BUDGETING AND COST

ESTIMATION
As a Project Manager, a resource-framed goal is required. How much
budget do we have to accomplish the project? Is there any flexibility in the
resources available for the project? This goes back to looking at what is
attainable. We want to set a deadline that is reasonable, given the resources
available and the amount of knowledge and experience we have with this
type of project.
In addition, we want everyone involved in the team to clearly know the
resource constraints and deadline so they can act in an empowered fashion
to help get the job done on time, within budget, and with high quality.
Clarity about resources is critical to project success.
In a world of limited funds, a project manager is constantly deciding how to
get the most return for the investment. The more accurate our estimation of
project cost is, the better we will be able to manage the projects budget.
Therefore, estimating a projects costs is important for several reasons:
It enables us to weigh anticipated benefits against anticipated costs to
see whether the project makes sense.
It allows us to see whether the necessary funds are available to support
the project.
It serves as a guideline to help ensure that we have sufficient funds to
complete the project.
A project budget is a detailed, time-phased estimate of all resource costs
for our project.
A Project Budget is typically built in stages from an initial rough estimate
to a detailed estimate to a completed, approved project budget.
On occasion, we may even revise our approved budget while the project is
in progress.
The projects budget includes both direct and indirect costs.

Direct costs include the following:
Salaries for team members on our project
Specific materials, supplies, and equipment for the project
Travel to perform work on the project
Subcontracts that provide support exclusively to the project

Indirect costs fall into the following two categories:
Overhead costs: Costs for products and services for the project that
are difficult to subdivide and allocate directly. Examples include
employee benefits, office space rent, general supplies, and the costs of
furniture, fixtures, and equipment.
The office space is also treated as an indirect project cost.
General and administrative costs: Expenditures that keep our
organization operational (if the organization doesnt exist, you cant
perform your project). Examples include salaries of your contracts
department, finance department, and top management as well as fees
for general accounting and legal services.






For our project based on Railway Reservation System, direct costs for it
may include the following:
Labor: Salaries for the Project Manager and other team members for
the hours they work on the project.
Materials:
Travel: The costs for marketing our project at different organizations
all over India.
Advertising: To make it popular among the masses, we advertise it via
eminent search engines like Google, MSN, and Yahoo.
Subcontract: The services of the ISP(Internet Service Provider) to
maintain connectivity between the system, user and the administrator.
Indirect costs for this project may include the following:
Rent: The cost of the office space we will provide to the administrator
to regulate the systems performance time to time.
Equipment: The computer you used to develop the system and the
software required which are as follows :
1. Operating System : Windows 7
2. MYSQL
3. MS Access
It also includes the computer which will be put to use by the
administrator.
Office Regulation: This includes the costs incurred in the regulation
of office by the administrator which are Electricity, Water Supply,
Internet Services and other miscellaneous needs.


Cost Vs Time S Curve
This is the type of analysis suitable for projects that require both labor and non-labor intensive elements. The main
concern here is the cumulative costs at a specific stage of the project and its effect on the cash flow as well as the
potential risks of exceeding the allotted costs.
Creating the Cost vs. Time S-Curve
Use the actual cumulative amount of expenditures incurred from baseline start date to cut-off date of progress stage
and compare the S curve created against the Baseline S curve for total cost allotment for the same cut-off date.


Considering the above S curve , we can witness that at the observation time
that is 6 months since the inception of project, the budget has not been fully
utilized and $40,000 have remained under spent.
Therefore S curve can be utilized to regulate the functioning of our project
cycle and enforce the required changes in order to get things back on track
and complete our project with efficient cost management .