbers pertain to department, followed by a number for the cost, which can be a cost center, profit center, work-breakdown-structure element, fund, or internal order. This facilitates the cost management process by aligning the cost codes with the work breakdown structure, which makes it easier to calculate financial performance.   In addition, costs in cost accounting may be classified by:  

• Traceability: Direct and indirect costs
• Behavior: Fixed or variable costs
• Controllability: Controllable or uncontrollable costs
• Time Incurred: Historical or predetermined costs
• Normality: Normal or abnormal costs
• Functions: The organizational function by which you incur a cost

  Cost accounts make it easy to identify cost overruns in specific sectors that might otherwise be lost in a budget overview. However, managing a large number of cost accounts — up to several hundred accounts and sub-accounts on larger projects — comes with its own challenges. It demands a higher degree of organization in accounting, for one, and classifying costs becomes more time consuming.   In addition, the system of categorization you use for a project’s cost accounts may not match up with the system of categorization you use for an organization’s cost accounts. This complicates the creation of a project budget from a final cost estimate, and is likely to happen when you create cost accounts using a system of categorization different than the performing organization uses.

Aside from recording historical expenditure, project managers must also forecast expected activity costs to ensure that they remain under control. Managers can do this through the use of tables that classify costs for individual cost accounts and cost modeling techniques that indicate whether work associated with a particular activity is due to be completed on budget.

Software’s Role in Project Cost Management

Cost management software simplifies and expedites project cost management activities. This can ease the burden on project cost managers and make it easier to extract insights, such as the cost performance index. Some of the common functionalities include:   Project-Tree Building: A visual representation of a work breakdown structure. This can be useful when employing deterministic estimating techniques.

Cost Estimation: Cost management software can provide powerful estimation capabilities such as using project trees to record activity costs, or running regression analyses to determine cost-estimate relationships in historical data.   Project Cost Management Templates: For projects that are similar, cost management ]templates can expedite cost management activities.   Budgeting: Cost management software can make it easier for project managers to conduct budget planning activities and allocate funding. 

Keep Projects On-Budget Using a Cost Management Template

One tool that can help with project cost management is Smartsheet, a collaborative work management and automation platform. As a cloud-based platform, you can share and collaborate on your cost management activities with internal and external stakeholders, and access the information from anywhere, on any device. 

Plus, with a pre-built, customizable template in Smartsheet, you can get started faster than ever. Track project and budget performance all in one sheet. Use symbols to quickly identify tasks that may be at risk of going over budget, and bring visibility to status of estimated versus actual labor, materials, and other costs. Set up alerts and reminders to notify you as costs change, and attach documents like invoices and purchase orders directly to tasks, to keep details in context.

Try one or all of the following templates to help ensure your next project stays on budget: 

Project Budget Template

‌ Download Project Budget Template

Excel | Smartsheet

Cost Management Plan Template

Download Project Cost Management Template

Activity Cost Estimate Template

Download Activity Cost Estimate Template

‌ Smartsheet Project with Schedule & Budget Variance Template

Cost Management for IT Projects

IT project costs are notorious for going over budget, mainly because of development approaches that allow scope creep during the product development life cycle. There is also a tendency for IT cost estimates to be less fixed than those of hard projects in fields such as construction and engineering, where maturity in planning and estimating is higher. In Information Technology Project Management , Kathy Schwalbe suggests that the people creating cost estimates for IT projects lack experience compared to specialist cost surveyors who create cost estimates for construction projects.   Furthermore, given how multifaceted these projects tend to be and how quickly IT evolves, IT projects often suffer from the “first-time, first-use penalty,” which means that it is hard to form accurate estimates when a project or project elements have not been attempted before. This makes documenting lessons learned crucial for IT projects.   The U.S. research and advisory firm Gartner creates a research report for the project and portfolio management market that categorizes vendors into four categories based on their ability to understand market needs and to drive the acceptance of new technologies. These are graphed on axes labeled “completeness of vision” and “ability to execute,” respectively. The “magic quadrant” is the upper right of this graph in which leaders in both areas cluster.  

Cost Management in Construction Projects

Construction project cost managers, or quantity surveyors, oversee cost estimation and cost control while maintaining a project’s profitability. They are responsible for ensuring that a project remains within budget while meeting its scope, quality, and performance requirements.   Though the majority of construction projects are not subject to the “first-time, first-use penalty,” they are still highly complex. And as hard projects, their design, scope, and budgetary requirements must be planned before work begins. Experience and formal training are essential for quantity surveyors.   The evaluation and recommendation of bids is one of the quantity surveyor’s primary responsibilities, though they may be engaged in a project from inception to conclusion. In fact, quantity surveyors get their name from the bill of quantities , a cost estimate prepared by the surveyor and by which contractors’ tenders are assessed.

To aid cost management for large, complex projects, quantity surveyors or project managers may use cost codes discussed earlier to set up multiple cost accounts. These accounts are essentially portions of budget marked for specific expenses such as labor, construction materials, architectural design, etc.

Home Construction Budget Template

Download Construction Budget Template

Excel |  Smartsheet

Construction Estimator Template

Download Construction Estimator Template

Excel  ‌| Word | PDF |  Smartsheet    

Exploring Cost Management as a Career

Professional cost managers, sometimes called quantity surveyors, work on large projects (such as construction). But project managers also need an understanding of cost management strategies and techniques to perform their duties.   Cost management requires creative problem-solving skills and a thorough understanding of the factors that affect project costs. As such, cost managers are in high demand and have opportunities to progress to lead project managers.   One popular cost management profession is cost accounting, which is determining the costs focused on creating a product or providing a service. Cost accountants deal with budget preparation and profitability analysis, and their main responsibilities include collecting and communicating cost-related data to aid management decision-making and create financial transparency.   Cost accountants typically study accounting or finance at the undergraduate level, and many pursue master’s degrees in business administration or finance with a specialization in accounting. They typically need a license to advance their careers, which can be obtained after meeting some combination of work and educational requirements.

How Smartsheet Can Help with Cost Management Across Your Projects

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Project cost management: Definition, steps, and benefits

Cost management is the process of planning, budgeting, and reporting project spend in order to keep teams on budget and overall costs reasonable. In this article, we'll go over the four functions of cost management and explain exactly how to use them to improve your project's bottom line.

What is cost management?

Cost management is the process of estimating, budgeting, and controlling project costs. The cost management process begins during the planning phase and continues throughout the duration of the project as managers continuously review, monitor, and adjust expenditures to ensure the project doesn't go over the approved budget.

Why is cost management important?

Have you ever wondered what happens when a project goes significantly over budget? The consequences can be severe—from strained relationships with clients to financial losses. Let's consider an example:

A small software development team was tasked with creating a custom application for a client. Midway through, they realized the project was quickly exceeding the initial budget. They faced a common dilemma: continue as planned and absorb the extra costs or re-evaluate their approach.

By implementing rigorous cost management strategies, the team was able to identify areas where expenses were ballooning. They streamlined their project management processes, prioritized essential features, and renegotiated terms with subcontractors. This approach not only brought the project back within budget but also improved their working relationship with the client, who appreciated their transparency and commitment to delivering value.

This scenario highlights how effective cost management can transform a potentially disastrous situation into a success story.

How to create a cost management plan

Cost management is a continuous, fluid process. However, there are four main elements or functions that can be found in any cost management plan:

Cost estimating

Cost budgeting, cost control.

Because new expenses can appear and project scope can be adjusted, cost managers need to be prepared to perform all four functions at any time throughout the project life cycle. Your workflow will vary according to the project’s needs.

Here, we'll break down each of the four elements in greater detail and explain what is required from the cost manager at each stage.

The very first step in any cost management process is resource planning, which is when the cost manager reviews the project's scope and specs to figure out what resources the project will require.

A resource is anything that helps you complete a project—including tools, money, time, equipment, and even team members. To create the most accurate resource plan possible, consult directly with team leads and stakeholders about what resources they will need during the project. People with hands-on experience in each project department will have a better understanding of what resources will be required. 

For this step, you'll need:

Clearly defined project objectives

A high-level project roadmap or a work breakdown structure (WBS) , depending on the complexity of the project

A tentative resource management plan

A project scope statement

Once you have a list of necessary resources, the next step is to estimate what it will cost to procure them. The key to this step is to gather as much pricing information as possible so that you can make informed cost estimates.

For tangible resources like tools, supplies, and equipment, get real price quotes from sellers to inform your cost estimate. For labor costs, get multiple price quotes from potential contractors to help give you a realistic idea of what the work you require will actually cost. Keep in mind that some time may pass between when you make your estimate and when these items will be purchased, so you should build in some room in case prices rise. 

In addition to building in a cushion for each individual cost, you'll also need to add a buffer of 5–10% to your cost total to account for unexpected expenses. If this is your first time working with this project team, find out if the previous cost manager generated budget reports at the end of past projects. 

You can take a look at how much previous projects' final costs deviated from their initial estimates and use this cost data as a benchmark to estimate how much of a margin you need to build into your estimation report.

In the estimation stage , you'll need:

Project schedule or a PERT chart , depending on the complexity of the project

A list of your project deliverables

Clearly defined success metrics

Now that you have general estimates for your project needs and resource requirements, you can begin to work on your project budget . Your project budget is a detailed plan of how much you plan to spend during the project, for what, and by when. 

Depending on the complexity of your project, the “when” may significantly influence your cost management strategy. For multi-year projects, you may want to specify cost allocations so that no more than 30% of your budget should be spent in the first year, etc. This can prevent cost overruns later down the road.

In this stage, you'll need:

A project budget document 

A project stakeholder analysis

The bulk of the cost management process is made up of cost control . This is the process of recording and accounting costs as the project progresses, making adjustments, and alerting stakeholders to problems when they occur. The goal of the cost control step is to compare actual project costs with original budgets and estimates and take steps to make sure the project stays as close to plan as possible.

The frequency with which you review this will depend on your project. Sometimes you’ll want to review costs in real time. In other cases, you may check in monthly or even quarterly. Share cost updates as necessary through project status reports so the entire project team is on the same page.

Keep in mind that any changes to the project scope will impact the project budget and costs, so keep a close eye on scope creep. If the project cost deviates too much from what you budgeted, let your stakeholders know so you can proactively come up with an action plan.

Project management tool

Universal reporting tool

Post-project cost accounting

Once the project is over, it’s time to calculate cost variance and evaluate how far your project deviated from your original budget and estimates. What were the project’s total costs? How did your actual costs compare to your estimated costs? 

A successful project ends close to (but under) the forecasted project budget. If you spent too much money, you either underestimated your project budget or had too many unforeseen expenses. If this happens, hold a project post-mortem meeting to evaluate why that happened and prevent it from happening in the future.

On the flip side, spending too little of your budget is also not ideal. You estimated these costs for a reason, and if you came in significantly under budget, your cost-budgeting process was inaccurate. Log this information as historical data and keep it in mind for future projects, so you can increase your accuracy during the cost estimation phase.

