Types of Budgets Based on Based on Based on Oth Period Flexibility Functions ore Long-term * Fixed * Master * Zero Base Budgets Budget Budgets Budgeting Short-term * Flexible * Functional * Performance Budgets Budget Budgets Budgeting Current Budgets Responsibility & D Planning Allocation > Policy Cost & Formulation Classification > Operating Efficiencies Control & > Profitability Objectives of Budgetary ControlOverview of the Master Revenues Budget Budget L Production Budget 1 Direct Direct Materials Manufacturing Costs Budget _ | [Labor Costs Budget ‘Manufacturing ‘Overheod Costs Budget ¥ Cost of Goods ‘Sold Budget ¥ R&D/Design Costs Budget v Marketing Cos's Budget ¥ Distribution Cos's Buoget y Customerservice Costs Budget t Costs Buaget Budgeted Income Statement I Adminstctive |g Copital Gah Budgeted fxpenatures 4g Seay [4] Baionce [> Budget Sheet Budgeted Statement of Cash Flows ‘OPERATING BUDGET = * FINANCIAL BUDGET ¥ Aciopteds rom Chasis 7, Homgren, George Foster and Srkant M. Data: Cost Accounting lew Ver: Prentice Hal, 2000)CL ~ natingSince no estimation approach is perfect, we should consider using multiple techniques and look for convergence within the ranges they predict. If we arrive at a similar set of estimate ranges using various approaches, we can have more confidence in the forecast. ESTIMATE CONVERGENCE 3 LOOK FOR CONVERGENCE BETWEEN APPROACHES 23 z g x g & < g 3 5 w COST CATEGORIESProject definition document Develop WBS Determine resource needs was) Inltiat resource requeements Network dlagram Develop ‘schedule Inital schedule Resource requirements Resouroa requirements, ‘uration estimates Acquire resource: Actual resources ‘Approved scheduie Cost estimates, Inia budget Finalize budget Approved scnedule, approved budget Project planManago exooctatons {erative process. Baseline or performance Tota liye measurement Time phasod Pre itcaton FO pean] [cg cae [asm (Cash tow mgm Document assumptions Planing oss loronco Conpechensive Tncive butlr ‘Stagitorard process mrpectot sera Capture a costs impact of enanizatonl potcies Spreacshoot Fibs enefs| Sica TE year Easy anayss 00 Work package love oct a Resource cots vs. task cos Batlomup method Pw sonar Labor yipment a Resource roquroranis masta, iy Duration estimates LUcorsaé andes Det inputs Trenng ales erzational poles ave! | cont snes Os pos ones [aecertdnt | A estates pztaona othe Cos esma Disposal nal budget Costs of change Unknow costs Actua resourses voy (/Seheatie ‘ietiaudilon inputs [Res tissng cost Wes Fisk sponses Nett teoyce inet cost sources Nozet ns eomnon a} [roan] Procurement tasks Nomanagerent serve Reconae schecle “Resource cuations Funds pe-allocatod Mgmt 68000 Labor costs not racked cuits __-Abmroved bvpet ets basen) ‘Approved scheduleExtemal Internal Labor “ase Management Equipment, Unidentitied work >Hidden-cests_ | PUnknown costs Materials Inflation Licenses and fees Costs of “change” " Project budget considerations Disposal Travel Maintenance Facilities Sapam Operational—— Donen Iconian manago ick acors _| Relation to risk mgmt ese tine indo manage ys Fanon aco pj dot Fourdaon ra roc sickle a PET estoy tio Beto er darn Sa frre] 7 ss 7 Perormed (approved) by people doing work i or erates a ons av WBS «sana reprng nol Lavage tical nad por jgnen xen yograe chal noe exile =n ais = Seresea Pet { key methods thework Deswreadeaneios lado Team consensus Project dniion do When ating rire poise: “Was aa Ingrepe wo don —— Wong pose exinag ren reosing Davina tudor rine mewn ge Poot Sources for ‘Assumed resource lve sk, procay Mongtechnique used __| estimating ‘Assumed quaity level and completion crtena Besowos iene woos ee hand ard erp eracis Lack of ong Management dessins For high ik profes Use PEFT andor team conseraus methods Measure actual pertormanceto improve estimating accuracyBudget Flow Budget Creation Options Implement Change Document Financial Impact Le | (If the option to allow edit after @) ™O) v3 a betel Initial et oj Budget ude Initial ForecastCUMULATIVE VALUES ——————> COST BASELINE PROJECT BUDGETPROJECT BUDGET COMPONENTS © L. STAGES OF BUDGET EVOLUTION ,A Finan ee ESTIMATION OF PROJECT Manageme COST over the life cycle of a project. The main components are = the cost of materials, human resources including labor & new hiring, pre-planning costs, and the operating costs . TECHNIQUES Analogous Estimation | Parametric Estimation | Bottom-up Estimation PROJECT COST js the total cost that will be incurred IMPORTANCE To determine financial viability Constant evaluation & control Remind to adhere to budget This makes use of past results Tt uses past data as well as to estimate costs of a current || statistical models to estimate project. Here, comect entry & || project costs. The accuracy in storage of past cost data ina |] this technique is higher than database is essential analogous estimation have actual amount in hand within which they have to complete the project. pessimistic & Tn this technique, we break down a project into smaller component & manager will then make a cost estimate for Oey ew oie 3-Point Estimation This technique is of use when project manager || It makes use of 3 different scenarios for the estimation of project cost, that is, optimistic, most likely each smaller parts.The process of creating plans to spend and use money in an organisation makes up budgeting. Execution of budgeting in project management is essential. The project manager holds responsibility for the streamlined working of the project. This ensures that project efficiency, standards, time and quality are not overlooked. Resource Budget Financial Budget Create a task list of requisite cost elements Use historical data Estimate components requirements Understand how competitors manage budgetary control Take advise of experts Confirm accuracy of report Streamline the budget based on above steps. Test the budget on pilot projects Get approval from respective authorities. pe Helps restrict unnecessary expenditures ‘Money is appropriately allocated to prioritized objectives Good communication and a shared vision rey J Inputs are received from all levels of the hierarchy