1.0 Abstract 1.1 Purpose The purpose of this paper is to focus and understand the importance and the skill that the organization has to master in Project Cost Management. 1.2 Design/methodology/approach This Research uses some simple example followed by all the terminology in a Project Cost Management whereby all the method are consider proven to be true and successful. 1.3 Findings The Project Cost Management may be used differently between every country depends on the purpose of the project and the scope of the project. With the understanding of the term, it will overcome a lot of problem that would appear when the project is ongoing. Some Project Cost Management has been re-engineered or enhances to lessen the weakness of the method in
It is clear that if benefits are greater than costs, the project should continue, but in the case that costs are more than benefits, the project should be reconsidered and checked again to see if it is possible to make any new repairs, so that benefits can increase and/or decrease costs. In cases where changes are not possible, the project may be rejected to continue (Investopedia). The effectiveness of the cost-benefit analysis depends on the length and outlay of a project. For example, for small and short-term projects, a cost-benefit analysis is sufficient to come to a decision, in contrary to large and long-term projects, where the cost-benefit analysis is not enough to effectively determine whether to continue or not with project, because it fails to calculate “important financial concerns such as inflation, interest rates, varying cash flows and the present value of money” (Investopedia). Recently, the cost-benefit analysis has been used to analyze public-sector projects.
What is a Budget? Nowadays, it is almost impossible for all people to be successful without planning their budget beforehand. Budget can seem simply summary of incomes and expenses for typical households. However, it is one of the key factors for business companies to invest time to create and manage budget in order to prepare right business plans and monitor performance precisely. Maintaining financial plans enable business companies to control their cash flows and make right decisions in tough situations.
The process of collecting, recording, classifying, analyzing, summarizing, allocating and evaluating various alternative to derive cost as while operating the business is termed as cost accounting. Its basic aim is to advise the management to follow the most appropriate course of action based on the cost efficiency and capability of the organization. A detailed cost information that is required by the management to control current operations in other words the variable cost and plan for the future, is provided through cost accounting only. As the decision taken by the managers are organization specific in other words they take decisions on keeping in mind their own organization only there is no need for the information to be compared to similar information from other organizations because when a manager takes such a decision he has already made a competitive. Instead, information which is gathered must be relevant for a particular type of environment.
(2014)45. Cost reduction is required for improving the Bottom line of the business. Understanding the RL cost equation will help to control and reduce unnecessary costs thereby positively impacting the bottom line. The RL management metrics need to be understood for real cost reduction. The RL cost equation takes into account the crucial cost elements associated with the creation, processing, handling and final disposition of the product returns.
Cost variance is an important factor to measure performance. Generally, a cost variance is the difference between a cost’s actual amount and its budgeted or planned amount. For example, if a company had actual repairs expense of RM 200 for January but the budgeted amount was RM 100. Then the company had a cost variance of RM 100. Since the actual cost was more than the budgeted amount, the cost variance is said to be unfavorable.
Moreover, by doing what was asked of me and reviewing the article I have established that the key arguments of the article is the importance of long-term strategies and planning helped by the use of cash flow forecasts and budgeting. The article also explains different methods used for forecasting whilst explaining how to use some of the methods or why they are used together such as the percentage of sales with linear regression and how they help with cash flow forecasting. Generally, the article is the authors own view on cash management and its significance with some who agreed with his knowledge and reasoning’s, though there will be a percentage of readers that either partly or do not agree due to their own views and
For instance, by identifying the costs and timing of capital improvements necessary to achieve targeted future service levels, a financial manager can help the retail management to get a better understanding of the results of the anticipated goals. (Nolan &Foran, 1983; p.437) Furthermore Christopher Bart () argues that budgets are essential to the management for effectively control of an organization. Budgets thus are the most important tools management has for leading a company towards its goals; in short budgets are required tools to “institutionalize” a company goals, monitor performances, and progress of both the business, and individual products; and vital to help measure the performance of managers” (p.285) An analysis of these resourceful clearly confirm the scope of budgeting as a potential financial tool for companies; they
Role in managerial decision making Differential costing considers relevant costs that changes as a result of a decision. Management rely on the incremental or differential costing system in decision making. Following are the decisions that are usually being answered by applying the differential costing technique: Will it be profitable to process a product further? Will an asset replacement be profitable? If a new sales territory can be explored?