BSBPMG423_Assessment 1

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BSB40920 Certificate IV in Project Management Practice BSBPMG423 Apply project cost management techniques Student name: Thanaphap Wechakorn Student ID: 170064 ASSESSMENT 1: QUESTIONING Question 1: Explain the following key steps of the project cost management process. For each, state at which stage of the project life cycle it is used.  Cost Estimation  Budget Determination  Spending Control. Cost Estimation: It is a process in which is determined approximately how much money is necessary to successfully complete the tasks in a project. It is necessary to highlight that this value is an estimate and it is based in costs from previous projects obtained in documents and data. -In the project life cycle the Cost Estimation is applied during the Initiation Stage. Budget Determination: It is a process where the approximate cost of every activity carried out in a project is estimated. This step seeks to add the estimated costs to all the tasks of a project and determine the cost baseline. This stage is considered important because is the base to determine when the project cost needs to be monitored and controlled.-In the project life cycle the Budget Determination is applied during the Planning and Development Stage. Spending Control: It consists in monitoring the project status in order to manage how the cost baseline could change and update these changes. This step is responsible for tracking the way the project cost is evolving and to determine if it is necessary to change the budget or activities. While controlling the money spent during the project the manager will be able to see how the budget in varying and what kind of decisions to be made. In the project life cycle the Spending Control is applied during the Implementation Stage. Question 2. Discuss the key purpose and objectives of budgeting in project management. The key benefit of budgeting is that the manager would determine the cost baseline against which project performance can be monitored and controlled. Which means, it would let you know what you can control, change, update and develop without affecting the project cost baseline and allowing to cover all the fundamental parts for the project to be completed. Some of the key objectives of budgeting are: Align strategic goals, project goals, track expected performance, make decisions on time and avoid running out of money.

Question 3: Identify the main steps in the budgeting process for a project Step 1 Set Realistic Goals. Goals for your money will help you make smart spending choices. Step 2 Revenue projects & KPIS Step 3 Separate costs by stream Step 4 Design Your Budget Step 5 Put Your Plan into Action Step 6 Seasonal Expenses Step 7 Look Ahead Question 4 . Explain why key performance indicators are used when managing the costs of a project and provide three examples of financial key performance indicators that can be used to determine the effectiveness of a budget. KPIs are measures by which a company can monitor its progress throughout a specified period of time. By closely managing budgets to achieve a KPI target, a company can reduce unnecessary spending and improve its bottom line. KPIs also help a company plan future spending. 1. Sales Growth; the percentage in which sales have increase over a period of time. 2. Income Sources; ways in which the organisation receives incomes. 3. Aging accounts receivable; period of time in which an invoice gets paid. A key performance indicator (KPI) is a quantifiable metric that helps the project manager(PM) determine overall project performance and its alignment to organizational objectives. Three examples are:  Cost performance index  Profitability by task  Planned value Question 5. Explain the use of milestones in cost management. Project milestones help project managers delineate points, breaks, or accomplishments in their project schedules. Project milestones can signify the beginning or end of a project, or can be dispersed throughout a project do denote achievements in the middle. Milestones can be used as a reminder to complete necessary tasks, such as a budget check or an external review of the project. Question 6 . Explain how to apply each of the following project cost management tools. For each tool, also describe its cost-effectiveness and its accuracy.

