The main benefit of cost aggregation is that it allows the project management team to see scheduled spending for every time period. It's a temporary endeavor undertaken to create a unique product, service or result. All Rights Reserved. Some argue that is an element of the earned value analysis (EVA) as well. Project management is the application of processes, methods, skills, knowledge and experience to achieve specific project objectives according to the project acceptance criteria within agreed parameters. Cost management is the process by which one plans and manages the budget of a business or project. Project cost management templates are helpful to plan typical projects. This will allow project managers to see the activities as well as the corresponding costs. In your project, the quartz countertops you wanted are not available. Ultimately, your cost management plan will help you to both plan for the project cost, and manage your project cost throughout the course of the project’s life cycle. Customers also use estimates to make decisions for changing their business and systems. The cost management plan in general terms analyzes how the project costs will be planned, funded and controlled. Cost Variance (CV) is an indicator of the difference between earned value and actual costs in a project. When monitoring costs, the project manager compares the costs already incurred with the known remaining costs and forecasts whether the project budget is adequate. Thisdocument is also the basis for stakeholder decisions and the selection ofproject options. Project Tree Builder: users can develop project trees and task hierarchies which help estimate cost per work item (task or activity). Project cost management is the activities used to estimate, allocate, and control costs of a project. 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Log in or sign up to add this lesson to a Custom Course. Without an accurate cost estimate, you could easily fall short of money to finish the project. Before a project is initiated, thepotential benefits need to be analyzed in a project business case. It contains 4 processes. Another important part of cost management is monitoring costs. It is a measure of the variance analysis technique which is a part of the earned value management methodology (EVM; source). Cost is usually one of the first questions that come up in any project. However, no matter whether you lead a software development project (IT project cost management) or construction project (construction project cost management), you should consider project cost management as a process that consists of the three key steps (get more info at the PM Guidelines). | 2 The inputs necessary include the project management plan, funding requirements, work performance data and organizational structure. What is the main goal of project cost management? Like most projects, your home addition will go through a few different types of cost estimates. He took a variety of roles and responsibilities for planning, executing, performing and controlling software projects and project activities. - Types & Examples, Biological and Biomedical When integrated with the scope/quality of the project and time management, these three functions form the core of Project Management. In general, the more accurate the estimate, the narrower the variance range. It contains 4 processes. Cost management covers the full life cycle of a project from the initial planning phase towards measuring the actual cost performance and project completion. It produces an approved budget, monitors costs throughout the project, and provides a basis for decisions to control unexpected or extra costs. Additionally, the customer wants an accurate cost estimate to ensure there's enough funds for the entire project. 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