BSBPMG514 Manage Project Costs: Detailed Analysis of Project Finance

This assignment solution provides a comprehensive analysis of project cost management principles, focusing on a case study involving Safe Hands Insurance Company. It includes a detailed evaluation of supplier quotations, assessing the cost-effectiveness of different AIS (Advance Insurance System) options from Access IT, Vision IT, and Total IT. The solution also addresses key aspects of management accounting, financial data analysis, and the importance of employee participation in decision-making. Furthermore, it examines budget variances, report writing checklists, and the preparation of financial statements such as the profit and loss statement, balance sheet, and cash flow statement. The document explores the role of project financial managers and the significance of accurate, timely reports in project management. Desklib offers a platform for students to access this and other solved assignments, aiding in their understanding of complex topics.

Running head: MANAGE PROJECT COSTS
Manage Project Costs
Name of the Student:
Name of the University:
Author’s Note:

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Table of Contents
Activity 2.........................................................................................................................................4
Recommendation:........................................................................................................................5
Activity 5:........................................................................................................................................6
Answer 1:.....................................................................................................................................6
Answer to question 2:..................................................................................................................6
Answer to question 3:..................................................................................................................7
Activity 6:........................................................................................................................................8
Answer A: Negative variance in Personnel Budget:...................................................................8
Answer to B:................................................................................................................................8
Activity 7.........................................................................................................................................9
Activity 8.........................................................................................................................................9
Requirement 1..............................................................................................................................9
Requirement 2............................................................................................................................10
Requirement 3............................................................................................................................11
Requirement 4............................................................................................................................11
Requirement 5............................................................................................................................12
Activity 9.......................................................................................................................................12
Requirement 1............................................................................................................................12
Requirement 2............................................................................................................................12

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Requirement 3............................................................................................................................13
Activity 10.....................................................................................................................................13
Activity 11.....................................................................................................................................14
Question 1..................................................................................................................................14
Question 2..................................................................................................................................15
Question 3..................................................................................................................................16
Question 4..................................................................................................................................16
Question 5..................................................................................................................................17
Project 1.........................................................................................................................................18
Project 2.........................................................................................................................................24
Budgeting Approach in Project Management............................................................................24
Introduction................................................................................................................................24
Areas to which Budgets are Applicable.....................................................................................24
Primary Functions of a budget...................................................................................................25
Supporting Data for Departments..............................................................................................26
Users of the Budgets..................................................................................................................26
Conclusion.................................................................................................................................27
Project 3.........................................................................................................................................28
Profit and Loss Statement..........................................................................................................28
Statement of Retained Earnings.................................................................................................28

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Balance Sheet.............................................................................................................................29
Cash Flow Statement.................................................................................................................29
Reference.......................................................................................................................................31

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Activity 2
Particulars Details Access IT Vision IT Total IT
Quoted price A $84,000 $105,000 $65,000
Cost for technical
support/yr. B $42,000 $0.00 $0.00
Service charges C $0.00 $10,000 $0.00
Hardware cost D $0.00 $0 $22,500
Total cost
(A+b+C+D)=
E
$126,000.0
0
$115,000.0
0
$87,500.0
0
Life span of the Goods
(in Year) F 7 10 5
Cost/yr E/F $18,000.00 $11,500.00
$17,500.0
0
Working Note 01:
Cost of technical support per year in Access IT = $6000
Total life span of the Goods = 7 years
Therefore total cost incurred = (cost of technical support) * (number of years)
= 6000 * 7 = $ 42000
Working Note 02:
Service charges of Vision IT = $500
Number of service per year = 2 times
Total life span of the Goods = 10 years
Therefore total cost incurred = service charge * number of services/ yr * Total life span
= $500 * 2 * 10

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= $10000
Recommendation:
 Safe hand insurance company should select the Vision IT to purchase the AIS, because
the calculation based on the supplier’s quotations addresses that cost incurred per year is
less in Vision IT.
 To, determine the availability of the financial support of an organisation to meet the
uncommitted requirements of an organisation laid on the company’s budget allocation
and resources planning (Henderson et al. 2015). Since, the budget prepares the road map
of expenditure to achieve the needs of an organisation in an efficient manner and the
resources planning assigns key to monitor the financial activity.
 An effective internal control system will significantly reduce the business risk and help in
workout in an effective and efficient manner like a reliable financial statement, complete
and accurate information (Hoyle, Schaefer and Doupnik 2015). Since, insurance is a
complex management system with a lot of paper work, which may hamper the
productivity. To, implement a strong internal control system AIS (Advance Insurance
System) could be the best choice. AIS assist the insurance company in the following
sector-
1. Underwriting
2. Claim processing
3. Financial management
4. Agency management
5. Human resources
6. Risk management

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Activity 5:
Answer 1:
Management accounting is regarded as the effective accounting system and to minimize
its limitation the accountants can perform the following activities;
a. Simplifying the decision making procedure: To overcome the limitations the
management accountant can create a detail technical report with the easy interpretations
(Warren and Jones 2018). This would enable the management accountant to undertake
the appropriate decisions for the company betterment.
b. Cost transparency: The management accountant to overcome the limitation should work
with the IT department more closely. This actions would help in providing cost
transparency to the company.
c. Assisting in the goal completion objectives: The management accountant can help in
attaining the long term goals (Pettigrew 2014). The management accountant can help in
achieving the goals because of the detailed information and the strong as well weak areas
of the company can be highlighted.
Answer to question 2:
The procedure necessary to follow the financial data are given below;
a. To access the financial data of the organization it is necessary to obtain the financial
reports of the company

