Question

What is cost planning and what are some of its methods? How is cost planning utilized in a project environment?

Answer 1

COst planning means estimation of cost during desing and construction of a project across the entire project life cycle.Cost planning tells how much and what expenses will occur.

Some of the cost planning methods are

- UNit cost planning : estimating what will be the cost to manufacture/produce unit item

-Conference Estimating Method - this estimation is based on qualitative inputs of experts

-Elemental Cost estimating - It estimates the cost in elemental basis by refering to an example of similar project

Utilization of COst planning in project environment - Cost plan is referred during the execution of project to control cost at differet stages. The actual costs are baselined with the estimated cost to measure the variance and hence flag risks if any. Accordingly, corrective measures are taken to reduce the variance and re-estimate the reserves