Project Cost Facts

There are several methods of providing project estimates:

• Bottom-up Project costs start at zero, each component in the WBS is estimated for costs, and then the "grand total" is calculated. This method takes the longest to complete, but provides the most accurate estimate.

• Analogous Project costs are based on a similar project. This is a form of expert judgment, but it is also a top-down estimating approach, so it is less accurate than a bottom-up estimate.

• Parametric modeling Price is based on cost per unit; examples include cost per metric ton, cost per yard, and cost per hour.

There are four types of costs attributed to a project:

• Variable costs The costs are dependent on other variables. For example, the cost of a food-catered event depends on how many people register to attend the event.

• Fixed costs The cost remains constant throughout the project. For example, a rented piece of equipment has the same fee each month even if it is used more in some months than in others.

• Direct costs The cost is directly attributed to an individual project and cannot be shared with other projects (for example, airfare to attend project meetings, hotel expenses, and leased equipment that is used only on the current project).

• Indirect costs These are the costs of doing business; examples include rent, phone, and utilities.

Project Management Made Easy

Project Management Made Easy

What you need to know about… Project Management Made Easy! Project management consists of more than just a large building project and can encompass small projects as well. No matter what the size of your project, you need to have some sort of project management. How you manage your project has everything to do with its outcome.

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