How to calculate project costs

To ensure that your project stays profitable and within budget, it is essential to have a solid understanding of how to calculate project costs. 

Project managers have a variety of cost management methods to choose from, and picking the best one depends on the specific needs and scope of your project. Consider factors like project complexity, the predictability of tasks, client expectations, and the level of flexibility you'll need to achieve your cost-performance goals.

Calculating project costs on an hourly basis involves paying for the amount of work done, measured in hours. This method is particularly effective for projects where the scope is flexible or uncertain because it allows for adaptability as the project progresses. 

For example, consider a software development project. The development team's cost is calculated based on the number of hours they spend on the project. If the team works 100 hours a month at a rate of $100 per hour, the project costing for that month would be $10,000. This method provides flexibility and can accommodate changes in the project's scope effectively.

A flat rate, or fixed price, approach involves agreeing on a total project cost upfront. This method is ideal for projects with a well-defined scope and deliverables. This gives both parties a clear understanding of the total cost.

Imagine a marketing campaign. The agency and the client agree on a fixed price of $20,000 for the entire campaign. This price covers all aspects of the project, from planning to execution. The advantage here is predictability in budgeting, as the client knows exactly how much the project will cost, irrespective of the time and resources utilized.

The cost-plus method involves charging the actual costs of the project plus a markup or additional fee. This approach is often used in long-term projects where the costs cannot be accurately estimated at the start. It ensures that all project costs are covered and includes a profit margin.

For instance, in a construction project, the contractor charges for the actual costs incurred (like materials and labor) plus a fixed percentage as profit. If the material and labor costs amount to $50,000 and the agreed markup is 20%, the total charge to the client would be $60,000. This cost management method aligns the interests of the client and the contractor, as both parties aim for optimal cost performance.

Value-based pricing

Value-based pricing focuses on the value or benefit the client receives rather than the cost of the project itself. This estimation method is ideal for projects where the outcome has a high perceived value, regardless of the actual cost of delivery.

Consider a scenario where a consulting firm is helping a client increase their annual revenue. If the consultant's strategies result in a $1 million revenue increase, the consultant may charge a fee based on a percentage of the revenue increase, say 10%, which would be $100,000. Value-based pricing ensures that the pricing reflects the value delivered.

Effective project cost management methods

One of the most persistent challenges faced by teams across various industries is controlling and preventing budget overruns. These overruns not only strain financial resources but can also lead to compromised project quality, delayed timelines, and even project failure. 

Effective cost management is the key to tackling this challenge because it makes certain that projects are delivered within their allocated budgets while maintaining high standards of quality and efficiency.

Choosing the best cost-management method is key to addressing these financial challenges head-on. For further cost optimization, teams can leverage automation, management software, and dashboards that offer real-time cost analysis, cash flow, and future cost visualization. This will ultimately contribute to the success of your project.

Top-down estimating

Top-down estimating is a method where the overall project cost is estimated first, and then individual costs are deduced from this total. This approach is beneficial in the early stages of project planning, when detailed information is not yet available. It gives a quick and rough idea of how much the project will cost.

For example, in a new software development project, the project manager might estimate the total project cost at $200,000 based on previous similar projects. This total cost is then broken down into smaller segments like design, coding, testing, and deployment, each allocated a portion of the total budget. This method is effective for providing a preliminary cost framework and guiding early project decision-making.

Bottom-up estimating

Bottom-up estimating is the reverse of the top-down approach. It involves estimating individual tasks or components of the project first and then adding them up to get the total project cost. This estimation method is more accurate and reliable, especially for projects with a well-defined scope, as it considers detailed cost information.

Consider a construction project where each part of the project, such as foundation laying, framing, plumbing, and electrical work, is estimated individually based on detailed analysis. After estimating all these components, the costs are summed up to determine the overall project budget. Bottom-up estimating is ideal for teams that need precise control over each aspect of the project's costs.

Earned value management

Earned value management (EVM) is a sophisticated approach to cost management that combines measurements of project performance in terms of scope, schedule, and cost. EVM provides a comprehensive view of the project's progress and its alignment with the original project planning.

For instance, in a large infrastructure project, EVM would be used to track the following: 

Budgeted cost of work scheduled (BCWS)

Actual cost of work performed (ACWP)

Budgeted cost of work performed (BCWP) 

By comparing these figures, project managers can gauge the project's cost performance and take corrective action if necessary.

Three-point estimating

Three-point estimating is used to determine a more realistic estimate by considering three scenarios: 

Most optimistic (best-case) 

Most pessimistic (worst-case) 

Most likely 

This cost management method provides a range of possible outcomes, which can increase the predictability and cost performance of a project.

Take, for example, a new product development project. The project manager might estimate that the design phase could take 30 days (optimistic), 45 days (most likely), or 60 days (pessimistic). Using these three points, they calculate an average or weighted average duration, which helps in setting realistic timelines and budgets.

FAQ about cost management

What is the first step in project cost management.

The first step in project cost management is to define the baseline for your project's budget. This involves identifying all potential costs and inputs related to the project, including labor, materials, equipment, and any other expenses. Creating a baseline is essential because it provides the framework for monitoring and controlling expenses during the lifecycle of a project.

What are the 5 functions of cost management?

The five key functions of cost management are:

Cost estimation: Determining the total cost required for completing the project.

Cost budgeting: Allocating the overall cost estimate to individual work items to establish a baseline for measuring performance.

Cost control: Monitoring project expenses and implementing measures to keep costs within the approved budget.

Cash flow management : Ensuring there is adequate cash flow to meet project needs, which is critical for maintaining project momentum.

Procurement management: Managing the procurement of goods and services, ensuring that everything is obtained at the best possible cost and meets project needs.

What is cost management in project management?

Cost management in project management is the process of planning, estimating, budgeting, and controlling costs with the aim of completing the project within the approved budget. It involves a continuous process of measuring and monitoring project activities and expenses and implementing necessary adjustments to ensure that the project's financial resources are used effectively. 

Improve your project performance with cost management

Cost management has a lot of moving parts. But as long as your team has visibility into project costs, you can prevent cost overruns and ensure you’re finishing your project under budget every time.

To keep track of all of your project’s information, use a work management platform like Asana. From project costing and kickoff to post-mortem, Asana helps you stay in sync with your project team members and stakeholders during the entire project process.

Related resources

Data-driven decision making: A step-by-step guide

How Asana uses work management for employee onboarding

4 ways to establish roles and responsibilities for team success

Cost control: How to monitor project spending to increase profitability

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Assign access to Cost Management data

• 5 contributors

For users with Azure Enterprise (EA) agreements, a combination of permissions granted in the Azure portal define a user's level of access to Cost Management data. For users with other Azure account types, defining a user's level of access to Cost Management data is simpler by using Azure role-based access control (RBAC). This article walks you through assigning access to Cost Management data. After the combination of permissions is assigned, the user views data in Cost Management based on their access scope and on the scope that they select in the Azure portal.

The scope that a user selects is used throughout Cost Management to provide data consolidation and to control access to cost information. When scopes are used, users don't multi-select them. Instead, they select a larger scope that child scopes roll up to and then they filter-down to what they want to view. Data consolidation is important to understand because some people shouldn't access a parent scope that child scopes roll up to.

Watch the Cost Management controlling access video to learn about assigning access to view costs and charges with Azure role-based access control (Azure RBAC). To watch other videos, visit the Cost Management YouTube channel . This video mentions the Azure EA portal, which is retired. However, equivalent functionality that's available in the Azure portal is also discussed.

Cost Management scopes

Cost management supports various Azure account types. To view the full list of supported account types, see Understand Cost Management data . The type of account determines available scopes.

Azure EA subscription scopes

To view cost data for Azure EA subscriptions, a user must have at least read access to one or more of the following scopes.

¹ The billing account is also referred to as the Enterprise Agreement or Enrollment.

² The enrollment account is also referred to as the account owner.

Enterprise administrators can assign the billing account, department, and enrollment account scope in the Azure portal . For more information, see Azure portal administration for direct Enterprise Agreements .

Other Azure account scopes

To view cost data for other Azure subscriptions, a user must have at least read access to one or more of the following scopes:

• Management group
• Subscription
• Resource group

Various scopes are available after partners onboard customers to a Microsoft Customer Agreement. Cloud solution providers (CSP) customers can then use Cost Management features when enabled by their CSP partner. For more information, see Get started with Cost Management for partners .

Enable access to costs in the Azure portal

If you have a Microsoft Customer Agreement (MCA) or an Enterprise agreement, you can enable access to costs in the Azure portal. The required setting varies by scope. Use the following information to enable access to costs in the Azure portal.

Enable MCA access to costs

The Azure charges setting is used to enable access to costs for MCA subscriptions. The setting is available in the Azure portal at the billing account scope. You must have Billing Profile Owners permission to enable the setting. Otherwise, you won't see the setting.

To enable the setting, follow these steps:

• Sign in to the Azure portal with an account with Billing Profile Owners permission.
• Select the Cost Management + Billing menu item.
• Select Billing scopes to view a list of available billing scopes and billing accounts.
• Select your Billing Account from the list of available billing accounts.
• In the left navigation pane, select Billing profiles .
• Select the billing profile.
• In the left navigation pane, select Policies .

Enable EA access to costs

The department scope requires the Department admins can view charges (DA view charges) option set to On . Configure the option in the Azure portal. All other scopes require the Account owners can view charges (Account owner (AO) view charges) option set to On . You must have the Enterprise Administrator role to enable the setting. Otherwise, you won't see the setting.

To enable an option in the Azure portal:

• Sign in to the Azure portal with an enterprise administrator account.

After the view charge options are enabled, most scopes also require Azure role-based access control (Azure RBAC) permission configuration in the Azure portal.

Enterprise administrator role

By default, an enterprise administrator can access the billing account (Enterprise Agreement/enrollment) and all other scopes, which are child scopes. The enterprise administrator assigns access to scopes for other users. As a best practice for business continuity, you should always have two users with enterprise administrator access. The following sections are walk-through examples of the enterprise administrator assigning access to scopes for other users.

Assign billing account scope access

Access to the billing account scope requires enterprise administrator permission. The enterprise administrator can view costs across the entire EA enrollment or multiple enrollments. The enterprise administrator can assign access to the billing account scope to another user with read only access. For more information, see Add another enterprise administrator .

It might take up to 30 minutes before the user can access data in Cost Management.

Assign department scope access

Access to the department scope requires department administrator (DA view charges) access. The department administrator can view costs and usage data associated with a department or to multiple departments. Data for the department includes all subscriptions belonging to an enrollment account that are linked to the department.

Enterprise administrators can assign department administrator access. For more information, see Add a department administrator .

Assign enrollment account scope access

Access to the enrollment account scope requires account owner (AO view charges) access. The account owner can view costs and usage data associated with the subscriptions created from that enrollment account. Enterprise administrators can assign account owner access. For more information, see Add an account owner in the Azure portal .

