Project Assessment

Appendix: Cost management plan

Criteria

Unit code and name

BSBPMG533 | Manage project cost

Qualification/Course code and name

BSB50820 | Diploma of Project Management

 

Project 1 – Task 4

Cost Management Plan

Introduction

Outline the purpose of the cost management plan in relation to the project.

Budget Development: Specifies how the initiative's funds will be created, including the procedure for estimating costs, assigning resources, and establishing financial limits. It creates a clear benchmark against which actual expenses can be measured.

Resource Allocation describes the techniques for allocating financial resources to various project activities and responsibilities, ensuring that money is dispersed efficiently to accomplish project goals.

Costs Estimation: The plan specifies techniques and criteria for estimating the costs of materials, labor, equipment, and other project resources. Cost estimates must be accurate in order to prepare and make decisions.

Tracking and Management: It covers processes and procedures for continuing project spending monitoring. This includes regularly analysing actual costs against the budget, identifying deviations, and taking remedial actions to avoid cost overruns

Risk Management: The cost management strategy may include strategies for detecting, assessing, and managing any financial risks that could affect the project's budget. Therefore, aiding in the proactive resolution of issues that may result in increasing costs

Reporting requirements and frequency are established in the plan. It specifies the structure and content of financial reports to be distributed to project stakeholders to ensure openness and accountability.

Change Management: If the venture's scope changes, the plan contains the procedures for assessing the financial implications of these changes, acquiring permits, and modifying the budget correspondingly.

Financial objectives

Include the financial objectives of the project and any actions required to maintain the financial objectives

Financial Objectives

Budget Adherence: Ensuring that the project adheres to the validated budget, avoiding overspending

Cost Control: Implementing effective cost control measures to prevent cost overruns

Money Value Maximisation: Optimising resource allocation to get the best value for every dollar spent

Actions required to maintain finance objectives

Regular monitoring and reviewing

of

project expenses

Tracking variances between estimated and actual costs

Implement cost-saving measures when appropriate

Obtaining approvals for any budget deviations

Resource requirements and cost

Summarise the major resource requirements, including the estimated and maximum allowable costs.

Resource	Estimated Cost	Maximum allowed cost	Quoted amount
Building plans	$ 5,000.00	$ 5,250.00	$ 5,100.00
Fitness equipment	$ 30,000.00	$ 31,500.00	$ 31,000.00
Office equipment	$ 10,000.00	$ 10,500.00	$ 10,000.00
Bathroom	$ 20,000.00	$ 21,000.00	$ 25,000.00
Construction	$ 70,000.00	$ 73,500.00	$ 69,000.00
Flooring	$ 30,000.00	$ 31,500.00	$ 30,000.00
	Total	$ 173,250.00	$ 170,100.00

Processes and procedures

Describe the processes and procedures for monitoring actual expenditure against the budget.

Implementing a regular financial reporting schedule: This involves setting up a consistent and structured plan for generating and distributing financial reports. It ensures that financial data is collected, analysed, and reported at predetermined intervals throughout the project's lifecycle.

Compare actual expenses against the budgeted costs: This procedure involves regularly comparing the actual expenditures incurred during the project to the budgeted expenses established in the cost management plan by using the initial budget as the baseline for comparison

Conduct monthly financial reviews to identify discrepancies: Monthly financial thoughts are essential for detecting differences and taking timely corrective actions. Key aspects include scheduling monthly financial inspections as part of the project's routine activities and assembling a review team that provides for finance experts, project managers, and relevant stakeholders

Establish a transparent process for obtaining approvals for additional expenses: This involves defining a structured approach for requesting, evaluating, and approving other costs that may arise during the project

Potential causes of increases in costs

Describe at least three factors that need to be considered that would increase costs.

Construction Delays:

Delays due to contractor shortages or unforeseen issues can

increase

 

labor

costs and project duration.

Equipment Shortages:

If the usual fitness equipment supplier faces shortages, negotiating with a new supplier may result in higher costs.

