There are usually a number of questions on the Project Management Professional (PMP)® exam relating to a Project Cost Management. This article will explain some terms relating to the Project Cost Management section of the course.
What is Project Cost Management?
Project Cost Management includes the process involved in the planning, estimating, budgeting & controlling costs so that the project can be completed within the approved budget. A project manager must:
• Estimate Costs
• Determine Budget
• Control Costs
What are “Resources”?
• Estimation involves determining
• What type of resources are required
• What resource rates
• What resource quantities
• Where will the resources come from
• Alternative strategies to obtain critical resources
What are the different Types of Costs?
Sunk Costs: A cost that has already been incurred whether action is taken or not. Sunk costs should not be considered when deciding whether to continue with a project.
Variable Costs: Any cost that changes with the amount of work e.g. materials, wages
Fixed Costs: Costs that do not change as production changes e.g. Set-up, rental etc
Direct Costs: Costs directly associated with the project
Wages, team travel, cost of materials.
Indirect Costs: Overhead items incurred for the benefit of more than 1 project. Examples include Taxes, cleaning, lighting and so on.
Remember, Project Cost Management is a commonly asked question in the PMP® Exam. In order to achieve the PMP® certification a project manager must be familiar with the Project Cost Management.
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