Assign management group scope access

Access to view the management group scope requires at least the Cost Management Reader (or Reader) permission. You can configure permissions for a management group in the Azure portal. You must have at least the User Access Administrator (or Owner) permission for the management group to enable access for others. And for Azure EA accounts, you must also enable the AO view charges setting.

You can assign the Cost Management Reader (or reader) role to a user at the management group scope. For more information, see Assign Azure roles using the Azure portal .

Assign subscription scope access

Access to a subscription requires at least the Cost Management Reader (or Reader) permission. You can configure permissions to a subscription in the Azure portal. You must have at least the User Access Administrator (or Owner) permission for the subscription to enable access for others. And for Azure EA accounts, you must also enable the AO view charges setting.

You can assign the Cost Management Reader (or reader) role to a user at the subscription scope. For more information, see Assign Azure roles using the Azure portal .

Assign resource group scope access

Access to a resource group requires at least the Cost Management Reader (or Reader) permission. You can configure permissions to a resource group in the Azure portal. You must have at least the User Access Administrator (or Owner) permission for the resource group to enable access for others. And for Azure EA accounts, you must also enable the AO view charges setting.

You can assign the Cost Management Reader (or reader) role to a user at the resource group scope. For more information, see Assign Azure roles using the Azure portal .

Cross-tenant authentication issues

Currently, Cost Management provides limited support for cross-tenant authentication. In some circumstances when you try to authenticate across tenants, you may receive an Access denied error in cost analysis. This issue might occur if you configure Azure role-based access control (Azure RBAC) to another tenant's subscription and then try to view cost data.

To work around the problem : After you configure cross-tenant Azure RBAC, wait an hour. Then, try to view costs in cost analysis or grant Cost Management access to users in both tenants.

• If you haven't read the first quickstart for Cost Management, read it at Start analyzing costs .

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Project Cost Management: Process, Importance, Examples, And Plan, And Tools

Written By : Bakkah

Table of Content

What is Cost management definition?

Importance and benefits of project cost management, project cost management best practices, project cost management process, project cost management template, what are cost management tools, how to create a cost management plan, effective project cost management methods, how to calculate project costs, who is responsible for project cost management, project cost management examples, challenges of cost management , project management cost with bakkah learning:, popular articles.

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Project Cost Management is the process of planning, estimating, budgeting, financing, funding, managing, and controlling costs so that the project can be completed within the approved budget. Project Cost Management includes activities such as cost estimation, budget development, cost control, and monitoring expenditures throughout the project lifecycle. Effective cost management is crucial for budget control, resource optimization, risk mitigation, stakeholder confidence, competitive advantage, and project success. 

Best practices of Project Cost Management include comprehensive planning, regular monitoring and reporting, risk management, clear communication, cost control measures, change management, continuous improvement, and the utilization of technology.

Successful project cost management involves the collaboration of project managers, finance teams, and other relevant stakeholders to develop realistic budgets, identify cost-saving opportunities, and mitigate financial risks . By implementing robust cost management practices, organizations can optimize resource allocation, enhance project performance, and maximize return on investment. 

Additionally, continuous evaluation and adjustment of cost management strategies based on project progress and changing circumstances are essential to adapt to unforeseen challenges and ensure the project's financial viability.

 Cost management involves a series of activities aimed at ensuring that the project is completed within the allocated financial resources while delivering the intended value and meeting stakeholders' expectations. 

This process encompasses various stages, including cost estimation, budget development, cost control, and monitoring of expenditures throughout the project lifecycle. Effective cost management requires accurate forecasting, diligent tracking of expenses, proactive risk management and regular reporting to stakeholders to ensure transparency and accountability.

Project cost management is crucial for several reasons:

1. Budget Control: 

Effective cost management ensures that a project stays within its allocated budget. By accurately estimating costs, tracking expenses, and implementing cost-saving measures, organizations can prevent overspending and avoid financial risks, ensuring the project's financial health and viability.

2. Resource Optimization: 

Proper cost management enables organizations to optimize resource allocation, including finances, manpower, materials, and equipment. By identifying and eliminating inefficiencies, reallocating resources as needed, and prioritizing spending, projects can operate more efficiently, enhancing productivity and reducing waste.

3. Risk Mitigation: 

Cost management helps identify and mitigate financial risks that may impact project outcomes. By proactively identifying potential cost overruns, fluctuations in resource prices, or unexpected expenses, organizations can develop contingency plans and strategies to mitigate these risks, minimizing the impact on the project's timeline and budget.

4. Stakeholder Confidence: 

Transparent and effective cost management builds trust and confidence among project stakeholders, including clients, investors, and sponsors. Providing regular updates on budget status, demonstrating prudent financial management practices, and delivering projects within budget constraints enhance stakeholder satisfaction and credibility, fostering positive relationships and future opportunities.

5. Competitive Advantage: 

Efficient cost management can give organizations a competitive edge by allowing them to deliver projects more cost-effectively than their competitors.

6. Project Success: 

Ultimately, successful project cost management contributes to the overall success of the project. By ensuring that the project is completed within budget, on time, and according to quality standards, organizations can achieve their objectives, deliver value to stakeholders, and sustain competitiveness in the marketplace. Effective cost management is therefore essential for achieving project goals, maximizing return on investment, and driving organizational success.

Some best practices for project cost management include:

1. Planning : 

Begin with comprehensive planning that includes detailed cost estimation and budgeting. Break down the project into manageable tasks, identify all potential costs, and develop a realistic budget based on accurate estimates.

2. Regular Monitoring and Reporting: 

Implement a robust system for monitoring project costs regularly. Track expenses against the budget, identify variances and analyze the reasons behind them. Provide timely and accurate reports to stakeholders to keep them informed about the project's financial status.

3. Risk Management: 

Anticipate potential cost risks and develop strategies to mitigate them. Identify common cost drivers, such as resource shortages, scope changes, or market fluctuations, and develop contingency plans to address them effectively.

4. Clear Communication: 

Foster open and transparent communication among project team members, stakeholders, and relevant departments. Ensure that everyone understands the budget constraints, cost objectives, and their roles in managing project costs effectively Cost Control 

5. Measures : 

Implement cost control measures to optimize spending and prevent cost overruns. This may include negotiating better prices with suppliers, implementing cost-saving initiatives, or reevaluating the scope to align with the budget.

6. Change Management: 

Establish a formal change management process to handle scope changes or variations that may impact project costs. Assess the financial implications of proposed changes, obtain approval from relevant stakeholders, and update the budget and plans accordingly.

7. Continuous Improvement: 

Regularly review project cost management processes and performance to identify areas for improvement. Collect feedback from team members, conduct post-project reviews, and incorporate lessons learned into future projects to enhance cost management practices.

8. Utilization of Technology: 

Leverage project management software and cost-tracking tools to streamline cost-management processes, automate reporting, and improve accuracy. Utilizing technology can also facilitate real-time collaboration and decision-making among project stakeholders.

By following these best practices, organizations can effectively manage project costs, minimize financial risks, and increase the likelihood of project success.

Project cost management is the process of planning, estimating, budgeting, financing, funding, managing, and controlling costs so that the project can be completed within the approved budget. It involves several key processes:

1. Cost Estimation:  

This involves estimating the costs of the resources (such as labor, materials, equipment) needed to complete the project activities.

2. Cost Budgeting: 

Once the costs are estimated, a budget is developed, which outlines how much will be spent on each activity or work package

3. Cost Control:  

During the execution phase, cost control involves monitoring project costs to ensure they stay within the approved budget. This includes tracking expenses, identifying variances, and taking corrective actions if necessary to keep costs in line.

4. Resource Planning: 

Efficiently planning and allocating resources to minimize costs while meeting project objectives.

5. Risk Management: 

Identifying and assessing potential risks that could impact project costs, and developing strategies to mitigate these risks.

6. Procurement Management:  

Managing the procurement process to obtain goods and services needed for the project at the best possible price.

Overall, effective cost management helps ensure that the project is completed within budget constraints while delivering the expected results.

A project cost management template typically includes sections for various aspects of cost management throughout the project lifecycle. Here's a basic template outline:

Project Cost Estimation:

• Identify all resources needed for the project (labor, materials, equipment, etc.).
• Estimate the cost of each resource.
• Use historical data, expert judgment, and other estimation judgment, and other estimation techniques

Cost Baseline Development:

• Develop a baseline budget that outlines the total cost of the project.
• Break down the budget by phase, deliverable, or work package.

Cost Tracking and Monitoring:

• Establish a system for tracking actual costs incurred during project execution.
• Compare actual costs to the baseline budget regularly.
• Identify and address any cost variances promptly.

Cost Control Measures:

• Implement measures to control costs and prevent budget overruns.
• Define thresholds for acceptable cost variances.
• Develop a process for approving and managing changes to the budget.

Resource Allocation:

• Allocate resources based on project needs and budget constraints.
• Ensure resources are utilized efficiently to minimize costs.

Risk Management:

• Identify potential cost risks and their impact on the project.
• Develop strategies to mitigate cost risks and minimize their likelihood of occurrence.

Procurement Management :

• Identify procurement needs for goods and services required for the project.
• Develop procurement plans and strategies to obtain goods and services at the best possible cost

Financial Reporting:

• Generate regular reports on project financials, including budget status, actual costs, and cost variances.
• Communicate financial status to stakeholders and project team members.

Documentation and Lessons Learned:

• Maintain documentation related to project costs, including estimates, budgets, and cost reports.
• Document lessons learned regarding cost management for future projects.

Continuous Improvement:

• Review cost management processes regularly and identify areas for improvement.
• Implement changes to enhance cost management effectiveness for future projects.

Cost management tools are software applications or platforms designed to assist project managers and teams in planning, tracking, analyzing, and controlling project costs effectively. These tools typically offer a range of features to streamline various aspects of cost management. Some common cost management tools include:

1. Project Management Software: 

Comprehensive project management platforms often include built-in features for cost management, such as budget tracking, expense management, and reporting. Examples include: 

• Microsoft Project

2. Spreadsheet Software : 

Spreadsheet programs are commonly used for cost management due to their flexibility and familiarity. They can be customized to create budget templates, track expenses, and perform cost calculations. Examples include:

• Microsoft Excel
• Google Sheets
• Apple Numbers

3. Cost Estimation Software : 

These tools specialize in helping project managers estimate project costs accurately. They may use historical data, industry benchmarks, and mathematical models to generate cost estimates. Examples include:

4. Expense Management Tools: 

These tools streamline the process of tracking and managing project expenses, including reimbursable costs, invoices, and receipts. Examples include:

• Zoho Expense

5. Financial Management Software: 

Dedicated financial management platforms offer features for budgeting, forecasting, and financial reporting, which can be useful for project cost management. Examples include:

6. Time Tracking Software : 

While primarily used for tracking time spent on tasks, time-tracking tools can also help indirectly in cost management by providing insights into resource utilization and labor costs. Examples include:

7. Procurement Management Software: 

For projects involving procurement of goods and services, procurement management tools can help streamline the procurement process, track vendor contracts, and manage supplier relationships. Examples include:

8. Business Intelligence Tools:

Advanced analytics and reporting tools can be used to analyze project costs, identify trends, and generate insights for better decision-making. Examples include

These tools can vary in complexity and functionality, so it's important to choose the ones that best fit the specific needs and requirements of your project and organization. Additionally, integrating multiple tools may be necessary to cover all aspects of cost management effectively.

