The actual cost AC is the sum of the amounts actually spent on the items. Dion and Carlita were both trying to lose weight and just wanted a nice salad. Consequently, the lunch cost less than expected. John makes a stop at a store that sells moving supplies at discount rates. They do not have all the items he needs, but the prices are lower than those quoted by the moving company.
They have a very good price on lifting straps so he decides to buy an extra pair. He returns with some of the items on his list, but this phase of the job is not complete by the end of day six.
John bought half of the small boxes, all of five other items, twice as many lifting straps, and none of four other items. John is only six days into his project, and his costs and performance are starting to vary from the plan. Earned value analysis gives us a method for reporting that progress Table The project manager must know if the project is on schedule and within the budget.
The difference between planned and actual progress is the variance. If less value has been earned than was planned, the schedule variance is negative, which means the project is behind schedule. The difference between the planned value and the earned value is the scheduled variance SV. A positive CV indicates the project is under budget. The schedule variance and the cost variance provide the amount by which the spending is behind or ahead of schedule and the amount by which a project is exceeding or not fully using its budget.
They do not give an idea of how these amounts compare with the total budget. The ratio of earned value to planned value gives an indication of how much of the project is completed. This ratio is the schedule performance index SPI. The ratio of the earned value to the actual cost is the cost performance index CPI.
A value greater than 1 indicates that the project is under budget. During the project, the manager can evaluate the schedule using the schedule variance SV and the schedule performance index SPI , and the budget using the cost variance CV and the cost performance index CPI.
Part way through the project, the manager evaluates the accuracy of the cost estimates for the activities that have taken place and uses that experience to predict how much money it will take to complete the unfinished activities— the estimate to complete ETC. To calculate the ETC, the manager must decide if the cost variance observed in the estimates to that point are representative of the future.
For example, if unusually bad weather causes increased cost during the first part of the project, it is not likely to have the same effect on the rest of the project. If the manager decides that the cost variance up to this point in the project is atypical—not typical—then the estimate to complete is the difference between the original budget for the entire project—the budget at completion BAC —and the earned value EV up to that point.
For his move, John was able to buy most of the items at a discount house that did not have a complete inventory, and he chose to buy an extra pair of lift straps. He knows that the planned values for packing materials were obtained from the price list at the moving company where he will have to buy the rest of the items, so those two factors are not likely to be typical of the remaining purchases. The reduced cost of lunch is unrelated to the future costs of packing materials, truck rentals, and hotel fees.
John decides that the factors that caused the variances are atypical. If the manager decides that the cost variance is caused by factors that will affect the remaining activities, such as higher labour and material costs, then the estimate to complete ETC needs to be adjusted by dividing it by the cost performance index CPI.
If the costs of the activities up to the present vary from the original estimates, this will affect the total estimate of the project cost. The new estimate of the project cost is the estimate at completion EAC. Once you have broken your project down into activities, you will be able to calculate your overall project costs by estimating and totaling the individual activity costs.
Costs are associated with activities, and since each activity has a start date and a duration period, it is possible to calculate how much money will be spent by any particular date during the project. The money needed to pay for a project is usually transferred to the project account shortly before it is needed.
These transfers must be timed so that the money is there to pay for each activity without causing a delay in the start of the activity.
If the money is transferred too far in advance, the organization will lose the opportunity to use the money somewhere else, or they will have to pay unnecessary interest charges if the money is borrowed.
A schedule of money transfers is created that should match the need to pay for the activities. The process of matching the schedule of transfers with the schedule of activity payments is called reconciliation.
Refer to Figure Funds are transferred into the project account four times. Notice that during most of the project, there were more funds available than were spent except at activity 6 when all the available funds were spent. In the project budget profile shown in Figure Contractual agreements with vendors often require partial payment of their costs during the project. Those contracts can be managed more conveniently if the unit of measure for partial completion is the same as that used for cost budgeting.
Skip to content Main Body. Figure Table If you don't have enough money to do everything you would like to do, then you can use this planning process to prioritize your spending and focus your money on the things that are most important to you.
Expense Tracker. Once you create your first budget, begin to use it and get a good feel for how it can keep your finances on track , you may want to map out your spending plan or budget for 6 months to a year down the road.
By doing this you can easily forecast which months your finances may be tight and which ones you'll have extra money.
You can then look for ways to even out the highs and lows in your finances so that things can be more manageable and pleasant. Extending your budget out into the future also allows you to forecast how much money you will be able to save for important things like your vacation , a new vehicle, your first home or home renovations, an emergency savings account or your retirement. Using a realistic budget to forecast your spending for the year can really help you with your long term financial planning.
You can then make realistic assumptions about your annual income and expense and plan for long term financial goals like starting your own business, buying an investment or recreation property or retiring.
Thus avoiding over-utilization and allowing balancing efficiency and effective workflow. Execution of budgeting in project management is essential. The project manager holds responsibility for the streamlined working of the project.
This ensures that project efficiency, standards, time and quality are not overlooked. A good Project Budget sustains itself as a tool to estimate project costs. All costs that are likely to incur in a project can highlight in the planning stage. A good project budget would include the following cost planning:. It is important to note that budgeting in project management is a strong tool.
Budgeting can assist in the right and appropriate allocation of costs. Thereby, focusing on the efficacy of activities in a particular project. The following factors usually affect the planning of Project Budget:. Project budget helps the implementation of money, costs and resources for the project.
Approval of the budget helps forecast operations which might not be adequate. Any changes made in correspondence to the planned budget is so during the project. A well-devised Project Budget helps put in place the earned-value analysis during the work process cycle of a project, thereby placing the project under control. The project budget is divided into sub-goals and makes the decision-making process much easier. Financial Budget matters concerning cash flow, payments and external resources.
In every Project Management process, the budgeting process involves requiring a cost estimate. This is an approximate prediction of how much money is needed to complete a project as it helps with assessment of project feasibility. It is thereby to be noted that accurate cost estimation helps with better management of the project budget.
0コメント