# Control of Costs

Video Activity
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Time
3 hours 24 minutes
Difficulty
Beginner
CEU/CPE
4
Video Transcription
00:00
Welcome back to the county. A project plus P k +0004
00:05
This is your instructor and burial, Hilario. Now we're looking at control off costs.
00:11
And what are you learning in this section?
00:14
First? Wanna learn about the different destination types? And second, we're gonna learn about the different management control methods using variants using performance indicators and burn rate indicators.
00:31
So cost management, as you remember cause is one of the three primary constrains that challenge a project success. So managing project is not only key is is really paramount to make sure that the other two variables, scope and time don't get affected as well.
00:52
They're gonna be looking at different tools that we can use this project management
00:57
to evaluate our execution off the budget.
01:02
First is cost estimating cost estimating, establishing how much the project or a task within a project will cost. Well, look at the four different techniques. The 1st 1 is in its analogous system meeting.
01:17
In this technique, we look back at projects that had similar components or similar resource is, and we use our previous experience
01:27
in terms of costs and transfer it into a new project to get an idea of how much the project will cost
01:36
the second one's Parametric, estimating its are a similar to analogous, but he uses, instead of the overall project, uses specific tasks.
01:46
So let's say, for example, if he takes, um, one individual one hour to build 10 widgets in 10 hours, how many witches will they build?
02:00
It will be 10 times 10 100 likewise, and costs if it cost you \$20 or or 20 X
02:12
foreign currency, uh, unit
02:15
to do something,
02:17
then
02:20
20 times that is gonna be 20 times to any that currency that we're using
02:27
bottom of estimating is more precise than analogous and parametric because it's really using the data that we have so bottom of estimating uses the word breakdown structure that we remember from a previous section
02:42
in what he does is that it takes each off the packages, the tasks and adds them up. If we could find the cost for each package, how what you will be, then we can add them all together and give us a very reasonable estimation off what the total overall costs will be.
03:02
Um, the last one is a three point estimating and we could actually use bottom out Parametric and analysis.
03:10
And this one just takes the worst case scenario, the best case scenario and the average or are realistic scenario. You add them all together and it gives you an average. Let's say that our optimistic scenario says that is gonna cost us \$55.
03:29
Um, that are pessimistic. Says that is going to be a 10 and that were realistic. Says that a seven. So we add five
03:38
plus 7 12 plus 10 trying to divide by three and they give us seven and change.
03:45
So this is what the three point estimate and this how it works.
03:50
Indicators are really important. One is cost variance. He tells us what we have planned versus what we had spent out of specific point in time.
04:02
What the difference is. So these days, US earned value and their value that is positive means that we are running our project with efficient budget utilization on her value. That is negative means that we are spending
04:19
or we have spent more than we have planned.
04:25
Another indicator is the cost Performance index uses the ER value and the actual cost. This the CP I measures the efficiency off the work against a total cost.
04:40
Annie's ratio
04:42
specifically so based on an indicator of 10 and then moving towards the The writer left. Whatever is below one is being handled well. Whatever is above one is probably being executed.
05:00
Um,
05:01
below the expected performance.
05:08
Finally, we have the burn rate indicator. This is how how we are using our budget over a period of time.
05:16
And it's basically if we were to use, ah, street term, how much cash we are burning over time.
05:25
So if we are using our budget efficiently, it should be within the plan or below the plan. But if we are using more money than when we are planning to, that means we may run out of budget sooner. And we need to plan for
05:44
acquiring more resources
05:46
before we hid a lack of resources situation.
05:51
So in this video, we have seeing the different estimation, types and techniques, and we have looked at the different indicators cost performance in this the burn rate indicator as well as the expected value that our management cost management has.
06:12
Thank you so much and looking forward to seeing you in our next video
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