Creating a cost management plan involves several key steps to ensure that project costs are effectively planned, monitored, and controlled. Here's a step-by-step guide to creating a cost management plan:

1. Define Objectives and Scope:

Clearly define the objectives of the cost management plan.

Identify the scope of the plan, including which projects or phases it applies to and the key stakeholders involved.

2. Identify Cost Categories:

Break down the project costs into categories such as labor, materials, equipment, overhead, contingency, etc.

Determine which costs are direct (specifically attributed to the project) and which are indirect (shared across multiple projects or overhead).

3. Estimation Techniques:

Choose appropriate cost estimation techniques based on the nature of the project and available information.

Common techniques include analogous estimation, parametric estimation, and bottom-up estimation.

4. Cost Baseline Development:

Develop a baseline budget that represents the total estimated cost of the project.

Break down the budget by phase, deliverable, or work package to track costs at a granular level.

5. Cost Control Measures:

Define measures to control costs and prevent budget overruns.

Establish thresholds for acceptable cost variances and develop a process for managing changes to the budget.

6. Resource Allocation:

Allocate resources based on project needs, budget constraints, and resource availability.

Ensure resources are utilized efficiently to minimize costs and maximize productivity.

7. Risk Management:

Identify potential cost risks that could impact the project budget.

Develop strategies to mitigate these risks and minimize their likelihood of occurrence.

8. Procurement Strategy:

Determine the procurement needs for goods and services required for the project.

Develop a procurement strategy to obtain these items at the best possible cost, considering factors such as quality, schedule, and budget.

9. Roles and Responsibilities:

Clearly define the roles and responsibilities of team members involved in cost management.

Assign specific individuals or teams to oversee cost estimation, budgeting, tracking, and control.

10. Communication Plan:

Establish a communication plan to keep stakeholders informed about project costs.

Define reporting mechanisms, frequency of updates, and the format of cost-related communications.

11. Documentation and Reporting:

Document all cost-related information, including estimates, budgets, actual costs, and cost variances.

Develop a system for generating regular cost reports and distributing them to stakeholders

12. Review and Update:

Regularly review the cost management plan throughout the project lifecycle.

Update the plan as needed to reflect changes in project scope, budget, or other factors.

By following these steps, you can create a comprehensive cost management plan that helps ensure your project stays on budget and delivers value to stakeholders.

Effective project cost management involves various methods and strategies to ensure projects stay within budget. Here are some key methods:

1. Cost Estimation : 

Accurately estimating project costs at the outset is crucial. Techniques like analogous estimation, parametric estimation, and bottom-up estimation can be used.

2. Budget Allocation: 

Once costs are estimated, allocate budgets to different project phases and activities. This helps in tracking and controlling expenses.

3. Cost Tracking: 

Regularly track expenses against the budget using tools like cost-tracking software or spreadsheets. This helps in identifying cost overruns early.

4. Change Management: 

Implement a robust change management process to evaluate and approve changes to the project scope, timeline, or budget. This prevents unauthorized scope creep and cost increases.

5. Resource Management: 

Efficiently manage resources to avoid wastage and optimize costs. This includes human resources, materials, equipment, and subcontractors.

6. Risk Management: 

Identify potential risks that could impact project costs and develop mitigation strategies. Contingency reserves can be allocated to handle unforeseen events.

7. Vendor Management: 

Negotiate contracts with vendors and suppliers to get competitive prices and favorable terms. Regularly review vendor performance to ensure value for money.

8. Earned Value Management (EVM):  

EVM integrates cost, schedule, and scope to assess project performance. It helps in forecasting future costs and identifying variances from the baseline plan.

Calculating project costs involves several steps:

1. Identify Resources:  

List all resources required for the project, including personnel, equipment, materials, and any external services.

2. Estimate Costs: 

Estimate the cost of each resource item. For personnel, this involves calculating labor costs based on salaries, wages, benefits, and overhead. For materials and equipment, research current market prices or obtain quotes from suppliers. For external services, solicit bids or estimates based on past experiences.

3. Allocate Costs: 

Allocate costs to specific project tasks or activities. Break down costs by phase, milestone, or deliverable to create a detailed cost breakdown structure (CBS).

4. Account for Contingencies: 

Include contingency reserves to account for unforeseen events or changes in scope. Typically, this is a percentage of the total project cost, based on risk assessment and historical data.

5. Calculate Total Project Cost: 

Sum up all estimated costs, including direct costs (e.g., labor, materials) and indirect costs (e.g., overhead, administrative expenses) to determine the total project budget.

6. Monitor and Update: 

Continuously monitor project expenses against the budget throughout the project lifecycle . Update cost estimates as needed to reflect changes in scope, schedule, or resource availability.

7. Analyze Variances: 

Analyze variances between actual costs and budgeted costs to identify areas of overruns or savings. Adjust future cost estimates and project plans accordingly to keep the project on track financially.

By following these steps, project managers can effectively calculate project costs and ensure financial transparency and accountability throughout the project.

Project cost management is a collaborative effort involving multiple stakeholders within an organization. The primary roles responsible for project cost management include:

1. Project Manager: 

The project manager oversees all aspects of project cost management. They are responsible for developing the project budget, monitoring expenses, managing cost estimates, and ensuring that the project stays within budgetary constraints.

2. Finance Department : 

The finance department provides expertise in financial planning and analysis. They may assist in creating cost estimates, tracking expenses, managing financial resources, and ensuring compliance with financial regulations.

3. Procurement Team: 

The procurement team is responsible for sourcing and acquiring the resources needed for the project. They play a crucial role in negotiating contracts, obtaining quotes, managing vendor relationships, and controlling procurement costs.

4. Project Team Members:

Team members contribute to cost management by accurately tracking their time and expenses, adhering to budget guidelines, and efficiently utilizing resources allocated to them.

5. Stakeholders : 

Stakeholders, including clients, sponsors, and senior management, are involved in project cost management by providing input on budget priorities, approving budget allocations, and monitoring financial performance against project objectives.

By engaging these key stakeholders and fostering effective communication and collaboration among them, organizations can ensure successful project cost management throughout the project lifecycle.

Here are some examples of project cost management in various industries:

1. Construction Project: 

In a construction project, cost management involves estimating costs for materials, labor, equipment, and subcontractors. Examples of cost management activities include preparing a cost baseline, tracking actual costs against the baseline, identifying cost variances, and implementing cost control measures to ensure the project stays within budget. 

For instance, a project manager might negotiate with suppliers to obtain discounts on materials, optimize resource allocation to minimize labor costs or identify opportunities to reduce waste and improve efficiency on the construction site.

2. Information Technology Project: 

In an IT project, cost management encompasses estimating expenses for hardware, software licenses, development resources, and ongoing maintenance. Examples of cost management activities include creating a budget for the project, monitoring spending against the budget, identifying cost-saving opportunities, and adjusting the budget as needed to align with project priorities. 

For instance, a project manager might explore options for using open-source software to reduce licensing fees, negotiate with vendors to obtain favorable pricing on hardware purchases or prioritize project features based on their cost-benefit ratio.

3. Marketing Campaign: 

In a marketing campaign project, cost management involves budgeting for advertising, creative services, promotional materials, and campaign execution. Examples of cost management activities include allocating funds to different marketing channels, tracking expenses for each campaign component, analyzing return on investment (ROI) for marketing initiatives, and optimizing spending to maximize the campaign's effectiveness.

For instance, a marketing manager might use cost-per-acquisition metrics to evaluate the efficiency of various advertising channels, adjust the allocation of funds based on campaign performance, or negotiate pricing with vendors to lower production costs for promotional materials.

4. Manufacturing Project: 

In a manufacturing project, cost management includes estimating expenses for raw materials, production equipment, labor, and overhead costs. Examples of cost management activities include developing a manufacturing budget, monitoring production costs in real-time, identifying opportunities to improve cost efficiency, and implementing lean manufacturing practices to reduce waste and increase productivity. 

For instance, a production manager might implement Just-In-Time (JIT) inventory management to minimize inventory holding costs, conduct value engineering to identify cost-saving opportunities in product design or invest in automation technologies to streamline manufacturing processes and reduce labor costs.

These examples illustrate how project cost management is essential in various industries to ensure that projects are completed within budgetary constraints while maximizing value for the organization.

Several challenges can arise in the process of cost management within projects. Some of these challenges include:

1. Accurate Estimation: 

It can be difficult to accurately estimate project costs, especially in complex projects with many variables. Uncertainties in material prices, labor rates, and project scope can lead to inaccurate cost estimates, which may result in cost overruns later in the project.

2. Scope Changes:  

Changes in project scope can impact costs significantly. Managing scope creep and effectively incorporating changes while controlling costs requires careful planning and communication with stakeholders.

3. Resource Allocation : 

Allocating resources efficiently while minimizing costs is a challenge, particularly in projects with competing priorities and limited resources. Poor resource allocation can lead to inefficiencies, delays, and increased costs.

4. Risk Management: 

Identifying and managing risks that could impact project costs is essential but challenging. Anticipating and mitigating risks such as material shortages, supplier delays, or regulatory changes requires proactive risk management strategies.

5. Vendor Management:  

Working with vendors and subcontractors introduces additional complexities in cost management. Ensuring that vendors deliver goods and services on time and within budget while maintaining quality standards, requires effective vendor management and communication.

6. Cost Tracking and Control: 

Tracking and controlling costs throughout the project lifecycle can be challenging, especially in large, complex projects. Without robust systems and processes in place, costs can escalate quickly, leading to budget overruns and project delays.

7. External Factors : 

External factors such as economic fluctuations, changes in market conditions, and geopolitical events can impact project costs unpredictably. Adapting to these external factors and mitigating their impact on project costs requires agility and flexibility in cost management.

Addressing these challenges requires a comprehensive approach to cost management, including accurate estimation, effective risk management, proactive communication, and continuous monitoring and control of project costs. By addressing these challenges proactively, project teams can improve cost predictability and deliver projects within budgetary constraints

Are you ready to take your career to the next level in  Project Management Cost? Look no further! Bakkah Learning offers comprehensive courses, including PMP, CAPM, and more, designed to equip you with the skills and knowledge you need to excel in this dynamic field.

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Conclusion:

In conclusion, Project Cost Management is indispensable for project success, ensuring that projects are completed within budget constraints while delivering value to stakeholders. 

