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Project Management APU Lec 8
Project Management APU Lec 8
Project Management APU Lec 8
BSB20315-7
Lecture 8
Cost and Benefit Planning
Learning Outcomes
• Ground-up costing
– Estimates of each level in the work breakdown structure are
added together progressing up the hierarchy
– Estimates are likely to be prepared by people who will carry
out work resulting in commitment to achieve the figures
– But proposals may be cut; if anticipated, activity costing may
be artificially inflated
• Top-down costing
– A certain amount of money is allocated to the project which is
then split between the sub-projects by way of estimations or
target costing
– Creates a degree of competition between supervisors, which
may be beneficial
Module Code and Module Title Title of Slides
Approaches to costing
(Basics of a cost planning process)(Continued)
• Time
– Direct input of labour
• Materials
– Consumables and other items
– At cost or cost + margin
• Capital equipment
– The means of providing the conversion process plus
maintenance, running, depreciation
– Entire cost when purchased specifically
– Possible residual value
Module Code and Module Title Title of Slides
Elements of cost
(Basics of a cost planning process)(Continued)
• Indirect expenses
– Transport, training, etc., not directly related to value-
adding activities but considered necessary
• Overheads
– Office, financial and legal support, managers and
non-direct staff
• Contingency
– Margin or allowance, e.g. 10 percent
Example 1
Module Code and Module Title Title of Slides
Financial appraisal
(Business case development)(Continued)
Example 2
Module Code and Module Title Title of Slides
Financial appraisal
(Business case development)(Continued)
Example 3
Module Code and Module Title Title of Slides
Financial appraisal
(Business case development)(Continued)