Fundamentals of Project Management 4th Edition

Running head: FUNDAMENTALS OF PROJECT MANAGEMENT
FUNDAMENTALS OF PROJECT MANAGEMENT- Cost and Finance
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Author Note

FUNDAMENTALS OF PROJECT MANAGEMENT1
Table of Contents
Introduction......................................................................................................................................2
Project cost types.............................................................................................................................2
Main project cost elements..............................................................................................................2
Method of cost estimation...............................................................................................................3
Budget for the project......................................................................................................................4
Cost and finance associated with the project...................................................................................6
Break even analysis.........................................................................................................................7
Cost management.............................................................................................................................9
Conclusion.....................................................................................................................................10
References......................................................................................................................................12

FUNDAMENTALS OF PROJECT MANAGEMENT2
Introduction
Cost estimation is mainly carried out for the purpose of estimating approximates that are
associated with a project’s probable cost. The cost estimation is mainly carried out at the concept
stage and ensures that the process are refined throughout the project preparation process. Cost
estimation becomes very much essential as this helps in identifying the predictive process that is
used for the purpose off quantifying the resources effectively (Yellman 2018). With the help of a
proper cost estimation process it becomes easy to estimate the overall budget that will be needed
for completing the project. Before estimating the cost associated with a project it is important to
ensure that the project is being designed effectively. The key principles that are associated with
cost estimation process are offering better integrity towards the data, managing the information
accuracy and ensuring that all the uncertain risks are identified at the early stage so that it
becomes easy to remove the issues.
Project cost types
While developing a project it becomes essential to ensure that the project costs are
determined and calculated efficiently so that it becomes easy to ensure that the multi storey car
parking has designed successfully for the purpose of benefiting the developer (Shafiee et al.
2018). The project cost types are mainly divided into three variable and fixed costs, direct and
indirect costs and opportunities. With the help of proper cost analysis it will become easy to
determine the actual cost associated with the project.
Main project cost elements
 Base cost: The base cost is mainly designed on the basis of detailed estimations of inputs
so that it becomes easy to identify the key outputs.

FUNDAMENTALS OF PROJECT MANAGEMENT3
 Contingencies: comprises separate physical and price contingency allowance. Thus it can
be stated that the cost estimation process plays a major role in the project.
 Financial changes during implementation: This is calculated on the basis of interest and
the other financing charges that are closely applicable for the project.
Method of cost estimation
Cost estimation is essential for every project as this helps in identifying the key resources
that are needed for completing a task along with all the necessary project activities. The main
motive of the project is to design a multi storey car parking area for residents of Woodland
(Bruijning et al. 2017). Thus for managing the project budget it is important to ensure that an
effective way of cost estimation procedure is used for determining the cost. There are several
methods for estimating the cost. This typically includes analogous estimating, bottom up
estimating, expert judgment, three point estimating and parametric estimating. After design the
project it can be stated that the bottom up estimation is most suitable.
Bottom up estimation process is selected for the multi storey car parking area because it
offers a way of estimating every single activity that takes place within the estimated project. The
bottom up estimation process helps in dividing the project scope into smaller work packages that
and thus it becomes easy to manage the performance of the project. The key reason behind using
the bottom up estimation is that it offers high accuracy and precision (Pryce and Shaffer 2018).
Thus it becomes easy to get exact value of the cost. With an efficient approach it becomes easy
to manage the budget that will be needed for carrying out the overall project.