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Identify the factors you need to keep in mind while determining the project budget. How would you determine the flexibility you need in the budget to accommodate changes?
According to My Management Guide, a project budget is "the total amount of monetary resources that are allocated for particular goals and objectives of the project for a specific period of time". The person in charge of compiling the project budget will have a couple of key factors to keep in mind.
1.Activity Cost Estimates - Each individual section of the work breakdown structure is going to have an associated cost involved, based on what is needed to complete them.
2.Estimates Basis - Gives all the details on the previous cost estimates and the gives the decisions on whether indirect project costs will be included or excluded.
3.Scope Baseline - This includes the scope statement, work breakdown structure, and the work breakdown structure dictionary. It uses this information with the cost estimates to determine the budget necessary.
4.Project Schedule - All the start and finish dates for all the project activities, milestones, time-frames for each of the work packages on the work breakdown structure.
5.Procurement Contracts - These are all the costs incurred and associated with products and services bought from vendors and suppliers.
6.Resource Calendars - These are for investigating the information on resources and the time needed from employees to tend to the resources.
The flexibility of a budget has to be based on the possible risks involved in the various work packages in the work breakdown structure. If a segment of work has a very high risk involved in the tasks that need to be done, than there should be an allotted flexibility in the budget and timeline constraints. It is much easier to account for these problems in the planning stages then it is to make up for them while the project is in progress.
Explain how inflation and changes in project scope and deadlines can, in turn, impact budgetary estimates.
Budgetary estimates can be made in advance for a project that could be anywhere from a week long to several years long. Due to this, the budget will have to have some inherent flexibility with possible inflation. Inflation can cause a project to require more capital to finish, especially if the project is over a long period of time. On a similar not, the project scope is a large factor in budgetary estimates. If the scope is extended in any way, it is most likely going to require a larger budget, as well as the opposite. The larger the scope of a project, the more money it will require to finish. Strict deadlines are difficult, because if they're enforced and completed on time, they are wonderful, but once one is missed, the budget will increase. The second a project begins falling behind on its deadlines, the budget will increase steadily with the more time required for the project.
Explain how you would manage variances in the project budget. Give at least two examples that use actual numbers.
Variance is defined as the difference between planned and actual performance (Schwalbe 211). I have managed the budgets on various projects that have varied in scope and finances through my multiple business endeavours. When the game company I began started, we put together a Kickstarter for the entire project. We had to put together a rough budget that would finance the completion of the game we were working on, as well as fund the eight employees that were involved. Considering we were all college students, the promise of any money at all was exciting, but we still assigned a number to the product. The budget we decided on was $50,000 to complete the game we were making in a year and a half. Now, after we decided on this number, the flaws in our project began to show overtime. Many of the employees would ignore deadlines, and thus pushing our projected finish date off. This is a very common scenario in the video game industry. If we made our Kickstarter (which thankfully failed), we would have had payed each employee around $100 a week to continue working on the video game. Every deadline that was missed, was about a two week assignment ignored. When push finally came to shove, the co-founder and I let go of all the employees except for the ones who would continue working for free. This was our way of handling those variances, we had no income for the company, so we either had to shut down entirely, or trim down the useless employees.
My mother payed an artist to illustrate her children's book. She and him decided on a timeline of two months for $2000. It contained 25 pictures, and required him to do three complete pictures per week. Unfortunately, the artist was very difficult at being timely with his picture drafts. He missed his first deadline, and only returned four pictures for the first two weeks. That pushed the whole project back, and based on the promised budget, my mother was put in a tough situation of being demanded more money when the two months turned into three. It was the fault of the artist, but he said at the end that it was too much work too fast. Even though he had agreed on the timeline and the budget. Considering his price for pictures were a collective hourly rate with the detail involved, it was difficult to determine what was necessary from the outside. At the end of the project, my mother payed him for what he did in the agreed timeframe, and the got my brother to finish the remaining pictures.
Determining Project Budget. (2010, June 11). Retrieved November 12, 2014, from http://www.mymanagementguide.com/guidelines/project-management/cost-management/determining-project-budget/
Schwalbe, K. (2014). Information Technology Project Management (7th ed.). Boston, MA: 2014 Course Technology, Cengage Learning.
The student has a salient point about removing negative employees from the project to reduce losses in regard to lost time, productivity, and ...
This is a discussion on project management and budget guidelines.