Basic Principles of Project Management

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Cost management refers to a process that is laid down to make sure a project team completes the assigned project within limits of the approved budget. Cost management principles can make communication between upper management and workers or a service provider easy (Schwalbe, 2007). They are able to discuss subjects such as net value analysis, return on investment, as well as other financial aspects of the project in question. Moreover, this can be used to make the people involved understand what is at stake for an organization of even to garner support.

Metrics used in managing costs include profits. These are simply revenues after deducting expenses. Life cycle costs, on the other hand, refer to total ownership costs or costs of development, in addition to project support costs. Benefits or costs are deemed “tangible” if they can be easily measured in dollars. Alternatively, “intangible” costs and benefits are not easy to quantify in monetary values. These include prestige, goodwill, and statements alluding to improved productivity (Schwalbe, 2007).

Direct costs are costs that are directly related to the goods and services of a project, while indirect costs are those that relate indirectly to a project (Schwalbe, 2007). Some examples of indirect cost are paper towels, electricity, or other features needed when operating in a large building to offer a development workspace.

Organizations or their management need to examine the relationships between revenue, costs and profit. This will promote the most effective use of company resources. These relationships are often complex in any business. However, splitting them up into sections such as fixed and variable costs can make them fairly simpler.

Reference

Schwalbe, K. (2007).