Fundamentals of Project Management: Cost and Finance Analysis Report

This report provides a comprehensive analysis of cost and finance within the context of project management, specifically focusing on the development of a multi-storey car parking project. The report begins with an introduction to cost estimation, highlighting its importance in quantifying resources a...Read More

Running head: FUNDAMENTALS OF PROJECT MANAGEMENT
FUNDAMENTALS OF PROJECT MANAGEMENT- Cost and Finance
Name of the Student
Name of the University
Author Note

1FUNDAMENTALS OF PROJECT MANAGEMENT
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

2FUNDAMENTALS OF PROJECT MANAGEMENT
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.

3FUNDAMENTALS OF PROJECT MANAGEMENT
 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.

4FUNDAMENTALS OF PROJECT MANAGEMENT
Budget for the project
The total cost for designing the multi storey car parking system is estimated to be
completed within $170,000. The estimated cost and expenses are listed below in the table.
Task Name Duration Start Finish Cost
multi storey 100 days Tue 1/14/20 Mon 6/1/20 $170,000.00
Phase 1: Initiation phase 23 days Tue 1/14/20
Thu
2/13/20
$4,160.00
developing business
case
6 days Tue 1/14/20 Tue 1/21/20 $1,200.00
feasibility study 4 days Wed 1/22/20
Mon
1/27/20
$960.00
designing project team 5 days Tue 1/28/20 Mon 2/3/20 $400.00
requirement analysis 5 days Tue 2/4/20
Mon
2/10/20
$1,000.00
Reviewing the phase 3 days Tue 2/11/20 Thu 2/13/20 $600.00
Phase 2: Planning phase 21 days Fri 2/14/20 Fri 3/13/20 $2,840.00
project planning 8 days Fri 2/14/20 Tue 2/25/20 $640.00
resource planning 4 days Wed 2/26/20 Mon 3/2/20 $480.00
financial planning 5 days Tue 3/3/20 Mon 3/9/20 $600.00

5FUNDAMENTALS OF PROJECT MANAGEMENT
developing
communication plan
4 days Tue 3/10/20 Fri 3/13/20 $1,120.00
Phase 3: Blue print 14 days Mon 3/16/20 Thu 4/2/20 $53,816.00
identifying the location 4 days Mon 3/16/20 Thu 3/19/20 $1,440.00
developing the design 4 days Fri 3/20/20
Wed
3/25/20
$51,152.00
sending design for
approval
3 days Thu 3/26/20
Mon
3/30/20
$1,224.00
receiving approval 3 days Tue 3/31/20 Thu 4/2/20 $0.00
Phase 4: Construction 37 days Fri 4/3/20
Mon
5/25/20
$107,224.00
Area selection 6 days Fri 4/3/20 Fri 4/10/20 $1,680.00
Constructing the area for
parking
5 days Mon 4/13/20 Fri 4/17/20 $1,440.00
implementing LED
lights
7 days Mon 4/20/20 Tue 4/28/20 $51,272.00
LCD at each floor 4 days Wed 4/29/20 Mon 5/4/20 $51,032.00
electric and wiring 10 days Tue 5/5/20 Mon $1,200.00

6FUNDAMENTALS OF PROJECT MANAGEMENT
5/18/20
installation of CCTV
camera
5 days Tue 5/19/20
Mon
5/25/20
$600.00
Phase 5: closure 5 days Tue 5/26/20 Mon 6/1/20 $1,960.00
Reviewing the project 3 days Tue 5/26/20 Thu 5/28/20 $1,560.00
Signing off 2 days Fri 5/29/20 Mon 6/1/20 $400.00
Cost and finance associated with the project
Cost and finance associated with the Multi storey car parking system needs to be
analyzed properly so that it becomes easy to carry out the performance. The resources that are
considered as an essential element for the purpose designing the multi storey car parking are
hardware cost, software cost, implementation cost, operational cost, resource cost, labor cost and
extra cost is kept for the future purpose (Pearce 2016). The estimated one time cost that is
associated with the development of the project is estimated to be around $170,000.
Tangible profit
Category
Hardware cost estimated $ 50,000.00
Estimated software cost $ 50,000.00
Implementation of other technologies $ 25,000.00
Operational cost $ 30,000.00
Planning cost $ 28,000.00
Resource cost $ 20,000.00
Labor cost $ 20,000.00
Other cost $ 10,000.00
Total Tangible profit $ 233,000.00
Tangible One-Time Costs