By implementing effective cost management practices and addressing challenges proactively, organizations can optimize resource allocation, mitigate financial risks, and increase the likelihood of project success. 

Training and certification programs, such as those offered by Bakkah Learning, provide professionals with the necessary skills and knowledge to excel in project cost management and advance their careers in the field.

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Project Cost Management Basics

Table of Contents

What is project cost management, how to manage project costs in 4 steps, what is a cost management plan, cost management plan outline.

• Why Is Cost Management Important?

Cost Management Tips

Projectmanager is your cost management software, free cost management templates.

Cost management is the process of planning and managing the budget of a business or project. In the case of a project, it helps the project manager estimate what the project will cost and set controls to reduce the chances of the project going over budget.

Cost management is one of the most important responsibilities of a project manager; projects always need resources such as materials, labor and equipment, which generate costs. Those costs must be estimated and controlled throughout the project life cycle to complete the project.

Get your free

Project Estimate Template

Use this free Project Estimate Template for Excel to manage your projects better.

The four steps below outline how the cost management process works in project management.

1. Resource Planning

Resource planning is the process of forecasting future resource requirements for a business, project or scope of work. To create a resource plan, you need to start by defining the project scope , a document that details the project activities that will be done.

Once the project activities have been defined, project managers usually rely on historical data, expert opinions, and resource planning tools such as a resource breakdown structure (RBS) to estimate the resources that will be needed.

2. Cost Estimating

Cost estimating consists of assigning costs to the resources you need to execute your projects, such as labor, materials and equipment. Cost estimating is one of the most important steps in the cost management process because it lays out the base for your project budget. There are several project cost estimating techniques you can use depending on the characteristics of your project.

3. Cost Budgeting

Based on your cost estimates, you can now create a project budget , which is simply the sum of all your project costs. Make sure to include all types of project costs, including direct, indirect, fixed and variable costs. A project budget should also include contingency reserves in case there’s work that needs to be redone, or a risk has struck the project and risk mitigation strategies need to be taken.

Once the project starts, the project budget is a baseline that’s used to compare actual costs vs. estimated costs. Therefore, project budgets allow project managers to quickly understand if their costs are too high and if there’s a risk of cost overrun .

4. Cost Control

Cost control refers to all the activities, guidelines and procedures taken to minimize and track project costs. Poor cost control can affect the profitability of a project, but luckily project management software can help you to easily keep track of costs with tools such as timesheets, workload planners and project dashboards.

The outputs of these 4 steps can be documented in a cost management plan, a critical component of the project plan.

Effective cost management requires the right software. ProjectManager is the perfect tool to track project costs, resources and workload. Our Gantt charts, project calendars and timesheets allow you to manage costs, time and tasks in one place. Get started for free.

A cost management plan sounds simple. It’s an outline of the cost estimation for the project—but that includes all allocation and how the project manager will control those costs to bring the project in as budgeted.

A cost management plan must take into account the resources that impact the project budget, whether materials or people. There are also fixed, variable and overhead costs. All these must be calculated to know what your financial commitment to the project will be.

Last but not least is the stakeholder, who has a vested interest in keeping costs down. Cost overrun is a problem many projects experience, but not one that stakeholders will tolerate well. Keep the stakeholder in mind when formulating your cost management plan. They need to stay in the loop and get reports throughout the project.

Project Cost Estimate Template

This free project cost estimate template for Excel lets you list down all the costs related to your project resources such as labor, materials and equipment rental. Once you’ve accurately estimated these costs, you can create a project budget.

Here are some key elements that must be included in a cost management plan:

• Estimation Methods: Explain which cost estimation method was employed, such as parametric, bottom-up, three-point, etc.
• Units of Measure: To measure costs accurately, it’s important to establish units of measure for your labor, materials and equipment. Some examples of measurement units can be staff hours, square feet, tons, kilograms, etc.
• Cost Baseline: Based on your cost estimates, you must define a cost baseline that marks the spending limit for your project.
• Cost Control Thresholds: Establishing thresholds to monitor cost performance is important. This simply means that when cost variation reaches a certain percentage, the project team will take cost management actions.
• Performance Measurement Methods: Establish how the cost performance will be measured to see if you’re meeting the goals and expectations of the project. To do so, you’ll need a cost tracking system and earned value management (EVM) techniques.
• Reporting Guidelines: You need to have a format and communication channels to report your findings as you monitor the project’s progress and present this data to your stakeholders.

Why Is Cost Management Important In Project Management?

The main reason why cost management is so important in project management is that your cost management plan includes the guidelines and procedures needed to stay on budget. This is critical because otherwise, the organization could lose money as costs exceed profits.

The cost management process begins in the planning phase of the project , where costs are estimated and then a project budget is defined. Then, when the project is executed, the expenses are carefully monitored and recorded to make sure that they’re aligned with the budget.

When you have a project budget, it sets a baseline for project costs. That means it governs the decisions and directions you take when managing costs on your project. This helps you keep the project on track without overspending.

The following are some tips to keep in mind as you’re working on managing your project costs.

• Plan for Inflation: Pricing is not set in stone, and any good budget is going to take this into account by allowing for a range of costs.
• Account for Natural Disasters or Potential Events: Expect the unexpected might sound silly, but you must have room in your budget for a weather event, personal issue or another unknown that will delay the project.
• Other Unexpected Costs: Not all unexpected costs are random. There can be legal issues, penalties associated with the project or unexpected labor costs, all of which you can’t budget for, but can inform your budget.
• Track in Real-Time: Having software to monitor the budget as you execute the project is key for managing costs. However, if you’re looking at data that isn’t current, you won’t be able to act swiftly enough to resolve issues. Therefore, you want to have software with real-time data tracking .
• Respond Promptly: Regardless of how you discover a discrepancy in your project cost, you must act immediately. The longer you wait, the more money is wasted.
• Size Accordingly: Some people think smaller projects don’t need project cost management. But small or large, you’ll want to manage costs.

In order to best manage project costs, you have to know your project inside and out. The best way to do that is at the start of the project by creating a thorough project charter .

ProjectManager is online software with the tools you need for cost management planning across all phases of your project. Because our software is cloud-based, project data is delivered in real time so you can immediately gauge the accuracy of your cost estimates against the actual expenditure.

Our resource management feature helps you keep your workload balanced, which reigns in costs. We also have easy-to-use timesheets, where team members can submit with one click and project managers can approve with one click. But, our most powerful feature for cost management is our project dashboard, which tracks project costs in real time so you can keep a close eye on your budget.

We offer dozens of project management templates to help you manage your projects. Here are some templates to assist you as you go through the cost management process.

Project Budget Template

Our project budget template is ideal to document all your costs and set a baseline for your projects. It can be easily customized to meet the needs of your organization.

Resource Plan Template

You can’t manage costs without solid resource planning. Our resource plan template is the perfect tool to keep track of all the different resources that you’ll need to execute your projects.

Cost Benefit Analysis Template

Projects must be profitable, otherwise, it’s not a good idea to execute them. Before you start a project, make sure you do a cost-benefit analysis beforehand. Our cost-benefit analysis template is a great place to start.

Related Content

• Cost Benefit Analysis
• How to Track Project Expenses
• How to Calculate Cost Variance
• Tips for Better Cost Control

Learn More About Managing Project Cost

When you’re working on cost management, you’re establishing policies and procedures to manage and control your project costs. Jennifer Bridges, PMP, speaks to the core knowledge you need to know in order to understand cost management on any project in this short tutorial video.

Here’s a thumbnail for your reference.

Deliver your projects on time and on budget

Start planning your projects.

Cost Allocation

The process of identifying, accumulating, and assigning costs to costs objects

What is Cost Allocation?

Cost allocation is the process of identifying, accumulating, and assigning costs to costs objects such as departments, products, programs, or a branch of a company. It involves identifying the cost objects in a company, identifying the costs incurred by the cost objects, and then assigning the costs to the cost objects based on specific criteria.

When costs are allocated in the right way, the business is able to trace the specific cost objects that are making profits or losses for the company. If costs are allocated to the wrong cost objects, the company may be assigning resources to cost objects that do not yield as much profits as expected.

Types of Costs

There are several types of costs that an organization must define before allocating costs to their specific cost objects. These costs include:

1. Direct costs

Direct costs are costs that can be attributed to a specific product or service, and they do not need to be allocated to the specific cost object. It is because the organization knows what expenses go to the specific departments that generate profits and the costs incurred in producing specific products or services . For example, the salaries paid to factory workers assigned to a specific division is known and does not need to be allocated again to that division.

2. Indirect costs

Indirect costs are costs that are not directly related to a specific cost object like a function, product, or department. They are costs that are needed for the sake of the company’s operations and health. Some common examples of indirect costs include security costs, administration costs, etc. The costs are first identified, pooled, and then allocated to specific cost objects within the organization.

Indirect costs can be divided into fixed and variable costs. Fixed costs are costs that are fixed for a specific product or department. An example of a fixed cost is the remuneration of a project supervisor assigned to a specific division. The other category of indirect cost is variable costs, which vary with the level of output. Indirect costs increase or decrease with changes in the level of output.

3. Overhead costs

Overhead costs are indirect costs that are not part of manufacturing costs. They are not related to the labor or material costs that are incurred in the production of goods or services. They support the production or selling processes of the goods or services. Overhead costs are charged to the expense account, and they must be continually paid regardless of whether the company is selling goods or not.

Some common examples of overhead costs are rental expenses, utilities, insurance, postage and printing, administrative and legal expenses , and research and development costs.

Cost Allocation Mechanism

The following are the main steps involved when allocating costs to cost objects:

1. Identify cost objects

The first step when allocating costs is to identify the cost objects for which the organization needs to separately estimate the associated cost. Identifying specific cost objects is important because they are the drivers of the business, and decisions are made with them in mind.

The cost object can be a brand , project, product line, division/department, or a branch of the company. The company should also determine the cost allocation base, which is the basis that it uses to allocate the costs to cost objects.

2. Accumulate costs into a cost pool

After identifying the cost objects, the next step is to accumulate the costs into a cost pool, pending allocation to the cost objects. When accumulating costs, you can create several categories where the costs will be pooled based on the cost allocation base used. Some examples of cost pools include electricity usage, water usage, square footage, insurance, rent expenses , fuel consumption, and motor vehicle maintenance.

What is a Cost Driver?

A cost driver causes a change in the cost associated with an activity. Some examples of cost drivers include the number of machine-hours, the number of direct labor hours worked, the number of payments processed, the number of purchase orders, and the number of invoices sent to customers.

Benefits of Cost Allocation

The following are some of the reasons why cost allocation is important to an organization:

1. Assists in the decision-making process

Cost allocation provides the management with important data about cost utilization that they can use in making decisions. It shows the cost objects that take up most of the costs and helps determine if the departments or products are profitable enough to justify the costs allocated. For unprofitable cost objects, the company’s management can cut the costs allocated and divert the money to other more profitable cost objects.