Access and Parking Issues:

Difficulties with access to the site and on-street parking for contractors can potentially cause delays and additional costs.

Project cost control procedures

Describe cost management processes that will be followed.

Variation Rates: Any expense variance exceeding 5% of the estimated maximum cost requires immediate review and approval.

Approval Requirements: Any changes to the budget, including increases in individual cost items, must be approved by the Project Sponsor (Margaret House) and documented.

Project 2 – Task 4

Cost Management Plan

Introduction

Outline the purpose of the cost management plan in relation to the project.

This plan guarantees that all monetary aspects of the initiative are consistent with the project's goals, objectives, and budgetary limits. Effective cost management is critical to the project's success allowing to maximize income, control expenses, and give benefit to our client, Bounce Fitness.

Financial objectives

Achieve Profit Target: The initiative's purpose is to achieve a net profit target of $200,000, representing a minimum of a 50% profit margin after accounting for all costs

Budget Adherence: Ensure that all project-related expenses remain within the allocated budget, and any variations should not exceed 5% without prior written approval.

Resource requirements and cost

Summarise the major resource requirements, including the estimated and maximum allowable costs.

Resource	Estimated Cost	Maximum allowed cost	Quoted amount
Registration software	$ 5,000.00	$ 5,250.00	$ 5,500.00
Equipment hire	$ 25,000.00	$ 26,250.00	$ 23,000.00
Marketing	$ 10,000.00	$ 10,500.00	$ 10,000.00
Venue	$ 70,000.00	$ 73,500.00	$ 82,000.00
Staff costs	$ 2,000.00	$ 2,100.00	$ 2,000.00
Speaker fees	$ 2,000.00	$ 2,100.00	$ 2,200.00
6th speaker fees	$ 2,000.00	$ 2,100.00	$ 1,500.00
Catering	$ 18,000.00	$ 18,900.00	$ 14,000.00
Entertainment	$ 6,400.00	$ 6,720.00	$ 6,720.00
	Total	$ 147,420.00	$ 146,920.00

 

Processes and procedures

Regular Expense Monitoring: Continuous tracking and reporting of project expenses by team members to ensure they align with the budget

Prior Approval for Budget Exceedance: Any individual resource or expense exceeding their estimated project cost by more than 5% must obtain written approval from the Project Sponsor, Margaret House, before procurement or contracting

Comprehensive Budget Documentation: Maintain detailed documentation of the project budget, including estimated costs for each resource and activity

Expense Reporting: Require all team members to submit regular expense reports, which will be reviewed during project meetings.

Budget Tracking Software: Utilise specialised budget tracking software to monitor and compare actual expenses with budgeted amounts, enabling real-time financial visibility

Variation Tracking: Implement a process to track and analyse variations between estimated and actual expenses, with a focus on identifying cost-saving opportunities.

Potential causes of increases in costs

Unforeseen Venue Expenses: Unexpected expenditures associated with the chosen location, such as unexpected equipment needs or venue change demands.

Speaker Fee Variability: Variations in speaker fees, with some presenters requesting costs that exceed the original granted range.

Scope changes: Changes in project scope or needs that entail extra resources or activities that were not initially budgeted for.

Market Fluctuations: Market developments impacting the price of project-related products and services, including catering and equipment rental.

Project cost control procedures

Variation Rates: Any expense variance exceeding 5% requires prior written approval from the Project Sponsor, Margaret House

Regular Expense Review Meetings: Conduct weekly meetings to review expenses, assess budget adherence, and identify areas for cost optimisation

Detailed Budget Reports: Provide comprehensive budget reports at specified intervals to ensure stakeholders have visibility into the financial status of the project

Expense Categorisation: Categorise and allocate expenses to specific project components, like venue, catering, and speakers, to identify potential cost-saving opportunities

Documentation of Approvals: Maintain records of all budget approvals, ensuring transparency and accountability in financial decisions