Project Cost Management: BSBPMG514 Report - Cost Analysis

This report analyzes project cost management, focusing on key aspects such as budgeting, cost estimation, and cost control. It begins by defining the purposes and objectives of budgeting in project management, outlining the main steps in the budgeting process, and explaining the use of key performance indicators (KPIs) and milestones. The report then delves into cost estimation methods, comparing expert judgment and analogous estimating, and discusses the application of Earned Value Management (EVM) for evaluating costs. Furthermore, it explores strategies for managing costs, providing examples of their application. The report also outlines processes for reviewing costs against outcomes, and highlights the role and responsibilities of a project manager in cost management. It includes a work breakdown structure, stakeholder consultation, and a project cost management plan. Finally, the report addresses managing project costs in various scenarios, change requests, status reports, and financial completion processes, along with lessons learned and invoicing issues.

BSBPMG514 - Manage
project cost

Contents
TASK 1..........................................................................................................................................................3
QUESTION 1.................................................................................................................................................3
QUESTION 2.................................................................................................................................................4
QUESTION 3.................................................................................................................................................5
Two strategies for managing costs and provide two examples of their application................................5
QUESTION 4.................................................................................................................................................5
Select and outline two (2) processes for reviewing costs against outcomes...........................................5
QUESTION 5.................................................................................................................................................6
Outline the key role and at least four responsibilities of a project manager in relation to cost
management...........................................................................................................................................6
TASK 2 Determine Project Cost...................................................................................................................7
(a) Work breakdown structure................................................................................................................7
(b) Consult with stakeholders..................................................................................................................7
(c) Project cost management plan...........................................................................................................8
Budget:..................................................................................................................................................12
TASK 3 Manage project cost and finalize project cost management processes........................................12
3.1 For each scenario.............................................................................................................................12
3.2 For each scenario.............................................................................................................................14
3.3 Change Request...............................................................................................................................14
3.4 Status report....................................................................................................................................16
5. Monitoring implementation..............................................................................................................18
6. Financial completation process.........................................................................................................19
7. Invoicing issues..................................................................................................................................20
8. Lesson Learned..................................................................................................................................20

TASK 1
QUESTION 1
Question Answer
What are the key purpose and
objectives of budgeting in
project management?
The objective of the strategy budget management is to
forecast and coordinate complex expenditures while staying
inside the allocated budget and meeting the project's policy
aims. The procedure of legally recognizing, authorizing, and
repaying the expenditures or expenditures associated with a
project is referred to as project budget management.
List the main steps in the
budgeting process for a project.
There are mentioned main steps of project budget such as:
Step 1: Recognizing project scope
Step 2: Defining resources
Step 3: Assign Amounts
Step 4: Build your budget
Step 5: Obtain approvals and implement
Explain why key performance
indicators are used in budgeting
and provide three examples of
financial key performance
indicators that can be used to
determine the effectiveness of a
budget.
KPIs are measurements that show if sections are meeting the
essential criteria to keep their businesses successful. Future
profit prospects, typical sales throughout a cycle time, and
conversion rates are all examples of relevant KPIs. When
planning with a KPI, employees are held responsible for the
final outcome of this sector of the company. Leaders can
make modifications to business operations until it's too later
by evaluating the financial success over the timeframe
specified in the KPI. There are three examples of KPI for
budgeting:
 Actual cost of work performed
 Deviations from planned budget
 Variations to the planned hours of work

Question Answer
How are milestones used in
budgeting?
Milestones are analysis tools that have been used to designate
certain milestones in a development's timetable. Those
milestones may indicate anchoring like the beginning and
conclusion dates of a work, as well as the requirement for
expert review or participation, as well as budgetary
inspections. In several cases, objectives have no bearing on
project time.
QUESTION 2
Question Answer
Explain two methods for
conducting project cost
estimating and at least one
advantage and disadvantage of
each.
For all undertakings, accurate cost estimates are required. It
would be hard to construct a business strategy, generate
precise budgets, anticipate material requirements, or manage
tasks expenses without even a cost estimate. There are
mentioned two methods of cost estimation:
Expert judgment method: Decision making, supported by
historical data, gives significant environmental knowledge
and data from similar projects.
 Advantage: It is a cheap method
 Disadvantage: Very inaccurate methods
Analogous estimating method: Analogous cost estimation
employs variables from a prior, comparable operation,
including such purpose, budget, funding, and timeframe, or
scale measurements including such length, heaviness, and
intricacy, as the foundation for forecasting its same variable
or statistic for a new work
 Advantage: Similar estimates are produced depends
on the state of time or cost of equivalent past efforts.
As a result, such estimates are based on the squad's

Question Answer
expertise or the proposal's background.
 Disadvantage: One drawback of this strategy is that
the assessment will not always be correct.
Describe earned value
management and its application
in evaluating costs.
EVM (Earned Value Management) is a tool that aids project
managers in assessing project outcomes. It is a methodical
project management approach for identifying program
deviations comparative analysis of work performed vs labor
anticipated. EVA is a quantifiable method for calculating
time and budget variations in order to assess success of a
project.
At what stage of the project
lifecycle would you estimate
cost?
The team will evaluate the cost estimates methodologies and
strategy they will use to develop and implement the budgeted
even during proposal's planning stage.
QUESTION 3
Two strategies for managing costs and provide two examples of their application.
Strategy Outline with two examples/strategy.
Reduce actual cost A high-rated hotel may be completely booked without any
need to promote.
Establish monthly budget Consider all the expenses in systematic manner and exclude
unnecessary expenditure.
QUESTION 4
Select and outline two (2) processes for reviewing costs against outcomes.
Process Outline (30-50 words/process)
Conduct a gap analysis  Examine the scope statement to see how well the

