ECON COSTS

• PROJECT - A collaborative enterprise, frequently involving research or design, that is carefully planned to achieve a particular aim; a problem in that needs to be solved.
• a PROJECT is temporary in that is has a defined beginning and end in time, and therefore defined scope and resources.
• PROJECT is a unique in that is not a routine operation, but a specific set of operations designed to accomplish a singular goal.
• CASH FLOW ANALYSIS - determines the estimated annual costs and benefits for a project and the resulting annual cash flow.
• TANGIBLE COST - those costs or benefits that an organization can easily measure in dollars.
• INTANGIBLE COST - costs or benefits that are difficult to measure an monetary terms.
• COSTS - resources used to research related areas of a project but not billed to the project.
• BENEFITS - goodwill, prestige, general statements of improved productivity not easily translated in dollars.
• PROJECT COST - any expenditures made or estimated to be made, or monetary obligations incurred to complete the project which are listed in a project baseline.
• COST - an amount of money needed to pay or compensate to buy or take a service or good.
• DIRECT COST - cost that can be reasonably measured and allocated to a specific output or work activity.
• INDIRECT COST - cost that are difficult to allocate to a specific output or work activity.
• INVESTMENT COST - this is the first cost; it is the capital required to get a project started.
• FIXED COST - cost that are unaffected by changes in activity level over a feasible range of operations for the capacity or capability available.
• VARIABLE COST - cost associated with an operation that vary in total with the quantity of output or other measures of activity level.
• INCREMENTAL COST - additional cost or revenue that results from increasing the output of a system by one or more units.
• SUNK COST - cost that occurred in the past and has no relevance to estimates of future costs and revenue related to an alternative course of action.
• SUNK COST - this is the amount which has been spent or capital invested which for some reason cannot be retrieved.
• OPPORTUNITY COST - costs that are incurred because of the use of limited resources such that the opportunity to use those resources to monetary advantage is in alternative use is forgone.
• COST ESTIMATE: FEASIBILITY/DETAILED DESIGN

  1. identify project
  2. identify individual project components
  3. classify individual project components
  4. schedule construction
  5. engage project cost estimator
  6. engage financial analysts
  7. engage economist
• TOP-DOWN APPORACH - uses historical data from similar engineering projects to estimate the costs, revenues, and other data for the current project by modifying these data for changes in inflation or deflation, activity level, weight, energy consumption, size, and other factors.
• BOTTOM-UP APPROACH - method that breaks down a project into small manageable units and estimates their economic consequences.
• COMPONENTS OF AN INTEGRATED APPROACH

  
  

  WORK BREAKDOWN STRUCTURE - this is an technique for explicitly defining, at successive levels of details, the work elements of a project and their interrelationships.
• COMPONENTS OF AN INTEGRATED APPROACH

  COST AND REVENUE STRUCTURE - delineation of cost and revenue categories and elements is made for estimates of cash flows at each level of the WBS.
• COMPONENTS OF AN INTEGRATED APPROACH

  ESTIMATING TECHNIQUES - selected mathematical models are used to estimate the future costs and revenue during the analysis period.
• CONTROL ACCOUNTS - responsible for a certain work
• PLANNING PACKAGES - work to be done
• WORK PACKAGES - things to do to work the plan
• HOW TO MAKE A WORK BREAKDOWN STRUCTURE

  GATHER CRITICAL DOCUMENTS - research about the project
• HOW TO MAKE A WORK BREAKDOWN STRUCTURE

  
  

  IDENTIFY KEY TEAM MEMBERS - identify the appropriate project team members. Analyze the documents and identify the deliverables
• HOW TO MAKE A WORK BREAKDOWN STRUCTURE

  DEFINE LEVEL 2 ELEMENTS - work process; level 2 elements are summary deliverable descriptions that must capture 100% of the project scope. Verify 100% of scope is captured. This requirement is commonly referred to as 100% rule.
• HOW TO MAKE A WORK BREAKDOWN STRUCTURE

  DECOMPOSE ELEMENTS - breakdown; begin the process of breaking the level 2 deliverables into unique lover level deliverables.
• HOW TO MAKE A WORK BREAKDOWN STRUCTURE

  CREATE WBS DICTIONARY - define the content of the WBS dictionary. The WBS dictionary is a narrative description of the work covers in each element in the WBS. The lowest level elements in the WBS are called Work packages.
• HOW TO MAKE A WORK BREAKDOWN STRUCTURE

  CREATE WBS DICTIONARY - descriptions at the work package level with detail enough to ensure that 100% of the project scope is coverd.
• GANNT CHART - a visual view of project plan over time.
• COST STRUCTURE - used to identify and categorize the costs that need to be included in the analysis.
• LABOR COST - also called direct cost, are the costs of employee's time spent on rendering services or performing manufacturing works within the projects.
• MATERIAL COSTS - arise as cost of raw materials, parts and supplies purchased for using in the project works or performing them. Sometimes, this cost type also includes insurance, custom clearance and other costs related to purchasing materials and goods.
• OVERHEAD COSTS - cannot be always allocated to a specific cost driver and don't create profit in a direct way. However, they influence project outcomes indirectly by making business activites possible or increasing their efficiency.
• SUBCONTRACTING COSTS - outsourcing costs; sometimes treated as direct costs and sometimes included in cost structures as a separate category.