Calculating your project cost information

Applies to
Microsoft Office Project 2003

With Project, you can estimate and track basic cost (cost: The total scheduled cost for a task, resource, or assignment, or for an entire project. This is sometimes referred to as the current cost. In Project, baseline costs are usually referred to as "budget.") information for your project. You can use several different types of costs, and Project calculates those costs for you as the project progresses.

What costs does Project allow?

How do you create and track against budgets in Project?

What are rate-based resource costs and how are they calculated?

How do you use cost rate tables?

What are per-use costs and how are they calculated?

What are fixed costs and how are they calculated?

How can you regulate cash flow?

What costs does Project allow?

Because cost can be an important aspect of project scheduling and control, Project provides for several different types of costs. With Project, you can enter and track the following types of costs:

More than one type of cost can be entered for a resource. For example, you might enter an hourly rate for work, but also a fixed cost for travel time.

The different cost types operate somewhat differently depending upon whether the resource is a work resource (person or piece of equipment) or a material resource (material resource: The supplies or other consumable items that are used to complete tasks in a project.). For work resources, the rate is applied per hour or some other unit of time. For material resources, the rate is applied per a specified unit, such as tons or yards.

How do you create and track against budgets in Project?

You may have a set amount of money that you are allowed to spend on a project, a top-down budget (top-down estimating: An estimating method that uses the actual costs of a previous, similar project as the basis for estimating cost totals of a current project. This method is often used when there is limited information about the project.). Project, however, provides bottom-up budgeting.

To create a budget in Project:

  • First, you enter pay rates, per-use, and fixed costs.
  • Then, you specify the estimated work or duration for tasks.
  • Finally, you assign resources to tasks.

Project then determines the total estimated costs to complete all tasks in the project. If this total is not in line with your top-down budget, you'll need to adjust the pay rates, resource assignments, and so on.

After you refine the estimated costs, you can save a baseline plan (baseline plan: The original project plans [up to 11 per project] used to track progress on a project. The baseline plan is a snapshot of your schedule at the time that you save the baseline and includes information about tasks, resources, and assignments.), thereby establishing a budget for the project.

With a budget in place, you can better manage costs by comparing actual expenditures with what you planned to spend so that you can make adjustments to stay within budget. For the most part, all you have to do is enter progress information for tasks. Project calculates the tasks' costs based on the project's progress. You can also enter specific costs, if needed.

 Note   You can see cost totals for tracking purposes in a number of ways: in the Project Information dialog box, in a view, or in a report. You can also export cost information to other programs, such as Microsoft Excel, and review and analyze it there.

What are rate-based costs and how are they calculated?

Rate-based resource costs are costs of work resources (work resource: People and equipment resources that perform work to accomplish a task. Work resources consume time [hours or days] to accomplish tasks.), such as people or equipment, to which you have assigned standard and (if needed) overtime rates (overtime: The amount of work on an assignment that is scheduled beyond the regular working hours of an assigned resource and charged at the overtime rate. Overtime work indicates the amount of the assignment's work that is specified as overtime work.), usually per hour. When you assign a resource to a task, Project calculates the total resource cost using the hourly resource rates you entered and the time it takes to accomplish the task.

By default, Project uses standard resource rates to calculate costs for any amount of work required to complete a task. It does not automatically calculate additional hours as overtime unless you specifically assign the additional hours as overtime work.

Because work always represents the total amount of work completed, the amount of overtime work is included in, not added to, the total amount of work. For example, if a person is scheduled to work 40 hours, which includes 8 hours of regular work and 2 hours of overtime work per day, you should assign 10 hours of work per day and designate 2 hours of it as overtime work. The cost of the hours specified as overtime work is calculated with the overtime rate you entered for the resource assigned to do the work, while the remaining hours are calculated at the standard rate.

Rate-based material costs are the costs of consumable material resources, such as building materials or supplies, to which you have assigned standard rates. To assign costs for material resources, you set the rate per unit of material, such as rate per yard or rate per ton. When you assign a material resource to a task, Project calculates material cost totals using the material resource rate you entered and the quantity of material used to complete the task.

How do you use cost rate tables?

A cost rate table (cost rate table: A collection of information about a resource's rates, including the standard rate, overtime rate, any per-use cost, and the date when the pay rate takes effect. You can establish up to five different cost rate tables for each resource.) is a collection of rates and per-use costs for material and work resources. There are five cost rate tables (A through E), so you can assign five sets of different rates if a resource charges different rates for different types of work. For example, you might pay a carpenter a higher rate for doing finish work than framing, so you can apply one cost rate table to the carpenter's finish work assignment and another to the framing assignment.

In each rate table, there are up to 25 rows which you can use to enter future rate changes, such as pay rate increases or material upgrades. For each rate change, you specify the date the change should take effect. For example, if you know a resource will get a pay increase in six months, you can have Project automatically start using the new rate at that time.

 Note   If you are using Project Professional 2003 and working with enterprise resources (enterprise resources: Resources that are part of an organization's entire list of resources. Enterprise resources can be shared across projects.), your organization may have restrictions on rate tables. For example, your organization may have designated rate table A for specifying billing rates and rate table B for non-billable rates. Contact your administrator for more information.

What are per-use costs and how are they calculated?

Per-use costs are set, one-time fees for the use of a resource, such as equipment. Per-use costs can be entered in addition to a rate-based resource cost. For example, rental equipment might have a delivery or setup charge every time it is used in addition to an hourly charge.

Per-use costs never depend on the amount of work done; they are one-time costs that are incurred each time the resource is used. While a per-use cost for a work resource depends on the number of assignment units (assignment units: The percentage of a work resource's time, or units, that the resource is assigned to a task.) used, a per-use cost for a material resource is applied only once. For example, if brick layers have a per-use cost of $100 and it takes three brick layers to do a task, the cost is $300. But the material resource, cement, with a per-use delivery cost of $100, is applied only once, even when 10 tons of cement are needed to complete the task.

What are fixed costs and how are they calculated?

Fixed costs are set costs for a task that remain constant regardless of the task duration, the amount of work performed by the resource, or the number of assignment units.

 Note   A rate-based resource cost may increase when a task takes more time, but a fixed cost does not. For example, if a carpenter is rate-based (paid hourly) and is scheduled to complete a task in five days, but the task takes seven days, the carpenter is paid more than planned. If the carpenter is paid a fixed cost for the work, then the cost is the same no matter how long the task takes.

Fixed costs can be assigned to a task in addition to rate-based resource costs. For instance, if a resource assigned to a task also incurs travel costs, the travel costs can be added as a fixed amount to the same task. Fixed costs are included in the cost totals of phases (on summary tasks (summary task: A task that is made up of subtasks and summarizes those subtasks. Use outlining to create summary tasks. Project automatically determines summary task information [such as duration and cost] by using information from the subtasks.)) and the entire project.

How can you regulate cash flow?

When assigning costs to tasks and resources, you can determine when the costs should accrue (accrual method: Determines when the cost for a resource is incurred and when actual costs are charged to a project. You can incur costs at the start [Start] or finish [End] of a task or prorate them [Prorated] during the task.). If cash flow in your project is a critical factor, you may want to change how costs accrue on individual tasks to ensure they accrue when you have the cash to pay for them.

Except for per-use costs, which always accrue at the start of a task, Project prorates costs by default and calculates cost accrual based on the percentage of the task completed, distributing it over the task's duration. However, you can also have costs accrue at the start of a task if you have a lump-sum amount payable at the start, or at the end of a task if you're holding payment until the work is finished.