Process Outline (30-50 words/process)
project's outcomes reflect the initial goals.
 Examine the intended outputs (particularly
documents) to check that they have been provided to
an adequate level or that a suitable alternative has
been found.
Determine project goals are
achieved
 Are users well-informed and endorsed? Would there
be an adequate number of self-assured, talented
individuals in location?
 In terms of consistency, timing, and money, how can
the final product compare to the initial project plan?
QUESTION 5
Outline the key role and at least four responsibilities of a project manager in relation to cost
management
1. Activity and resource planning: Achieving due dates requires preparation, and several
failed attempts as a result of inadequate preparation. Successful project managers, and
first primarily, identify the project objectives and assess existing resources. Good project
managers understand how to produce typical time forecasts and assess the capabilities of
their group or divisions.
2. Cost estimating and developing the budget: Good project managers expect to stay inside
a program's expense. Even though a project fulfils the user needs and is completed on
schedule, it will be considered a disappointment if it exceeds the budget by a large
margin. To prevent massive payment delays, task - oriented leaders evaluate the budget
often and sized areas.

TASK 2 Determine Project Cost
(a) Work breakdown structure
(b) Consult with stakeholders
Individuals or organizations that are currently engaging in the initiative and those whose
purpose is to detect events by the project's results are known as project participants.
• Relevant parties have a say in the development's activities and goals.
• Earlier on in the venture, the program section identifies Project Activities and assesses their
needs, expectations, and controls their impact in respect to the firm's goals.
• When engaging in a venture, stakeholder groups have varied levels of leadership, which might
change over the project cycle.

(c) Project cost management plan
Project overview: As a Project Manager, XYZ Pty Ltd trading as MMI will formulate and
execute a plan to create a new campus in Sydney.
•The project has been given a budget of $3 million by the board of directors.
•The project will last one year.
They will be able to hire four additional employees to join the project manager for the duration
of the contract. The rest of the team must be drawn from current MMI employees (flexible work
arrangements will be needed).
Project objectives and requirements: The main objective of the project such as:
1. To set up a campus for students who wants to higher study
2. Set up business in education department
3. Increase revenues by investments in this project
4. This might encompass concrete items like deliverable and investments, as well as
subjective goals like increasing efficiency or inspiration.
Different requirements of the project such as:

1. Provide higher studies to students as per their requirements
2. Generate higher profitability
3. Set up good image
4. Provide good education to talented students
Project deliverables: There are mentioned different deliverables of this selected project that are
mentioned below:
 Engineering report.
 Proposal.
 Design drawings.
 Design documents.
 Completed product (building, bridge, etc.)
 Technical interpretation.
 Site investigation report.
 Design review.
Resource breakdown structure: The resource breakdown structure (RBS) is a hierarchical list
of materials organized by purpose and material category that helps with project planning and
management. The RBS would not include currency as a capacity; only such assets that will
require millions are listed.
Project cost management approach:

Cost Management Approach
Funding sources
Determine the project funding
sources and timelines for funding
for the project
Project funding might originate from a number of places.
Ownership, loans, and government funding are the most
common sources. Alternatives financing has significant
ramifications for a project's total cost, net income, primary
decision, and rights to project earnings and resources. These
funding are based on short term, medium and long term
basis.
Development
o How resource requirements
are identified for the project
o How project expenses are
estimated and how the budget
was determined and finalised
o Include the project
contingency approach which
considers project context, risk
level and contingency factors.
Project management necessitates the use of resources to
complete assigned task. Personnel, technology,
infrastructure, funds, or everything that could be defined
(typically apart from labour) that is necessary to complete a
project activity are examples of all these.
The practise of projecting the financial resources required to
accomplish a task within a stated framework is known as
cost estimating in managing projects. Project budget
estimates a total number that sets a program's budget by
accounting for each aspect essential to the project, from
supplies to labour.
Contingency theory is an administrative concept that
assumes that what a project management's job is to find the
highest expected connection between the company, its
surroundings, and its components. In project planning, a
contingency is a specified, concrete strategy that will be
implemented if a recognised risk materialises. It's basically a
"Plan B" that's implemented if events don't go as planned.

Cost monitoring and control
Monitoring and Control:
o How project costs are
monitored and what cost-
analysis methods is employed
to identify cost variations
Cost Variance Response Process:
o How the response to cost
variances is managed,
approved and implemented
Cost Change Control Process:
o How changes in budget and
costing are managed.
Reporting Format:
o How financial reports are
developed and provided to
key stakeholders.
Delegated authority:
o Determine delegate authority
to ensure ongoing
management of project
finances
(150-200 words)
For project cost monitor and analysis use Earned Value
Management (EVM) is a quantitative approach for
determining a program's actual improvement. They'll utilise
EVM to keep track of your project's costs, both in terms of
time and money. Prediction, TCPI, and Asset Turnover may
all benefit from EVM concepts.
The project managers establish a strategy to handle
variations from the three elements of scope, schedule, and
price after defining the scope, schedule, and cost. A
favourable number indicates that the operation is beforehand
to or under budget. A negative number indicates that the
project is needed or over budget.
The easiest strategy to deal with deviations is to have regular
reports and group communication with appropriate
department leaders to address them. They can also hold
certain performance management for keeping budget
variation to a minimum. A duplicate of the latest budget
should be requested.
Autocratic leadership in the project matrix organisation
refers to the exchange of power to make project-related
judgments from the program manager to people who are
responsible for the team's achievement: the program's doers.