What is Cost and project Cost Management Cost is a resource sacrificed or fore gone to achieve a specific objective or something given up in exchange Costs are usually measured in monetary units like dollars Project cost management includes the processes required to ensure that the project is completed within an approved budget 2021/2/21
2021/2/21 6 What is Cost and Project Cost Management? ◼ Cost is a resource sacrificed or foregone to achieve a specific objective or something given up in exchange ◼ Costs are usually measured in monetary units like dollars ◼ Project cost management includes the processes required to ensure that the project is completed within an approved budget
Project Cost Management Processes Resource planning: determining what resources and quantities of them should be used Cost estimating: developing an estimate of the costs and resources needed to complete a project Cost budgeting: allocating the overall cost estimate to individual work items to establish a baseline for measuring performance Cost control: controlling changes to the project budget 2021/2/21
2021/2/21 7 Project Cost Management Processes ◼ Resource planning: determining what resources and quantities of them should be used ◼ Cost estimating: developing an estimate of the costs and resources needed to complete a project ◼ Cost budgeting: allocating the overall cost estimate to individual work items to establish a baseline for measuring performance ◼ Cost control: controlling changes to the project budget
Quick Quiz on Cost Concepts Suppose you sell 10 widgets per day on average and the average cost per widget is $10. If you sold 11 widgets on day, what would the affect on profits be? Suppose you were buying 10 PCs for your new business. What would some of the life cycle costs be? Give examples of"tangible"vS. "intangible benefits of a new project 2021/2/21 8
2021/2/21 8 Quick Quiz on Cost Concepts ◼ Suppose you sell 10 widgets per day on average, and the average cost per widget is $10. If you sold 11 widgets on day, what would the affect on profits be? ◼ Suppose you were buying 10 PCs for your new business. What would some of the life cycle costs be? ◼ Give examples of “tangible” vs. “intangible” benefits of a new project
6.2 Basic Principles of cost Management
6.2 Basic Principles of Cost Management
Basic Principles of cost Management Most ceos and boards know a lot more about finance than It, IT project managers must speak their language Profits are revenues minus expenses Life cycle costing is estimating the cost of a project over its entire life Cash flow analysis is determining the estimated annual costs and benefits for a project Benefits and costs can be tangible or intangible, direct or indirect Sunk cost should not be a criteria in project selection 2021/2/21 10
2021/2/21 10 Basic Principles of Cost Management ◼ Most CEOs and boards know a lot more about finance than IT, IT project managers must speak their language ◼ Profits are revenues minus expenses ◼ Life cycle costing is estimating the cost of a project over its entire life ◼ Cash flow analysis is determining the estimated annual costs and benefits for a project ◼ Benefits and costs can be tangible or intangible, direct or indirect ◼ Sunk cost should not be a criteria in project selection