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Chapter 13 - Cost Breakdown and Budget

Part 3


To summarise the keywords of that chapter, here is a quick overview:

Technical term Definition
Project Office = Project Management Office (PMO)
The PMO ensures that the project portfolio is transparent (deadlines, resource usage, costs, functional relationships between the projects) and supports the processes of project selection and coordination
In some cases it also provides a pool of project managers, organises project management training for project team members, standardises processes and develops standards
Fixed costs Costs independent of time and resources used for an operation
Variable costs Costs dependent of time and resources used for an operation
Estimate at completion (EAC) Estimate of total costs at the time of project handover.
Estimate to completion (ETC) Estimate of anticipated costs up to project handover
Degree of completion Ratio of net income value/cost to complete to (budgeted) total project costs.
A target and actual degree of completion can be ascertained at any time during the course of the project.
Cost to complete = Estimate to complete
Ratio between actual costs and target costs
Estimate of remaining costs

Test yourself!

Now it is time to check your knowledge.

Answer the following questions for yourself. Please take your time and think carefully about what you would answer before revealing the solution.

What role does a work breakdown structure play in cost budgeting?

Since it charts the components of a project, a work breakdown structure is an essential prerequisite for the application of practically all cost budgeting methods.

What is the procedure for cost budgeting?

Cost budgeting on the basis of expert surveys
Team estimate

Cost estimating with cost ratios and code systems
CHF per cubic metre of interior space
Product cost database

Parametric cost estimates
Number of programmed code lines

How can project costs be monitored?

Over the course of the project (e.g. at monthly intervals) variance analyses of actual and scheduled costs are implemented.

What do you have to take into account in project resource planning?

The available or procurable resources have to be obtained within an optimum time schedule.