2. Helps evaluate and motivate staff

Cost allocation helps determine if specific departments are profitable or not. If the cost object is not profitable, the company can evaluate the performance of the staff members to determine if a decline in productivity is the cause of the non-profitability of the cost objects.

On the other hand, if the company recognizes and rewards a specific department for achieving the highest profitability in the company, the employees assigned to that department will be motivated to work hard and continue with their good performance.

Additional Resources

Thank you for reading CFI’s guide to Cost Allocation. In order to help you become a world-class financial analyst and advance your career to your fullest potential, these additional resources will be very helpful:

• Break-Even Analysis
• Cost of Production
• Fixed and Variable Costs
• Projecting Income Statement Line Items
• See all accounting resources

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What is Cost Assignment?

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Cost assignment.

Cost assignment is the process of associating costs with cost objects, such as products, services, departments, or projects. It encompasses the identification, measurement, and allocation of both direct and indirect costs to ensure a comprehensive understanding of the resources consumed by various cost objects within an organization. Cost assignment is a crucial aspect of cost accounting and management accounting, as it helps organizations make informed decisions about pricing, resource allocation, budgeting, and performance evaluation.

There are two main components of cost assignment:

• Direct cost assignment: Direct costs are those costs that can be specifically traced or identified with a particular cost object. Examples of direct costs include direct materials, such as raw materials used in manufacturing a product, and direct labor, such as the wages paid to workers directly involved in producing a product or providing a service. Direct cost assignment involves linking these costs directly to the relevant cost objects, typically through invoices, timesheets, or other documentation.
• Indirect cost assignment (Cost allocation): Indirect costs, also known as overhead or shared costs, are those costs that cannot be directly traced to a specific cost object or are not economically feasible to trace directly. Examples of indirect costs include rent, utilities, depreciation, insurance, and administrative expenses. Since indirect costs cannot be assigned directly to cost objects, organizations use various cost allocation methods to distribute these costs in a systematic and rational manner. Some common cost allocation methods include direct allocation, step-down allocation, reciprocal allocation, and activity-based costing (ABC).

In summary, cost assignment is the process of associating both direct and indirect costs with cost objects, such as products, services, departments, or projects. It plays a critical role in cost accounting and management accounting by providing organizations with the necessary information to make informed decisions about pricing, resource allocation, budgeting, and performance evaluation.

Example of Cost Assignment

Let’s consider an example of cost assignment at a bakery called “BreadHeaven” that produces two types of bread: white bread and whole wheat bread.

BreadHeaven incurs various direct and indirect costs to produce the bread. Here’s how the company would assign these costs to the two types of bread:

• Direct cost assignment:

Direct costs can be specifically traced to each type of bread. In this case, the direct costs include:

• Direct materials: BreadHeaven purchases flour, yeast, salt, and other ingredients required to make the bread. The cost of these ingredients can be directly traced to each type of bread.
• Direct labor: BreadHeaven employs bakers who are directly involved in making the bread. The wages paid to these bakers can be directly traced to each type of bread based on the time spent working on each bread type.

For example, if BreadHeaven spent $2,000 on direct materials and $1,500 on direct labor for white bread, and $3,000 on direct materials and $2,500 on direct labor for whole wheat bread, these costs would be directly assigned to each bread type.

• Indirect cost assignment (Cost allocation):

Indirect costs, such as rent, utilities, equipment maintenance, and administrative expenses, cannot be directly traced to each type of bread. BreadHeaven uses a cost allocation method to assign these costs to the two types of bread.

Suppose the total indirect costs for the month are $6,000. BreadHeaven decides to use the number of loaves produced as the allocation base , as it believes that indirect costs are driven by the production volume. During the month, the bakery produces 3,000 loaves of white bread and 2,000 loaves of whole wheat bread, totaling 5,000 loaves.

The allocation rate per loaf is:

Allocation Rate = Total Indirect Costs / Total Loaves Allocation Rate = $6,000 / 5,000 loaves = $1.20 per loaf

BreadHeaven allocates the indirect costs to each type of bread using the allocation rate and the number of loaves produced:

• White bread: 3,000 loaves × $1.20 per loaf = $3,600
• Whole wheat bread: 2,000 loaves × $1.20 per loaf = $2,400

After completing the cost assignment, BreadHeaven can determine the total costs for each type of bread:

• White bread: $2,000 (direct materials) + $1,500 (direct labor) + $3,600 (indirect costs) = $7,100
• Whole wheat bread: $3,000 (direct materials) + $2,500 (direct labor) + $2,400 (indirect costs) = $7,900

By assigning both direct and indirect costs to each type of bread, BreadHeaven gains a better understanding of the full cost of producing each bread type, which can inform pricing decisions, resource allocation, and performance evaluation.

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cost management

• Ben Lutkevich, Site Editor

What is cost management?

Cost management is the process of planning and controlling the budget of a business. Having a good cost management system in place makes it easier for an organization to estimate and allocate its budget.

Cost management is a form of management accounting that helps a business reduce the chance of going over budget with more accurate forecasts of impending expenditures. Many businesses use cost management tactics for specific projects and for the overall business.

When applied to a project, expected costs are calculated while the project is being planned and are approved beforehand. All project expenses are recorded and monitored to ensure they align to the cost management plan. After the project is finished, the actual total costs are compared to the predicted costs. This analysis enhances future cost management predictions and cost budgeting.

While cost management is a general term relating to project cost management in any industry, it also often refers to estimating and managing cloud services costs to reduce cloud waste .

4 steps of cost management

Cost management is an integral part of project planning and management. Cost management strategies are developed alongside the project plan.

The following are the four main steps to cost management.

The setup phase determines what's included in the cost management plan. It identifies who the stakeholders in the plan are, the tools used to manage costs and the data structure needed to track costs.

2. Resource planning

This planning phase identifies the resources needed to complete a project. These could be physical materials, information assets, staff and cloud computing resources. Resource planning determines resource allocation, including how much of a resource is needed, for how long and how it will be allocated.

3. Budgeting and cost estimation

In this stage, project teams develop a project budget. Budgeted cost estimates get more specific as the project scope is refined. A picture of the full project costs emerges as resources are allocated.

Project managers compare the current project to earlier ones to gain insight. They can use top-down and bottom-up estimation methods. In the top-down approach, upper management in an organization determines the project duration, the tasks and project activities involved and the estimated costs for each of them. In a bottom-up approach, each team estimates the duration and allocated budget of their individual tasks. Management uses that information to determine the project's duration and estimated budget.

4. Cost control

This phase involves monitoring and controlling costs as the project progresses, using data from different project teams. Managers track how costs differ from the estimated budget and take action to accommodate cost overruns, reduce deviations from the budget and cap the budget when necessary.

Effective cost management processes require accurate cost reporting. This involves access to real-time cost data and insight using data visualization . Variances from budgeted costs must be measured, and corrective measures taken.

Benefits of cost management

The benefits of cost management include the following:

• Reduces overspending. Cost controls help project managers keep their budget on track and not let costs get out of control.
• Encourages planning. Cost management helps identify what is and isn't working. It provides insight into resources and processes that helps managers make faster and better decisions about the current project and future ones.
• Facilitates financial health. Continuous monitoring, cost control and cost reporting contribute to a company's long-term financial health. These efforts provide the data necessary for good decision-making. Implementing a cost management structure for projects helps a business keep its overall budget under control.
• Mitigates risk. Cost management typically involves setting a risk allowance for unforeseen costs, a useful step to prevent overspending.
• Supports standards. Consistent cost control, analysis and reporting help organizations adopt standards for assessing future cost data and productivity levels.
• Improves visibility. Many cost management tools for cloud services give real-time visibility into cost management metrics, like savings. They also provide a list of the users' assets, and some use machine learning to provide suggestions on areas where users can change behaviors to save money.

Challenges of cost management

Common challenges of cost management include the following:

• Change management. Project changes are inevitable. Teams must be able to adapt to changing circumstances and manage the budget accordingly.
• Effective communication. Reporting can be perceived in different ways, depending on who sees it. A project manager may view results differently than project stakeholders.
• Tool sprawl. Lack of a dedicated project management or cost management tool can make managing cost over multiple tools difficult and complex. This can cause data integrity issues and hamper reporting and visualization capabilities.
• Project scope. Poorly defined project scope can lead to cost overruns from inaccurate estimates.
• Underestimation. If a project manager underestimates costs that go into a budget, it can lead to a lack of resources and project delays.
• Vendor lock-in. Some cloud vendors offer proprietary tools to help IT teams calculate the cost of using their service. The downside of this is that the tool only works with their service, and this locks the client into using the service .

Cost management tools

While cost management software is useful, it's not imperative for executing a cost management plan. These tools commonly include the following functions:

• time tracking

Several business intelligence programs offer cost management software to help organizations monitor costs and increase profitability. Some of these include Google's Looker, Microsoft Power BI and Oracle Analytics Cloud.

Cloud vendors also offer proprietary cost management tools to help users track and optimize costs. Two such tools are the following:

• Azure cost management tools. The Azure cloud computing service includes a pricing calculator, alerts and dashboards that let Azure users optimize their spending and clearly monitor use. Cloud users are charged per use, sometimes per second, so using these tools is important for keeping costs down. These tools integrate with Azure budgets for planning and cost optimization. Azure cost alerts aid monitoring and tracking, and Azure cost analysis can suggest potential adjustments based on monthly cost breakdowns. The tool also integrates with other third-party tools, such as VMware Aria Cost and Apptio Cloudability.
• Amazon Web Services (AWS) Cost Management. This tool set provides dashboards and billing reports that help users track AWS cloud use and set budget goals. AWS Cost Management tools included are AWS Budgets, AWS Cost Explorer, AWS Cost and Usage Report, and AWS Cost Anomaly Detection, which uses machine learning to monitor cloud use and detect unusual spending.

Vendors may refer to cost management software applications as cost accounting, spend management or cost transparency products. Cloud cost management tools may also be referred to as FinOps .

Cost management is particularly important in cloud management, where bills can skyrocket because of unaccounted-for service fees. Learn eight ways to cut cloud costs and avoid unexpected bills.

Continue Reading About cost management

• Cloud storage cost challenges and how to tackle them
• Quiz yourself on FinOps principles and concepts
• How FinOps can rein in cloud costs
• AI for project management makes projects more strategic
• Azure cost management tools to control cloud spending

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What Is Cost Accounting?

Understanding cost accounting.

• Cost vs. Financial Accounting
• Cost Accounting FAQs

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Cost Accounting: Definition and Types With Examples

Yarilet Perez is an experienced multimedia journalist and fact-checker with a Master of Science in Journalism. She has worked in multiple cities covering breaking news, politics, education, and more. Her expertise is in personal finance and investing, and real estate.

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Cost accounting is a form of managerial accounting that aims to capture a company's total cost of production by assessing the variable costs of each step of production as well as fixed costs, such as a lease expense.

