Cost Management for Engineers-Cost Terms
Cost management is the process of planning and controlling the budget of a business
Cost management Terms:
Value Engineering: Value engineering is a balance between cost and quality in order to achieve the desired function. Value Engineering (VE), also called:
• Value Management
• Value Analysis
• Target costing
It is a powerful systematic methodology to optimize the cost performance &overcome the cost constraints
Cost budgeting: Allocating the overall cost estimate to individual work items to establish a baseline for measuring performance.
Cost control: Controlling changes to the project budget.
Cost estimating: Developing an approximation or estimate of the costs of the resources needed to complete a project.
Direct costs are costs that can be directly related to producing the products and services of the project.
Indirect costs are costs that are not directly related to the products or services of the project, but are indirectly related to performing the project.
Life cycle costing considers the total cost of ownership, or development plus support costs, for a project.
Profits are revenues minus expenses.
A cost management plan is a document that describes how the organization will manage cost variances on the project.
Cost budgeting involves allocating the project cost estimate to individual work items over time. and there are plenty of Cost Management Software which applying this concept.
Define the Term Cost Centre:
AC Actual Cost
ACWP Actual Cost of Work Performed
ADM Arrow Diagramming Method
AF Actual Finish date
AS Actual Start date
BAC Budget at Completion
BCWP Budgeted Cost of Work Performed
BCWS Budgeted Cost of Work Scheduled
BOM Bill Of Materials
CAP Control Account Plan
COQ Cost of Quality
CPI Cost Performance Index
CPM Critical Path Method
CV Cost Variance
CWBS Contract Work Breakdown Structure
DD Data Date
EAC Estimate at Completion
EF Early Finish date
ES Early Start date
ETC Estimate to Complete
EV Earned Value
EVT Earned Value Technique
FF Free Float
FMEA Failure Mode and Effect Analysis
LF Late Finish date
LS Late Start date
OBS Organizational Breakdown Structure
OD Original Duration
PDM Precedence Diagramming Method
PF Planned Finish date
PMBOK® Project Management Body of Knowledge
PMIS Project Management Information System
PMO Program Management Office or Project Management Office
PS Planned Start date
PSWBS Project Summary Work Breakdown Structure
PV Planned Value
QA Quality Assurance
QC Quality Control
RAM Responsibility Assignment Matrix
RBS Resource Breakdown Structure or Risk Breakdown Structure
RD Remaining Duration
RFP Request for Proposal
RFQ Request for Quotation
SF Scheduled Finish date
SOW Statement of Work
SPI Schedule Performance Index
SS Scheduled Start date
SV Schedule Variance
SWOT Strengths, Weaknesses, Opportunities, and Threats
TC Target Completion date
TF Target Finish date
TF Total Float
T&M Time and Material
TQM Total Quality Management
TS Target Start date
VE Value Engineering
WBS Work Breakdown Structure
You should be aware of the above mentioned Cost terms in order to understand the Cost in Project Management.