• Analogous Estimating • Parametric modelling • Bottom-up estimating. Analogous Estimating: Analogous estimation is base on information from historical data from previous projects for similar tasks or deliverable. So the more historical information the organization has the easier it is to find a comparable task/deliverable. Historical data should be adjusted to the current task/deliverable to reflect differences in complexity, team members, etc. Parametric modelling: Parametric Estimation as the name suggests is based on parameters, a number of units you need to do. In many cases based on industry published tables, then adjusted by region and season. Some large organizations have built detailed historical data that can be used. Bottom-up estimating: Bottom-up estimating breaks the whole project up into smaller elements and components and allows you to estimate costs for each of these steps. This can be a more accurate way of estimating costs, as it allows you to look in more detail at each part of the project. Question 7 . Identify the key procedures that should be followed in the event of a cost change during a project.. Receive the change request. The change request is initiated in the form of an oral, written, or electronic request. The person making the request can be either internal or external to the project. The requested change can be optional or legally mandated. Record the request. The specifics of the change request are recorded, usually in a change request log, so that the request can be managed. The level of detail is up to project management. Enough information should be recorded so that anyone related to the project can understand the request. Assess the request. Someone on the project team assesses the impact that the proposed change will have on the rest of the project. Budget changes can potentially affect time, cost, quality, and objectives. You have to do a cost/benefit analysis of the change. Make a recommendation. Based on the assessment, the assessing team member or members make a recommendation to accept, reject, or modify the change request. The recommendation is presented to the project authority. Decide whether to accept or reject the request. Based on the recommendation, the project authority decides what to do with the request. If rejected, the change request is closed and the documentation is filed. If accepted, the project budget is adjusted accordingly to incorporate the approved change.

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Question 8: Provide three examples each of financial assets and liabilities as they relate to project management. Assets Liabilities Cash Project salaries and wages Inventory Insurance Equipment Contracts Question 9 : Explain what a project Work Breakdown Structure (WBS) is and how it can be used as part of the project cost management process. Work breakdown structure (WBS) is a method of organizing projects into a hierarchical reporting structure. WBS is used to breakdown or breaks each work process into more detail. This is intended to make the project planning process have a better level. Also included in the WBS is cost for each smaller activity.  Project statement must be determined and described first. You can do it by highlighting phases of the project.  Deliverables must be created and listed, after that devide all deliverables into manageable tasks. Question 10 . List four different project records that may be used to evaluate the project cost management process at the end of the project life cycle.  Project monitoring and evaluation reports Project monitoring and evaluation is used to measure a project's progress . It's important because it lets you keep tabs on a project and identify potential problems.  Accounting records Accounting records are the general ledger, all subsidiary ledgers, invoices, bank statements, cash receipts, and checks.  Budget variation A budget variance is an accounting term that describes instances where actual costs are either higher or lower than the standard or projected costs. An unfavorable, or negative, budget variance is indicative of a budget shortfall, which may occur because revenues miss or costs come in higher than anticipated.  Changes log

A changelog is a log or record of all notable changes made to a project. The project is often a website or software project. Question 11. Identify how project records can be used to improve future project cost management processes. Organizations do create their internal policies and guidelines for records management. It is ensured that all the employees are aware about such policies and guidelines. Information Technology can be used effectively for records management. For the project records management, proper file structures can be created where the records will be stored. Proper access control can be provided to various stakeholders based on their roles in the project. Project records management system is an integral part of the overall project management information system. Maintaining the records and ensuring that such records are easily available when needed is very important. Project records are used to improve cost management by creating the contingency reserve, performing change control, and having better estimation and budgeting for future projects.

References https://www.studocu.com/row/document/yeditepe-universitesi/innovation- management/project-management/19206953 https://opentextbc.ca/projectmanagement/chapter/chapter-12-budget-planning-project- management/ https://www.workflowmax.com/blog/what-is-cost-estimate https://www.ecosys.net/knowledge/project-cost-management/ https://bizfluent.com/about-7312144-kpi-budgeting.html https://learn.g2.com/project-milestone https://www.projectmanagement.com/contentPages/wiki.cfm? ID=368759&thisPageURL=/wikis/368759/Analogous-estimating#_=_ http://itpmpro.blogspot.com/2008/06/project-cost-change-control-system.html https://www.projectmanager.com/guides/work-breakdown-structure https://www.guru99.com/initiation-phase-project-management-life-cycle.html https://www.knowledgehut.com/tutorials/project-management/project-records- management

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BSBPMG423_Assessment 1

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