Before understanding the application of cost management tools, it is very essential to know that what Cost management is actually means actually it is processed for controlling and planning the budget of business. It is an indicator for Account Managers to forecast the impending expenditures so that it should not cross the estimated budget and reduce the chances of over expenditure.
Many organizations employ cost management plans for businesses and also for specific projects to handle cost issues smoothly and efficiently. During the project, all expenditure details are noted and systematically managed with the cost management plan. Thus cost management tools home work answers plays a vital part in preparing for business houses in the hour of discussion.
Now Let us see the various tools of cost Management whose applications are beneficial for Businesses:-Â Â Â
- Reserve Analysis
- Cost Aggregation
- Historical relationships
- Expert Judgement
- Cost Performance Baseline’
- Project Funding Baseline
- Funding limit Reconciliation.
Now let me explain the brief idea about this various Cost management tools which are discussed above
Reserve Analysis:-
In a project schedule reserves are actually time, and cost buffers that help the project counter in the face of uncertainties reserve analysis main task are to monitor those buffers and reduce or reuse those buffers in the time of crisis to eliminate the chances of shortage and deficit in the cash flow. With cost management tools homework answers, you can get a detailed idea of this concept.
Cost Aggregation:-
Individual cost is taken into consideration in different ways for setting the budget which includes summary activity. Deliverable’s, work package and other classification levels are also to be checked.
Expert Judgement:-
For taking the right decision experts use the cost analysis method to reach out the optimum result within a stipulated period of time with the help of the hands on experience of the expert person. Knowledge of the experts also plays a very vital role in accessing the outcome of a particular situation in an accounting year.
Historical Relationship: –
This historical relationship refers to the connection between the cost involvement in the past and the present projects to deliver the idea of cost involvement the present project.This historical data helps to make proper decision at the right time to ensure best decision making.
Funding Limit Reconciliation: –
Funding limit Reconciliation is one of the most important factors to be taken into consideration and an important Cost management tools homework answers is the fact that what amount of fund should be spent on a particular project monthly, yearly or quarterly. This is the most important part of cost management.
As for example if Actual cost of the project stands to be Rs 60000 and if the estimated cost stands after completion are Rs 50000 then the deficit of Rs 10000 may be forwarded in the next month or year to meet up the shortfall.Thus ensuring better cost management to deliver the desired result.
Cost Performance Base Line:-
The Cost performance baseline is duration phased budget that is used for monitoring project cost, reporting and constant monitoring though they are derived from the same point of source but these terms are inter changeable in nature to ensure better budgeting. Cost performance base line is one of the subsets of Project performance base line to ensure stability in fund availability in the time of need.
These are very much fluctuating in nature. In In addition knowing funding requirement of the project it also reveals many other different cost requirement for a new or running project that is what are the raw material cost, labour cost, electricity cost, & other cost just like all other important baseline cost baseline reflects the various changes which are required to be made to achieve the desired objective of the organization.
Project performance baseline: –
Project funding baseline is performing the entire estimated cost of the budget which is required to be made including management reserves and contingencies. It is very essential that the performing organization use this cost management tools homework answers properly and to give the organization a clear blueprint that what amount of money they require to complete the project including all the contingencies and management reserves to support the organizations estimated budget.
The main objective of this tool is that it reduces the gap between the estimated cost and Actual cost for performing the project smoothly without any chances of shortage of funds. Every organization tries to set their budget on various broad parameters to ensure that everything is in the right place. Some of the important budget determining factors is as follows:-
1) Labour or Personnel
2) Reserves
3) Supplies and materials
4) Professional contracted or outside services
5) Equipment Hardware or software
6) Fees, Licenses
7) Training, travel
8) Indirect cost
9) Duties and taxes estimation.
The Cost management tools homework answers play a very vital role in estimating the fixed and variable cost requirement of an organization on a particular point of time to ensure steady growth and project estimation cost requirement in a particular point of time.