Project Costs and Project Budget
Part 1 (1/2 page)
The project budget is created to bring these two parts together.
How would you explain the difference between a project cost plan and a project budget to a business sponsor? Remember that the sponsor is not familiar with the project management process or its terminology.
Part 2 (1/2 page)
You are a consultant project manager hired to implement a major ERP application and your company will receive 10 million dollars at the end of the project. The CFO determines it will cost 7 million dollars in total and take one year to finish the project. The consulting company will profit 3 million dollars for completing this project.
However, in the 10th month of operation, the project team runs into problems with the data integration functionality of the ERP system. The organization already spent 5.25 million dollars on this project, and the CFO must decide whether to continue with the project or cancel it. She estimates that this major setback will cost an extra 1 million dollars. However, the company can still profit 2 million dollars from the project (Nickolas, 2015).
Do research on project sunk costs and provide the following information:
Should the CFO approve the continuation of the project?
What would be the basis of the decision to move forward?
Should sunk costs be included in the decision to move forward?
Overview ( 3 page)
Estimating project budgets is far from an exact science. Many of us have heard of projects running over budget. Why is this? Why do we consistently forecast low? There are many reasons for this inconsistency, including everything from improper funding at the beginning of the project to taking shortcuts that should never have been taken. Whatever the reason, there is a need for project managers and their teams to become better at forecasting technology costs.
For this assignment, you will complete the Cost Budget Template (See attached), update your project schedule in Microsoft Project, and update the Cost Estimate / Schedule Update section of the Project Management Plan Template.
Using the information from the Unit 5 assignment and your WBS, provide a complete budget for the project using the Cost Budget Template provided.
For this assignment:
Identify the costs of each task.
Identify the time frames within which the costs will be incurred.
Prepare a cost estimate for the project using the Cost Budget Template.
Prepare a preliminary budget for the project using the cost estimate.
Enter your budget into Microsoft Project.
Use the Microsoft Project function to establish a baseline budget.