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Cost Management is a really important one among all the project management knowledge areas. There are several activities in a project, several project resources work on project activities and several materials, tool and equipment are used to complete the project scope. All these require a budget to be allocated. Because you need to purchase tools, materials, and the company must pay salaries of the project personnel. This knowledge area deals with the management of the expenses and the budget of the project. Attend our 100% Online & Self-Paced One-Hour Free PMP Training. Note that, project management processes are documented and controlled by the help of project management templates. You can see sample free project management templates to have an idea of how they work. In Project Management Professional training, you can find detailed information about the processes and the other important terms of Cost Management. Also, there are many sample PMP exam questions about Cost Management knowledge area. If you are in the process of application for PMP, these questions will be useful to assess your knowledge. What is Cost Management?It includes processes required to complete the project within the approved budget. With its processes, this knowledge area aims to determine the required budget to complete the project and then aims to monitor and control the project costs to meet the determined budget. The major output of this knowledge area is Project Budget. After the project scope is clear and project activities are determined, each project deliverable and each project activity will have an associated cost. Because, project resources will perform activities, and they have some costs to projects such as expenses, salary etc. And there will be tools, materials or equipment that need to be used during the project as well. These will require a budget as well. This knowledge area primarily concerns with the cost of resources needed to complete the project activities. After the budget is determined, cost management will keep on measuring and monitoring the cost performance of the project to meet the agreed budget. Cost Management has 4 processes, three of these processes belong to planning process group, and on of them belongs to monitoring and controlling process group. These processes are:
The Importance of Cost ManagementThis knowledge area plans how to manage expenses and budget of a project, monitor and control the status of the project and measures budget performance. Plan Cost Management ProcessThe first process of this knowledge area is plan cost management process. In this process, how to determine budget, estimate costs and manage the expenses throughout the project are planned. Cost Management plan is the primary output of the this process. It describes how to manage the project costs and budget. Two Important Terms in Plan Cost Management Process
Estimate costs processEstimate costs process is the second process of cost management knowledge area. Cost estimation for each project activity and tools, materials, equipment are done in this process. Then, based on these estimations, overall project budget is estimated. Different types of costs in the project:
Inputs for Estimating Costs & The Accuracy of Estimates:Inputs for estimating costs are important. Because all cost estimation is based on the inputs.
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We sent links to your email! You should have received an email from us already. If you did not receive, make sure you check your spam folders and add masterofproject.com to safe senders list to receive our emails. Determine Budget ProcessDetermine Budget Process is the third process of cost management knowledge area. After estimations are done, all cost estimations are combined during this process and overall project budget is determined. Control costs processControl costs is the fourth and last process of the cost management knowledge area. This process mainly aims to control the project expenses and complete the project on determined budget. What is Progress Reporting?Progress reporting for cost management is crucial as well. Because, based on the previous expenses and track, whether the remaining activities will be completed with the remaining budget must be assessed frequently. And these must be reported to relevant stakeholders. What is Earned Value Management?Earned Value Management is a critical part of cost management knowledge area. Earned Value calculations show whether you are ahead of budget or under budget. These calculations are critical for evaluating whether the project will meet the schedule and cost targets. Which is an input of the process of controlling costs?The project management plan and project funding requirements are inputs of the process of controlling costs.
What are 5 cost control methods?5 cost control methods. Planning the budget properly. One method of cost control that most businesses use when starting a new project is budget management. ... . Monitoring all expenses using checkpoints. ... . Using change control systems. ... . Having time management. ... . Tracking earned value.. What are the four processes of cost management?While cost management overall is a complicated process and a critical project management knowledge area, we can break it down into four processes:. Resource planning. ... . Cost estimation. ... . Cost budget. ... . Cost control.. What is cost control with example?Cost control is the practice of identifying and reducing business expenses to increase profits, and it starts with the budgeting process. Cost control is an important factor in maintaining and growing profitability.
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