Planning the Project - Cost Terms

Running head: PM
Planning the Project
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Table of Contents
1. Definition of Project Cost Terms.....................................................................................2
2. Analogous, Parametric and Bottom Up Estimation.........................................................3
3. Issues In project Cost estimating.....................................................................................4
References............................................................................................................................6

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PM
1. Definition of Project Cost Terms
The project cost can be described as the total fund needed to complete a particular project
work. The project cost terms indicate the monetary obligation that is required to be incurred by
the team to ensure successful execution of an undertaken project (Nicholas & Steyn, 2017). One
of the necessary steps linked with the defining the cost of any undertaken project is to define the
type of expenses that the said project will incur. The project cost management is therefore
associated with the management of the standard criteria linked with the expenses to be incurred
in the project.
The different cost terms in project management include direct cost, fixed cost, indirect
cost, variable cost and sunk cost.
Cost Estimation in Project:-
Fixed cost is the type of cost estimation that allow change in the project cost throughout
the project lifecycle. There is a high risk factor in this type of cost estimation.
The Variable cost is associated with the estimation of the project cost that might change
during the project life cycle (Fleming & Koppelman, 2016). For example, the cost estimation in
complex construction projects generally employ this particular method of cost estimation.
The direct costs are required to estimate the project cost that come out of the budget
directly. For example, in some outsourcing project work, the salary of the human resources can
be considered as direct cost and accordingly the project budget is estimated.
The indirect cost are used in estimation of the project cost that are shared across multiple
projects. This type of expenses in a project is often referred to as oversight cost.