Costing and budgeting is considered bone to project management. Any project cannot be managed without scheduling the timeframe and allocating the perfect resources, especially, without proper budgeting and costing. These three items in the project management has core importance to be identified and properly handle well before the commencement of project, during the project and at the end of project. Project costing comprise on two things, one is standard costing and the other is actual costing. These two costing practices could make it possible to manage the project well and conclude it into success and get sufficient profits.
The expenses incurred from commencement of project to the end of project are called costs and overhead expenses. These costs and overheads are categorized as under:
Fixed or direct cost:
Fixed or direct cost is the expenses incur to the projects that are in process by the same enterprise. These expenses are should be split into all of the projects in process equally. The process of dividing would bring out fixed cost per project which should be considered respectively to each project. Fixed or direct costs normally general and administrative costs which more often remain same until any major change happen.
Variable or indirect cost:
Variable cost is the expenses incur to a particular project and have speculative change in it. Variable costs are the major part of project costing and should be evaluated perfectly. It matters from financial feasibility to managing the project within the financial budgets and get profits. Therefore, variable costs contain the actual project cost which should be realized at its par vale, otherwise, there would be chances that financial management could be disrupt which could come out with negative results and loss.
Time-phased budget for the project. What will be the cumulative cost of the project?
Time-phased budget constitute on the fixed and variable costs incurred and realized up to the stipulated timeframe of the project. That standard or actual cost card shows the cumulative cost of the project which includes all admin, operational and variable cost. The three constituent includes the comprehensive glance of the cumulative cost. Therefore, the costs incurred within the timeframe of the project and realizing all costs with perfect and realistic aggregate would be the perfect cumulative cost.
Identify areas in the budget where cost cutting can be made if needed?
The project costing has very rare chance to cut the cost. However, it is not impossible, if the management is perfect. Project management is core to complete the order or project within the financial and timeframe. Moreover, project management is mostly appreciated and considered with cost effectiveness. The cost cuttings could be managed with time management and resource management. It is project manager’s duty to done the duty with less available resources and high proficiency within the budget and timeframe.
Identify and assess one major and one minor risk inherent to the project. Develop a contingency plan for each of these risks.
Normally the major risk involve in the project management is resource management. Proper resource management is guarantee to the success of project. Therefore, it is important to management all the resources including human resources. Moreover, human resource management is real test of a manager. Lastly managing the resources perfectly, an especially human resource is guaranteed to be successful in the project. The minor risk is omission, if some project is managed properly. It is impossible that it has any risk other than omission which can be rectified with less effort and high efficiency.
The contingency plan would be managing the mismanaged things. And have good efforts to become successful and profitable in the project.