TEST YOUR KNOWLEDGE: UNDERSTANDING PROJECT BUDGETS

A forecast is a cost estimate or prediction that helps you calculate the correct expenses for a particular time period. You will frequently review your project budget, and it will evolve throughout the project life cycle.

Resource cost rates refer to the cost of resources like labor, tools, equipment, materials, and software. You will need to determine how much each of these resources will cost the company.

Time-phased budgeting allows you to allocate costs for project tasks over the projected timeline in which those expenses are planned to take place. By looking at your tasks against a timeline, you can track and compare planned versus actual costs over time. Also, make sure you baseline your budget and document all types of costs. Explanation: A baseline budget is the estimate of costs you start with at the beginning of a project. When your project accrues actual costs, you use the baseline budget to determine if the project is under or over budget. It is also a good idea to document all costs and time-phase your budget. Explanation: You should document all types of costs—both internal and external. Some additional strategies to implement include time-phased budgeting and setting a baseline budget.

Employees and contractors are the people who do the work necessary to complete the project. Therefore, their wages and salaries are considered direct costs. Explanation: Staff training is a direct cost because it is necessary in order to complete your project. Explanation: Since materials are necessary to complete your project, they are considered a direct cost.

It’s important to remember the project manager may need to adjust the budget throughout the project life cycle.

The project manager also collaborates with other people on the project to create the estimates.

By budgeting for surprises, the project manager is less likely to go over budget. Explanation: A project manager may need to create a separate, revised budget based upon how the project is tracking. Explanation: It’s important to know exactly what stakeholders expect from the project.