Cost accounting is not GAAP-compliant , and can only be used for internal purposes.

Key Takeaways

• Cost accounting is used internally by management in order to make fully informed business decisions.
• Unlike financial accounting, which provides information to external financial statement users, cost accounting is not required to adhere to set standards and can be flexible to meet the particular needs of management.
• As such, cost accounting cannot be used on official financial statements and is not GAAP-compliant.
• Cost accounting considers all input costs associated with production, including both variable and fixed costs.
• Types of cost accounting include standard costing, activity-based costing, lean accounting, and marginal costing.

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Cost accounting is used by a company's internal management team to identify all variable and fixed costs associated with the production process. It will first measure and record these costs individually, then compare input costs to output results to aid in measuring financial performance and making future business decisions. There are many types of costs involved in cost accounting , each performing its own function for the accountant.

Types of Costs

• Fixed costs are costs that don't vary depending on the level of production. These are usually things like the mortgage or lease payment on a building or a piece of equipment that is depreciated at a fixed monthly rate. An increase or decrease in production levels would cause no change in these costs.
• Variable costs are costs tied to a company's level of production. For example, a floral shop ramping up its floral arrangement inventory for Valentine's Day will incur higher costs when it purchases an increased number of flowers from the local nursery or garden center.
• Operating costs are costs associated with the day-to-day operations of a business. These costs can be either fixed or variable depending on the unique situation.
• Direct costs are costs specifically related to producing a product. If a coffee roaster spends five hours roasting coffee, the direct costs of the finished product include the labor hours of the roaster and the cost of the coffee beans.
• Indirect costs are costs that cannot be directly linked to a product. In the coffee roaster example, the energy cost to heat the roaster would be indirect because it is inexact and difficult to trace to individual products.

Cost Accounting vs. Financial Accounting

While cost accounting is often used by management within a company to aid in decision-making, financial accounting is what outside investors or creditors typically see. Financial accounting presents a company's financial position and performance to external sources through financial statements , which include information about its revenues , expenses , assets , and liabilities . Cost accounting can be most beneficial as a tool for management in budgeting and in setting up cost-control programs, which can improve net margins for the company in the future.

One key difference between cost accounting and financial accounting is that, while in financial accounting the cost is classified depending on the type of transaction, cost accounting classifies costs according to the information needs of the management. Cost accounting, because it is used as an internal tool by management, does not have to meet any specific standard such as  generally accepted accounting principles (GAAP) and, as a result, varies in use from company to company or department to department.

Cost-accounting methods are typically not useful for figuring out tax liabilities, which means that cost accounting cannot provide a complete analysis of a company's true costs. 

Types of Cost Accounting

Standard costing.

Standard costing assigns "standard" costs, rather than actual costs, to its cost of goods sold (COGS) and inventory. The standard costs are based on the efficient use of labor and materials to produce the good or service under standard operating conditions, and they are essentially the budgeted amount. Even though standard costs are assigned to the goods, the company still has to pay actual costs. Assessing the difference between the standard (efficient) cost and the actual cost incurred is called variance analysis.

If the variance analysis determines that actual costs are higher than expected, the variance is unfavorable. If it determines the actual costs are lower than expected, the variance is favorable. Two factors can contribute to a favorable or unfavorable variance. There is the cost of the input, such as the cost of labor and materials. This is considered to be a rate variance.

Additionally, there is the efficiency or quantity of the input used. This is considered to be a volume variance. If, for example, XYZ company expected to produce 400 widgets in a period but ended up producing 500 widgets, the cost of materials would be higher due to the total quantity produced.

Activity-Based Costing

Activity-based costing (ABC) identifies overhead costs from each department and assigns them to specific cost objects, such as goods or services. The ABC system of cost accounting is based on activities, which refer to any event, unit of work, or task with a specific goal, such as setting up machines for production, designing products, distributing finished goods, or operating machines. These activities are also considered to be cost drivers , and they are the measures used as the basis for allocating overhead costs .

Traditionally, overhead costs are assigned based on one generic measure, such as machine hours. Under ABC, an activity analysis is performed where appropriate measures are identified as the cost drivers. As a result, ABC tends to be much more accurate and helpful when it comes to managers reviewing the cost and profitability of their company's specific services or products.

For example, cost accountants using ABC might pass out a survey to production-line employees who will then account for the amount of time they spend on different tasks. The costs of these specific activities are only assigned to the goods or services that used the activity. This gives management a better idea of where exactly the time and money are being spent.

To illustrate this, assume a company produces both trinkets and widgets. The trinkets are very labor-intensive and require quite a bit of hands-on effort from the production staff. The production of widgets is automated, and it mostly consists of putting the raw material in a machine and waiting many hours for the finished good. It would not make sense to use machine hours to allocate overhead to both items because the trinkets hardly used any machine hours. Under ABC, the trinkets are assigned more overhead related to labor and the widgets are assigned more overhead related to machine use.

Lean Accounting

The main goal of lean accounting is to improve financial management practices within an organization. Lean accounting is an extension of the philosophy of lean manufacturing and production, which has the stated intention of minimizing waste while optimizing productivity. For example, if an accounting department is able to cut down on wasted time, employees can focus that saved time more productively on value-added tasks.

When using lean accounting, traditional costing methods are replaced by value-based pricing  and lean-focused performance measurements. Financial decision-making is based on the impact on the company's total value stream profitability. Value streams are the profit centers of a company, which is any branch or division that directly adds to its bottom-line profitability.

Marginal Costing

Marginal costing (sometimes called cost-volume-profit analysis ) is the impact on the cost of a product by adding one additional unit into production. It is useful for short-term economic decisions. Marginal costing can help management identify the impact of varying levels of costs and volume on operating profit. This type of analysis can be used by management to gain insight into potentially profitable new products, sales prices to establish for existing products, and the impact of marketing campaigns.

The  break-even point —which is the production level where total revenue for a product equals total expense —is calculated as the total fixed costs of a company divided by its contribution margin. The contribution margin , calculated as the sales revenue minus variable costs, can also be calculated on a per-unit basis in order to determine the extent to which a specific product contributes to the overall profit of the company.

History of Cost Accounting

Scholars believe that cost accounting was first developed during the  industrial revolution  when the emerging economics of industrial supply and demand forced manufacturers to start tracking their fixed and variable expenses in order to optimize their production processes.

Cost accounting allowed railroad and steel companies to control costs and become more efficient. By the beginning of the 20th century, cost accounting had become a widely covered topic in the literature on business management.

How Does Cost Accounting Differ From Traditional Accounting Methods?

In contrast to general accounting or financial accounting, the cost-accounting method is an internally focused, firm-specific system used to implement  cost controls . Cost accounting can be much more flexible and specific, particularly when it comes to the subdivision of costs and inventory valuation. Cost-accounting methods and techniques will vary from firm to firm and can become quite complex.

Why Is Cost Accounting Used?

Cost accounting is helpful because it can identify where a company is spending its money, how much it earns, and where money is being lost. Cost accounting aims to report, analyze, and lead to the improvement of internal cost controls and efficiency. Even though companies cannot use cost-accounting figures in their financial statements or for tax purposes, they are crucial for internal controls.

Which Types of Costs Go Into Cost Accounting?

These will vary from industry to industry and firm to firm, however certain cost categories will typically be included (some of which may overlap), such as direct costs, indirect costs, variable costs, fixed costs, and operating costs.

What Are Some Advantages of Cost Accounting?

Since cost-accounting methods are developed by and tailored to a specific firm, they are highly customizable and adaptable. Managers appreciate cost accounting because it can be adapted, tinkered with, and implemented according to the changing needs of the business. Unlike the  Financial Accounting Standards Board (FASB)-driven financial accounting, cost accounting need only concern itself with insider eyes and internal purposes. Management can analyze information based on criteria that it specifically values, which guides how prices are set, resources are distributed, capital is raised, and risks are assumed.

What Are Some Drawbacks of Cost Accounting?

Cost-accounting systems ,and the techniques that are used with them, can have a high start-up cost to develop and implement. Training accounting staff and managers on esoteric and often complex systems takes time and effort, and mistakes may be made early on. Higher-skilled  accountants  and  auditors  are likely to charge more for their services when evaluating a cost-accounting system than a standardized one like GAAP.

Cost accounting is an informal set of flexible tools that a company's managers can use to estimate how well the business is running. Cost accounting looks to assess the different costs of a business and how they impact operations, costs, efficiency, and profits. Individually assessing a company's cost structure allows management to improve the way it runs its business and therefore improve the value of the firm. These are meant to be internal metrics and figures only. Since they are not GAAP-compliant, cost accounting cannot be used for a company's audited financial statements released to the public.

Fleischman, Richard K., and Thomas N. Tyson. "The Economic History Review: Cost Accounting During the Industrial Revolution: The Present State of Historical Knowledge." Economic History Review , vol. 46, no. 3, 1993, pp. 503-517.

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Transaction Analysis for Project Planning Resource Assignments

Project application administrators can use the Transaction Analysis for Project Planning Resource Assignments report to analyze how a cost rate was calculated for project planning resource assignments. The report helps to identify causes where a cost rate can’t be determined or a cost rate value is not as expected.

Use the Transaction Analysis for Project Planning Resource Assignments Report to:

• Rate wasn’t found for the person or person job.
• Rate wasn’t found for the nonlabor transaction.
• Application can't find a costing rule for the labor transaction.
• A rate wasn't found for job X because the job doesn't exist in the job set or isn't mapped to another job in the job set.
• Was a labor costing override used?
• Was a project cost rate override used?
• Was the correct date-effective rate schedule entry used?
• Was the correct organization costing rule used for the expenditure organization?
• Was an actual cost rate or planning cost rate used?

Let’s look at an example that describes how a project application administrator uses the Transaction Analysis for Project Planning Resource Assignments Report to assist a project manager in troubleshooting a costing error in the financial project plan, budget, or forecast.

• A project manager encounters one or more costing errors when they create a project forecast. The project manager has to clear the errors before submitting the forecast for approval.
• The project manager chooses an error to investigate first, for example 'A raw cost rate wasn't found for the planning transaction'.
• Project name
• Financial plan type
• Plan version
• Planning resource
• Planning period
• The project manager sends the above details to their project application administrator to help resolve this issue so that they can successfully submit the forecast.

