Question

Why use continuums?

What makes up project cost management plan?

Why determine and outline project objectives?

Explain project cash flow statement

What’s top down and bottom up estimating?

Cost trade offs management?

Answer 1

1. The continuum enables marketers to see the relative goods/services composition of total products

• A product’s position on the continuum, in turn, enables marketers to spot opportunities
• At the pure goods end of the continuum, goods that have no related services are positioned
• At the pure services end are services that are not associated with physical products.
• For example, goods such as furnaces, which require accompanying services such as delivery and installation, are situated toward the pure goods end.
• Products that involve the sale of both goods and services, such as auto repair, are near the center

And products that are primarily services but rely on physical equipment, such as taxis, are located toward the pure services end.

2. Cost management is the process of estimating, allocating, and controlling the costs in a project. It allows a business to predict coming expenses in order to reduce the chances of it going over budget.

• Projected costs are calculated during the planning phase of a project and must be approved before work begins.
• As the project plan is executed, expenses are documented and tracked so things stay within the cost management plan.
• Once the project is completed, predicted costs vs. actual costs are compared, providing benchmarks for future cost management plans and project budgets.
• Cost management refers to the activities concerning planning and controlling a project’s budget
• Effective cost management ensures that a project is completed on budget and according to its planned scope
• Cost management activities are conducted throughout the project life cycle, from planning and budget allocation to controlling costs during project execution and assessing a project’s cost performance upon completion.
• Four primary phases of cost management are -

1. Resource planning
2. Cost estimating
3. cost budgeting
4. cost control

• Resource Planning: Part of the initiation stage of a project, resource planning uses a work breakdown structure — a hierarchical representation of all project deliverables and the work required to complete them — to calculate the full cost of resources needed to complete a project successfully.
• Cost Estimating: Cost estimating is an iterative process that uses a variety of estimating techniques to determine the total cost of completing a project. Cost estimating techniques vary widely in their approaches to computing project costs, and stretch from conceptual techniques that draw mainly from historical experience and expert judgment to determinative techniques that estimate costs on a component-by-component basis
• Cost Budgeting: Once you’ve created satisfactory estimates, you can finalize and approve the project’s budget. Cost managers typically release budgeted amounts in stages according to the level of a project’s progress. These allocations include contingencies and reserves
• Cost Control: Cost control is the practice of measuring a project’s cost performance according to cost and schedule baselines that provide points of comparison throughout the project life cycle. The specific requirements for effective cost control are set out in the project management plan.

3 . Project objectives are way to communicate to your team, those individuals who will be executing the project and creating the deliverables that better meet the quality expectations of stakeholders.

Three distinctions in an effective project objective is

1. Vision statement
2. Goals
3. Project objectives

• The vision statement is considered the highest level statement because it describes the direction and aspiration of the project, even if that might not ever be achieved.The vision statement is the foundation on which any strategic plan is built. Therefore, it must be sturdy and outline the grand scheme. It can be a little “pie in the sky.”
• Goals are also high-level statements, and they can be somewhat vague. They do, however, provide overall context for what the project is set to achieve and how it aligns with business goals.There are different types of goals, such as performance goals, time goals (referring to start and end dates) and resources goals. These three goals compete with one another, therefore, a variable with one will have an impact on the others.
• Project objectives are specific and are considered lower-level statements. They describe results: specific, tangible deliverables that the project will produce. Progress towards an objective can usually be tracked with a project dashboard because objectives are often associated with metrics.

4.A cash flow statement is one of the most important financial statements for a project or business. The statement can be as simple as a one page analysis or may involve several schedules that feed information into a central statement.

• A cash flow statement is a listing of the flows of cash into and out of the business or project. Think of it as your checking account at the bank. Deposits are the cash inflow and withdrawals (checks) are the cash outflows. The balance in your checking account is your net cash flow at a specific point in time.
• A cash flow statement is not only concerned with the amount of the cash flows but also the timing of the flows. Many cash flows are constructed with multiple time periods. For example, it may list monthly cash inflows and outflows over a year’s time. It not only projects the cash balance remaining at the end of the year but also the cash balance for each month
• Working capital is an important part of a cash flow analysis. It is defined as the amount of money needed to facilitate business operations and transactions, and is calculated as current assets (cash or near cash assets) less current liabilities (liabilities due during the upcoming accounting period). Computing the amount of working capital gives you a quick analysis of the liquidity of the business over the future accounting period. If working capital appears to be sufficient, developing a cash flow budget may not be critical

5.The Top-down approach is practical for the initial stage of strategic decision-making and in situations where the information required to develop accurate duration and costs estimates is not available in the initial phase of the project. Hence, top-down estimates are used initially until the tasks in WBS are defined clearly, which enable the development of well-defined schedules and budget.

• Delphi (Consensus) Method: Uses the pooled experiences of senior and/or middle managers to discuss thoroughly and ultimately reach an agreement of best estimate of the total project duration and costs in the initial stage
• Apportionment (analogous) technique: Uses good historical data of past projects that are relatively standard with minor variation or customization as a reference to allocate duration and costs to the current project.

The Bottom-up approach is typically more reliable and preferred for estimating because it assesses each work package from the bottom, working up to a deliverable and phase. It is practical to use when project schedules and budget from previous similar projects are available for reference. Estimating duration and costs for each work package facilitates the development of schedules and a time-phased budget, which are required to monitor and control the project as it progresses.

• Template Method: The schedules and budget from past projects of similar starts but with different endings can be used as a starting point for the new project. For example, an engineering services company has different sets of standard templates for different equipment repair and site maintenance projects. These templates are used as starting points for estimating the duration and costs of new projects which are similar. Though similar in technical specifications, the equipment of the new project may require to be more sophisticated in performances. Hence, the differences in resources required are defined, and times and costs are adjusted accordingly. Storing of such templates in the company’s database enables the project manager and members to develop potential schedules and budgets of optimal accuracy in a short time frame.
• Parametric technique: Uses arithmetic means based on historical data and project parameters that are similar as the current project to calculate its duration and costs. This technique is typically used when the environment is stable.

• Top-Down Estimates:

• Feasible for overview estimates
• Tasks are not defined clearly
• Volatile environment, not viable to develop well-defined schedules & budget
• Less reliable duration & costs estimates
• Bottom-Up Estimates:
• Feasible for detailed estimates
• Tasks are defined clearly
• Stable environment, viable to develop well-defined schedules & budget
• More reliable duration & costs estimates

6.The objective of the time-cost trade-off analysis is to reduce the original project duration, determined form the critical path analysis, to meet a specific deadline, with the least cost. In addition to that it might be necessary to finish the project in a specific time to:

• Finish the project in a predefined deadline date
• Recover early delays.
• Avoid liquidated damages.
• Free key resources early for other projects.
• Avoid adverse weather conditions that might affect productivity.
• Receive an early completion-bonus.
• Improve project cash flow

Reducing project duration can be done by adjusting overlaps between activities or by reducing activities’ durationThe activity duration can be reduced by one of the following actions:

• Applying multiple-shifts work.
• Working extended hours (over time).
• Offering incentive payments to increase the productivity.
• Working on week ends and holidays.
• Using additional resources.
• Using materials with faster installation methods.
• Using alternate construction methods or sequence.

The minimum time to complete a project is called the project-crash time. This minimum completion time can be found by applying critical path scheduling with all activity durations set to their minimum values. This minimum completion time for the project can then be used to determine the project-crash cost.