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What does it mean if the estimated and actual project cost are different?
Wiki User
∙ 11y ago
It means that your project has gone over its budget. When planning a project, a project manager must estimate things such as cost, time and effort and these estimates will get written into a plan which gets approved by those with authority. The project manager then proceeds to get the work done within these constraints of cost and time.
However, projects never go according to plan. There are always things which take longer than planned, or cost more than planned. It's good practise for the project manager to track costs and time during the project and to update the plan with "actuals" IE. the actual costs, effort and time taken. These can vary considerably from what was originally forecast (IE. estimated) and the project manager will then adjust the plan according to the actual cost, time and effort and the new forecasts for the remaining effort, cost and time.
Ideally the revised plan also needs to get approved, especially if the revised forecasts show they will exceed the original forecasts. If the revised plan does not get approved, the project should close because it's no longer worthwhile to continue.
Wiki User
∙ 11y ago
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How do you use estimated in a sentence?
Estimation is a range of the subject spoken about. There is estimated to be over 90 different species of birds in California.
What is material cost variance?
The material cost variance denoting the difference between the standard cost of materials and actual cost of matrials. The material cost variance is between the standard material cost for actual production in units and actual cost. The total cost is usually determined by two differenct factors of influence viz quantity of materials utilized/ required and price of the materials. The fluctuations in the material cost are only due to the fluctuations in the utility of materials due to many factors. Material cost variance can be computed into two different ways: DIRECT METHOD AND INDIRECT METHOD material cost variance= Standard cost of materials for actual output- actual cost of raw materials. MCV=(S Q AO X SP)-(AQ X AP) Indirect Method: material cost variance= Material price variance (MPV)+Material usage Variance
Where the actual cost is found to greater than the standard cost is known as?
adverse variance
Estimating Software?
Estimating Software Can Save Time And Money Businesses predicated upon project work find estimating software a valuable time saver. Estimating software is available as part of regular modules within most accounting software such as Peachtree or Quickbooks. In departments where estimating is the chief responsibility it may be necessary to consider installing estimating software to hasten the pre-project cost analyses as well as costs for time, labor and parts. Small businesses as well as large operations where accounting transactions occur frequently benefit from estimating software. It’s infinitely easier to assess costs of various parts for mechanical inventories and mechanical installation projects with the use of estimating software. Examples Of How Estimating Software Works One example of how estimating software is a necessity is in engineering projects. Most engineering projects begin with estimating the cost of design, installation, equipment, parts, labor and time. This is done by estimators whose duty it is to research all of these costs, create a template in an estimating software environment and produce a estimated report of the total cost of the project. Another example of estimating software use is in small laboratories where testing is done. In these cases estimating software track costs of chemicals for testing, labor and time as well as tabulate the impact on overhead. The Final Stages of Good Estimating Software In its most useful final stage in the estimating process, estimating software has one other significant value: cost comparisons from one project or transaction to that of others. In instances where projects or business transactions are similar, estimating software tracks increases or reduction in costs that make it easier to identify budgetary impact. In large engineering projects, estimating is essential to maintain true cost of parts and labor from one project to the next. It just makes good sense to evaluate the need for estimating software as it pertains to the specifics of each business. For new businesses, estimating software is crucial to defining project costs vs. actual costs. Estimating Software And Internal Cost Accounting Internal cost accounting requires a tracking of estimated costs for projects or regular transactions of business to produce a clear representation of profit and loss.
Bradford Services Inc BSI is considering a project that has a cost of 10 million and an expected life of 3 years There is a 30 percent probability of good conditions?
Bradford Services Inc. (BSI) is considering a project that has a cost of $10 million and an expected life of 3 years. There is a 30 percent probability of good conditions, in which case the project will provide a cash flow of $9 million at the end of each year for 3 years. There is a 40 percent probability of medium conditions, in which case the annual cash flows will be $4 million, and there is a 30 percent probability of bad conditions and a cash flow of -$1 million per year. BSI uses a 12 percent cost of capital to evaluate projects like this. a. Find the project\'s expected cash flows and NPV. b. Now suppose the BSI can abandon the project at the end of the first year by selling it for $6 million. BSI will still receive the Year 1 cash flows, but will receive no cash flows in subsequent years. Assume the salvage value is risky and should be discounted at the WACC. c. Now assume that the project cannot be shut down. However, expertise gained by taking it on will lead to an opportunity at the end of Year 3 to undertake a venture that would have the same cost as the original project, and the new project\'s cash flows would follow whichever branch resulted for the original project. In other words, there would be a second $10 million cost at the end of Year 3, and then cash flows of either $9 million, $4 million, or -$1million for the following 3 years. Use decision tree analysis to estimate the value of the project, including the opportunity to implement the new project in Year 3. Assume the $10 million cost at Year 3 is known with certainty and should be discounted at the risk-free rate of 6 percent. Hint: do one decision tree for the operating cash flows and one for the cost of the project, then sum their NPVs. d. Now suppose the original (no abandonment and no additional growth) project could be delayed a year. All the cash flows would remain unchanged, but information obtained during that year would tell the company exactly which set of demand conditions existed. Use decision tree analysis to estimate the value of the project if it is delayed by 1 year. Hint: Discount the $10 million cost at the risk-free rate since it is known with certainty. Show two time lines, one for operating cash flows and one for the cost, then sum their NPVs. e. Go back to part c. Instead of using decision tree analysis, use the Black-Scholes model to estimate the value of the growth option. The risk-free rate is 6 percent, and the variance of the project\'s rate of return is 22 percent. You can also get answer on onlinesolutionproviders com thanks
What is the difference between estimated cost and actual cost?
Estimated cost is the budgeted cost according to the original Project Management. Actual cost represent the actual payments (actual cost of the project). Your question seems related to earned value analysis, which is essentially comparing the budgeted cost/hours against the actual cost/hours.
What are the parts of market list?
item actual cost estimated cost unit quantity description
What is Project cost control vs approved budget in project management?
Project cost control is comparing the actual project cost against planned project cost.
Are you using actual or estimated cost for planning purposes?
Simply speaking you are asked for the purpose of a plan of any type did you use figures which were estimated or have you been figures of the actual costs associated with the planning project. When dealing with any planning process if actual are used then you would not expect to see cost increase when the plan is completed. If they are estimated there is a strong chance of cost variance either more than estimate (which is normal) or less than estimate which rarely occurs.
What is an estimated cost of a project called?
It is called the Cost Budget or the Budget Baseline
What is cost to cost?
It is a type of estimate of completion used in construction contracts. It is the ratio of costs incurred by a given date which is divided by the estimated total project cost.
What are the feasibility study and define each?
Feasibility study is the evaluation of a proposed project. This is to determine if the project is technically feasible, feasible within estimated cost, and will be profitable.
What is levelized tariff?
A levelized tariff is estimated for recovery of all cost inputs( CPP and EPP) including cost of equity over the agreement /project life. It if computed by amortizing the financial cost over the project life and with addition of O&M cost.
What the difference between actual value and earned value?
The difference between the Actual Value & Earned Value is the Project Cost Variance
The actual cost of an item is 98.50 one student estimated the cost to be 96.60 and the othe student estimated it to be 100.50 whose estimate is closer to the actual cost?
To find the better estimate, first find the distance between each estimate and the true cost. 98.50-96.60 = 1.90 100.50-98.50 = 2.00 The lower estimate, 96.60, is closest.
What is FE component or FEC in a research project?
Foreign Exchange (FE) or Foreign Exchange Component, meaning, an estimated cost for the project given in US$ (US dollars).
How does an actual costing system different from a normal costing system?
actual is the actual cost, normal is estimating