A project application administrator can then help resolve this issue in the following manner:

• Navigate to the Reports and Analytics work area.
• Click Browse Catalog .
• Navigate to Shared Folders > Projects > Projects Maintenance and open the Transaction Analysis for Project Planning Resource Assignments Report .
• Enter the parameter values provided by the project manager and click Apply . The application downloads the report output.
• Report Details - Displays report parameter values and runtime details, such as the date the report was run and by which user.
• Transaction Details - Provides a summary of key resource assignment attributes to assist analysis.
• Transaction Errors - Provides a summary of any existing errors or warnings relating to the resource assignment.
• Costing - Provides a detailed breakdown of cost processing and related setups.
• Cost Processing - Where a resource assignment is already costed, this section shows the outcomes of those successful events.
• To check whether the costing error reported in the application still exists. For example, since the error was raised another user may have fixed the costing setups, but has yet to revisit the resource assignment to clear the error.
• Where a transaction has already been costed, you can compare the simulated outcome to the existing cost outcomes. You can, for example, identify where there have been any changes in costing setups since the transaction was processed. For transactions created before the 22D release, you won't see the Costing Date and Costing Method for previous cost processing.
• Simulated Cost Processing Errors - Details any errors resulting from the simulated cost processing described above.
• Cost Processing Setups - Lists out all of the application setups that relate to each of the costing methods that are used to calculate raw costs.
• There are labor costing overrides for the person associated with the resource assignment, but they're not date effective as of the planning date.
• There are organization costing rules matching the expenditure business unit of the resource assignment, but they are not a match for the expenditure organization.
• The planning options for the plan version are configured to use planning rates, as opposed to actual rates.
• Depending on the root cause of the costing exception as identified above, the project application administrator can take the necessary corrective actions. For example, they could add a new organization costing rule for the relevant business unit and expenditure organization.
• After updating the relevant application configuration, the project application administrator can rerun the report and check the Simulated Cost Processing section, to see if the error is cleared.
• The project manager can then revisit their forecast (or budget or financial project plan, as applicable) to clear the error and successfully submit it for approval.

Elektrostal (Q198419)

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Elektrostal

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Elektrostal , city, Moscow oblast (province), western Russia . It lies 36 miles (58 km) east of Moscow city. The name, meaning “electric steel,” derives from the high-quality-steel industry established there soon after the October Revolution in 1917. During World War II , parts of the heavy-machine-building industry were relocated there from Ukraine, and Elektrostal is now a centre for the production of metallurgical equipment. Pop. (2006 est.) 146,189.

USD 61.5333 Rub. ↓-0.04 EUR 68.5358 Rub. ↓-0.12 CNY 8.97105 Rub. ↑+0.03 city, Analysis of real estate market in Moscow Oblast, Russia:   ,   ,   ,   RUB: USD: /m² EUR: /m² USD: /ft² GBP: /ft² CHF: /m² CNY: /m² JPY: /m² Change of cost per square foot in per week (USD): Change of average apartment cost in rubles per week, 906 apartments $49.14 million 49.0 thousand m² 527.5 thousand ft² flats/apartments in secondary housing market 1 bedroom apartments 27.3% 247 $9.00 million 8.67 thousand m² 93.4 thousand ft² 2 bedroom apartments 37.4% 339 $17.08 million 17.3 thousand m² 186.3 thousand ft² 3 bedroom apartments 31.0% 281 $19.48 million 19.4 thousand m² 209.2 thousand ft² multi-bedroom apartments 4.3% 39 $3.58 million 3.59 thousand m² 38.6 thousand ft² average apartment cost per square foot/meter 1 bedroom apartments 2 bedroom apartments 3 bedroom apartments multi-bedroom apartments flats/apartments cost on 06.01.2020 1 bedroom flat 35.1 m² 378.0 ft² 2 bedroom flat 51.1 m² 549.7 ft² 3 bedroom flat 69.1 m² 744.3 ft² 4+ bedroom flat 92.0 m² 989.8 ft² | | | and date of original publication. Liability limitation: the owner and administration of website RLT24.com are not responsible for the interpretation and consequences of using the materials from this website. 392 IMAGES Assignment 1- Cost Management strategic cost management assignment in chapter ,7 Assignment 1C Cost Management Plan 2 1 .docx Assignment Cost Management Assignment Strategic Cost Management Assignment VIDEO Project Cost Management: The Essential Guide: PMP Exam Preparation BUSINESS STUDIES || Principles of Management || Assignment || creativity 💡 Individual Assignment (Cost Management) HTH587 Hospitality Financial Performance And Analysis Individual Assignment ATF10103 Fundamental of Management MGT402 Cost & Management Accounting MGT402 Cost & Management Accounting GDB Spring 2024 Virtual University of Pakistan COMMENTS The Ultimate Guide to Cost Management Financing and Funding: The process of requesting, authorizing, and receiving money for a project. Cost Management: The general practice of overseeing project expenditures and making cost-related decisions throughout the project life cycle. Controlling: Addressing cost variations to avoid cost overruns. Project cost management: Definition, steps, and benefits Cost management is the process of planning, budgeting, and reporting project spend in order to keep teams on budget and overall costs reasonable. In this article, we'll go over the four functions of cost management and explain exactly how to use them to improve your project's bottom line. When it comes to project management, there are few ... How to Make a Cost Management Plan It is typically made up of four steps: resource planning, cost estimation, budgeting and cost control. It's strongly recommended that you use project planning software to assist you in the process of creating a cost management plan, as there will be many tasks, costs and resources to track. 1. Assign access to Cost Management data You can assign the Cost Management Reader (or reader) role to a user at the resource group scope. For more information, see Assign Azure roles using the Azure portal. Cross-tenant authentication issues. Currently, Cost Management provides limited support for cross-tenant authentication. PDF Project Cost Management The cost management processes and their associated tools and techniques are usually selected during the project life cycle definition (read Sec. 2.1), and are documented in the cost mgmt. plan. Life Cycle Costing It is defined as the cost of using, maintaining & supporting the product, Cost assignment definition What is Cost Assignment? Cost assignment is the allocation of costs to the activities or objects that triggered the incurrence of the costs. The concept is heavily used in activity-based costing, where overhead costs are traced back to the actions causing the overhead to be incurred. The cost assignment is based on one or more cost drivers.. Cost assignments are associated with direct costs ... Project Cost Management: Process, Importance, Examples, And Plan, And 5 Jun 2024. Project Cost Management is the process of planning, estimating, budgeting, financing, funding, managing, and controlling costs so that the project can be completed within the approved budget. Project Cost Management includes activities such as cost estimation, budget development, cost control, and monitoring expenditures throughout ... Project Cost Management Basics Effective cost management requires the right software. ProjectManager is the perfect tool to track project costs, resources and workload. Our Gantt charts, project calendars and timesheets allow you to manage costs, time and tasks in one place. Get started for free. Keep project costs under control with ProjectManager's dashboards. Cost Allocation Cost allocation provides the management with important data about cost utilization that they can use in making decisions. It shows the cost objects that take up most of the costs and helps determine if the departments or products are profitable enough to justify the costs allocated. For unprofitable cost objects, the company's management can ... (PDF) Project Cost Management The important topics covered include cost management planning, cost estimation, budget determination, and cost control. Compared with available texts on project management, the perspective of this ... The Complete Guide To Project Cost Management Steps involved in project cost management. While cost management is a very complicated process and a vital project management knowledge area, we can break it down into four steps: 1. Plan cost management. The first step of cost management entails outlining the resources needed to complete all project activities. What is Cost Assignment? In summary, cost assignment is the process of associating both direct and indirect costs with cost objects, such as products, services, departments, or projects. It plays a critical role in cost accounting and management accounting by providing organizations with the necessary information to make informed decisions about pricing, resource ... PDF Introduction To Cost Accounting Sloan School of Management Massachusetts Institute of Technology April 28, 2004 7 Outline ... Cost Assignment Direct costs are traced to a cost ob ect. Indirect costs are allocated or assigned to a cost ob ect. Direct Cost A Direct Cost B ect ect Indirect Cost C Page 2 . 12 What is Cost Management? Definition, Steps and Benefits Cost management is the process of planning and controlling the budget of a business. Having a good cost management system in place makes it easier for an organization to estimate and allocate its budget. Cost management is a form of management accounting that helps a business reduce the chance of going over budget with more accurate forecasts ... 7.13: Introduction to Cost Management This page titled 7.13: Introduction to Cost Management is shared under a CC BY 4.0 license and was authored, remixed, and/or curated by Lumen Learning via source content that was edited to the style and standards of the LibreTexts platform. Cost Accounting: Definition and Types With Examples Cost accounting is an accounting method that aims to capture a company's costs of production by assessing the input costs of each step of production as well as fixed costs, such as depreciation of ... PDF PMG 323: Project Cost Management This course satisfies 3 credit hours at Arizona State University. It is strongly encouraged that you consult with your institution of choice to determine how these credits will be applied. In order to receive academic credit for this course, you must earn a grade of "C" or better. You have one year to add the course to your transcript. Project Cost Management Assignment Project Cost Management Assignment - Free download as Word Doc (.doc / .docx), PDF File (.pdf), Text File (.txt) or read online for free. Project Cost Management Assignment help has team of dedicated, this Project Cost Management Assignment showing calibre of our writers Cost Management Assignment Cost Management Assignment - Free download as PDF File (.pdf), Text File (.txt) or read online for free. This document discusses the importance of management accounting. [1] It defines management accounting as providing accounting information to assist management in policy formulation and operational planning/control. [2] Management accountants collect, analyze, and report financial data to ... Transaction Analysis for Project Planning Resource Assignments Project application administrators can use the Transaction Analysis for Project Planning Resource Assignments report to analyze how a cost rate was calculated for project planning resource assignments. The report helps to identify causes where a cost rate can't be determined or a cost rate value is not as expected. HTH250 ASSIGNMENT (pdf) marketing document from universiti teknologi mara, 20 pages, universiti teknologi mara pulau pinang faculty of hotel and tourism management food and beverage control hth250 assignment on menu prcing and using recipe detail and cost card prepared by: yumni binti abdul rahim - 2022890836 - phm1163a2 sofea nasuha bint Elektrostal capital of. Elektrostal Urban Okrug. 1 reference. located in the administrative territorial entity. Moscow Oblast. start time. 14 January 1929 Gregorian. 1 reference. Elektrostal Urban Okrug. Elektrostal Elektrostal, city, Moscow oblast (province), western Russia.It lies 36 miles (58 km) east of Moscow city. The name, meaning "electric steel," derives from the high-quality-steel industry established there soon after the October Revolution in 1917. During World War II, parts of the heavy-machine-building industry were relocated there from Ukraine, and Elektrostal is now a centre for the ... File:Coat of Arms of Zhukovsky (Moscow oblast).svg 您可以向此项目. Zhukovsky coat of arms. Date of adoption: April 25, 2002. Russian Heraldic Register no. 959. Textual description: "On a sky-blue (azure) field there are three wide arrow-heads in a triangle (two and one in a form of a plane). Above them there're two wings. All figures in gold". 2009年2月2日. File:Zhukovsky coat of arms ... Real estate in Elektrostal, Moscow Oblast, Russia * calculated weighted mean of apartment cost per 1 square foot/meter in Elektrostal secondary housing market. Among prices in range from 30 to 200 thousand Rub/m² for Elektrostal.Among apartments with area in range: from 20 to 350 m², from 215 to 3767 ft². assignment essay homework phd report resume review speech thesis