Project Costing and Financial Management

Running head: PROJECT COSTING AND FINANCIAL MANAGEMENT
Project Costing and Financial Management
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PROJECT COSTING AND FINANCIAL MANAGEMENT
Table of Contents
Tangible and Intangible Costs.............................................................................................2
Fixed Costs, Direct Costs and Indirect Costs......................................................................2
Cost Baseline.......................................................................................................................2
Cost Variances.....................................................................................................................3
Management Reserve and Contingency Reserve................................................................3
Area 2...................................................................................................................................3
Area 3...................................................................................................................................3
Area 4...................................................................................................................................4
References............................................................................................................................6

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PROJECT COSTING AND FINANCIAL MANAGEMENT
Tangible and Intangible Costs
A tangible cost is mainly described as a cost that is quantifiable that is related with an
identified asset or source. Tangible costs are therefore used to represent the expenses that might
arise as a result of purchasing the materials or renting an equipment for a project.
The intangible cost on the other hand can be described as an unquantifiable cost that is
related to an identifiable sources (Cañibano, 2018). The intangible costs in a project therefore
represents a number of expenses related the goodwill of the customers, employee morale drop
and loss of the brand value of the compnay. An intangible cost is therefore quite difficult to
quantify unlike the tangible cost.
Fixed Costs, Direct Costs and Indirect Costs
An expense that does not changes with the change in the goods or services offered is
termed as fixed cost. The direct cost on the other hand can be described as a price that is
attributed by the development and production of specific goods. One example of direct cost
include direct labor, materials and commissions. The indirect cost on the other hand is derived
from the overhead charges of the subsidiary work. These costs are no directly accountable to a
cost object. Indirect cost therefore can either be fixed or variable.
Cost Baseline
Cost baseline is a part of project baseline that is used for handling or estimating the
amount of money that a particular project is predicted to cost (Kerzner & Kerzner, 2017). Cost
baseline is therefore an approved budget indicated in a time distribution format. The estimation,
monitoring and control of the cost is a project is implemented with cost baseline. Cost baseline is