Project Cost Management Definitions

PCM seems to have a lot of confusing technical terms. Can you point to the important ones?

 

PCM Planning Definitions - 1

    Opportunity Costs

·         The value of an opportunity that is lost or sacrificed when the choice of one course of action requires that another course of action must be given up

·         A non-accounting value that can be significant in certain circumstances, usually as a consequence of limited resources

·         It is measured by the profit that could have been generated had the resources been available

 

PCM Planning Definitions - 2

    Variable Costs

·         Costs that change with the production quantity or the performance of services

      Fixed Costs

·         Costs that do not change with the production quantity or the performance of services

·         And continue to be incurred regardless of the level of usage until the encompassing activity is finished or stopped

 

PCM Planning Definitions - 3

    Incremental Costs

·         Costs added to an existing total as a result of a particular decision or action

    Sunk Costs

·         Unavoidable costs irrespective of project decisions because the money has already been spent and is unrecoverable

 

Unallocated Fund Definitions - 1

·      Contingency Allowance

·         Specific provision to cover typical variations which may occur in the expected values of elements of cost or schedule of the required project scope

·         Hence, does not cover changes in scope or quality

·         Contingency allowances cover normal elements of project risk

·         Used at the discretion of the project manager

 

Unallocated Fund Definitions - 2

·      Management Reserve

·         An amount set aside in the the owner or sponsor's total allocated budget

·         For possible, or unexpected, scope changes

·         But withheld under the owner's management control

·         Rather than assigned as part of the project's scope of work

·         Hence, not under the control of the project manager

 

PCM Execution Definitions - 1

·      Direct Costs

·         Any costs that are specifically attributable to a project activity, such as

·         Plant and Labor hourly rates or fees

·         Corresponding payroll burdens

·         Expenses for shipping, transportation, travel

·         Cost of material consumed

·         Including on-the-job wastage

·         Contractor and sub-contractor charges

 

PCM Execution Definitions - 2

    Indirect Costs

·         The costs for common or joint objectives that cannot be specifically identified with a particular project or activity

·         But which may be allocated to projects, or activities on a prorated basis

·         Also known as Overheads, such as

·         Administration

·         Interest charges

·         Inflation adjustments

·         Markup and profit