7FUNDAMENTALS OF PROJECT MANAGEMENT
Category
Cost for improvement $ 50,000.00
new hardware cost $ 20,000.00
new software cost $ 30,000.00
Cost for automation $ 50,000.00
Maintenance cost $ 10,000.00
Others $ 10,000.00
Total Tangible One-Time Costs $ 170,000.00
Tangible Recurring Costs
Category
Software maintenance cost $ 30,000.00
Hardware maintenance cost $ 2,000.00
Business strategy implementation $ 3,000.00
Lease line cost $ 1,000.00
Suppliers cost $ 1,000.00
Other cost $ 1,000.00
Total Tangible Recurring Costs $ 38,000.00
Break even analysis
Break even analysis is referred to the financial tool that helps to determining the stage at
which the project is likely to offer with the implementation of the new service. This is a financial
calculation that is used for the purpose of determining the number of the products that are going
to be cover within the costs. The break even analysis is carried out with the help of dividing the
total fixed costs of the production by the price per unit less (Held et al. 2016). The main reason
behind using break even analysis is to ensure that exact profit is obtained with the use of proper
cost. The main reason behind using break even analysis for the purpose of determining the cost
associated with the development of the project is that it helps in measuring profit and losses that
occurs at different levels of the productions and sales. This also helps in analyzing the
relationship between the variable cost and fixed costs. Beside this with the help of breakeven
analysis it becomes easy to determine the changes that comes with the profitability. The below
break analysis table is designed for the purpose of identifying the cost of the existing system and

8FUNDAMENTALS OF PROJECT MANAGEMENT
the cost that is associated with the future system (Hauck et al. 2017). Thus with the analysis
provided below it will become easy to understand the expenses that will be needed for
maintaining the services in the upcoming years.
Break Even Analysis
Costs of Existing System Year 1 Year 2 Year 3 Year 4 Year 5
Total Development Costs $ - $ - $ - $ - $ -
Cost for Additional hardware
$
22,000
$
10,000
$
25,000
$
35,000
$
40,000
Operation costs
$
30,000
$
20,000
$
15,000
$
20,000
$
20,000
Time for the user during development $ - $ - $ - $ - $ -
Total Maintenance costs
$
15,000
$
15,000
$
20,000
$
25,000
$
30,000
Total Cost of Existing System
$
67,000
$
45,000
$
60,000
$
80,000
$
90,000
Costs of Proposed System Year 1 Year 2 Year 3 Year 4 Year 5
Total Development Costs
$
50,000 $ - $ - $ - $ -
Cost for Additional hardware
$
20,000 $ - $ - $ - $ -
Operation costs
$
2,500
$
2,500
$
2,500
$
2,500
$
2,500
Time for the user during development $ - $ - $ - $ - $ -
Total Maintenance costs
$
2,500
$
2,500
$
2,500
$
2,500
$
2,500
Total Cost of Proposed System
$
75,000
$
5,000
$
5,000
$
5,000
$
5,000

9FUNDAMENTALS OF PROJECT MANAGEMENT
1 2 3 4 5
$-
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
$80,000
$90,000 Break Even Analysis
Total Cost of
Existing
System
Total Cost of
Proposed
System
Year
$ US
Cost management
Costs plays the key role while executing a project. Hence it becomes essential to ensure
that the project is executed with a feasible budget and has the potential to offer better benefit. In
order to manage the cost associated with the project it is important to implement proper
precaution procedures that will ensure that the cost has been managed wisely while carrying out
the project (Howard et al. 2017). Multi storey car parking project is one of the most crucial
project as this has the potential to add positive value towards the customers. Thus the project
needs to be executed efficiently within the estimated time and budget. In order to ensure that
proper cost is managed while carrying out the project it becomes essential to follow the set of
procedures listed below:
 It is important to obtain proper endorsements at each milestones at the development of
the project. The project team members should ensure that proper peer reviews are
conducted so that it becomes easy to achieve the key milestones (Celli et al. 2017).

10FUNDAMENTALS OF PROJECT MANAGEMENT
 The project team must ensure that a good communication practice is developed among
the key stakeholder and the management team so that it becomes easy to estimate the key
requirements associated with the project (Freeman et al. 2018).
 The project document should be updated based on the base estimate so that it becomes
easy to develop the project based on the scope, cost, schedule and corresponding budget.
Thus it can be stated that with the help of an efficient cost management knowledge it
becomes easy to align the project objectives. This helps in ensuring that the project has been
executed successfully by fulfilling the needs of the customers (Svensson 2016). The cost
management process plays a major role as this ensures that all the key requirements are enlisted
while carrying out the project.
Conclusion
The project of multi storey car parking area is designed with the aim of offering a better
flexibility and accessibility towards the people associated with the Woodland residential area.
The project has been designed effectively after analyzing all the necessary factors. It can be
stated that with the use of proper cost analysis and estimation strategy it becomes easy to
determine the overall cost that will be needed for carrying out the project. In order to execute the
project the calculated expenses cost is around $170,000. The paper has included all the necessary
details regarding the project and has ensured that all analysis are carried out efficiently so that
exact data can be obtained. The cost estimation methodology that has been selected for the
project is bottom up approach as this allows the project member to divide the scope into several
units so that the cost related to the project can be determined easily within the estimated time
period. Hence it can be concluded that with an effective project management knowledge it

11FUNDAMENTALS OF PROJECT MANAGEMENT
becomes easy to carry out a project. This helps in identifying the cost and finance that will be
incorporated in successfully executing the project.

12FUNDAMENTALS OF PROJECT MANAGEMENT
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