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b. The access to an organizations interim financial reports can also be made to access the
financial reports of the company (Kaner 2014).
c. Another procedure to gain access to the financial data is to review the key financial
statements based on the context of the relevant accounting standards.
Plans that are necessary for efficient operations of a team:
a. Creating an inspiring working environment where digitally minded people can be
allowed to allow a creativity flow.
b. Fostering the strong company culture by giving the team with small perks such as place
where they can relax while brainstorming.
c. Helping the team to keep the clear mind and focus for maximizing the productivity of day
to day activities.
Answer to question 3:
Participating the workers in the decision-making procedure has contributed in significant
creation of value in several organizations. Below listed are the ways through which employee
participation helps in taking decision;
Participation with the help of suggestive schemes: Encouraging the employees to bring new
and unique ideas can significant contribute to organization success on matters relating to cost
minimization (Kieso, Weygandt and Warfield 2016). This involves developing a full-fledged
procedure which may help in adding value to the functions of organization and creating a healthy
environment as well as work culture.

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Creativity and innovation: Involving the operational staff helps in bringing innovation with a
greater risks bearing capacity and there usually an equal chance of success and failures. Workers
usually lacks the expertise for executing the enterprise that can involve bigger costs.
Participation with the help of job enrichment: This can be done by expanding the job content
and adding additional motivators as well as rewards to the current job profile is a better way of
keeping the operational staff involved in the managerial decision making. The job enrichment
procedure would help in providing the freedom to the employees for exploiting their wisdom and
using their judgement while handling the day-to-day business problems.
Activity 6:
Answer A: Negative variance in Personnel Budget:
Creating employee value: When an organization introduces a proper internal control, a cross
functional environment as well as efficient internal auditing procedure would help in creating an
employee value. This will help in meeting the cultural commitments and would simultaneously
increases the chances that the variance would be unfavourable. This implies that the business
commitments would be favourable in meeting or exceeding the expectations of the employees.
Cost of Direct labour: The labour rate variance information would be incorporated to provide
information to the management regarding the actual price and the price that is paid to the direct
labour at the time of production. This will help in determining the standard costs. This kind of
information would help in planning the budget for the future period and would also work for as
the employee feedback for the purpose of direct labour component for the organization.

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Answer to B:
While reporting the use of evidence is necessary because it supports the matters that is
claimed and ultimately makes it more strong than before. As a matter of fact, the report would be
more convincing if an evidence is provided. Evidence helps in making sure that the appropriate
arguments are claims are made. This signifies that while preparing a report one has adequately
performed research by listing the resources that one has used for obtaining the information.
Activity 7
Certain data needs to consider for an accurate and up-to-date profit and loss report. It
needs to be mentioned that most of the information required for the preparation of profit and loss
report comes from the monthly budget and cash flow statement of the firms. In addition,
estimated computation of depreciation needs to be ensured from the tax advisor. After that, data
related to revenue and other incomes of the firm need to be considered in the profit and loss
report. After that, firms must ensure collecting data for direct cost or cost of goods sold for
reaching to gross. After that, data for expenses need to be collected. In order to make sure that
the collected data are error free and comprehensive, they need to be verified against the actual
sources from where they are collected.
Activity 8
Requirement 1
Report Writing Checklist
Format Format of the report needs to be followed that includes physical
presentation, proper layout, presence of proper headings and subheadings

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and numbering system
Tables and
Figures
Key tables and figures need to be there in the report along with caption of
the tables and figures
Structure Proper structure needs to be followed in the report that consists of title,
executive summary, table of content, introduction, discussion, conclusion
and others
Content Information content needs to be there along with quality discussion and
conclusions
Referencing Report should be properly referenced that involves acknowledging all
sources of information
Technical Complete sentences need to be used along with appropriate voice
Requirement 2
Error of Omission – This error occurs when a transaction is not recorded or completely left out.
Error of Principles– This error takes place when a transaction is recorded against the applicable
accounting principle.
Error of Original Entry – This error occurs when a correct entry is recorded with wrong figure.
Error of Commission – This error or discrepancy can be seen when there is accounting
miscalculation.

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Compensating Error – This error takes place when two or more errors nullify the wrong effect
in the balance sheet.
Requirement 3
The project managers need accurate and timely reports as it helps them in tracking the
current progress of the project. After that, these reports help the project managers in identifying
risks in the early stages so that precautionary measures can be taken. Moreover, these reports
increase the visibility of the project managers about the project that is majorly helpful for
managing the tricky task of project cost management (Kerzner and Kerzner 2017). On the overall
basis, the managers can establish control over the whole project by these timely and accurate
reports.
The project managers require all the cost related information for the project’s finances
such as fixed cost and variable costs of the project. After that, they need the wage related
information of the employees and staffs of the project (Leach 2014). At the same time, they
require the information about the sources of income of the project.
The Project Financial Managers are responsible for the financial management of the
whole projects. They have the responsibility of planning and managing the projects while taking
into account the fact that the projects stay within the budget and the financial standards. At the
same time, they are responsible for overseeing and monitoring the financial operations of the
project.