Costs

Question 1

What is the main purpose of cost control?

Answer 1

Ensure that no preventable wastage of money

or unauthorized increase in expenditure is allowed to happen.

Question 2

What is cost management?

Answer 2

Ensuring not only that the amounts of money spent and received are in accordance with budgets, but also that the timing of each transaction is appropriate and in line with the scheduled cash flows

Question 3

What are variable costs?

Answer 3

Costs that are incurred at a rate which is proportional to the rate of working on the project: these are generally the same as the direct costs. (costs can be measured and associated directly with, and only with,
a particular job or project.)

Question 4

What are fixed costs?

Answer 4

Constitute the company’s overhead or
indirect costs. ‘Indirect’ means that these are costs incurred generally in running the
business

Question 5

How can a project manager control variable costs?

Answer 5

Follow sensible purchasing procedures
Avoiding unnecessary changes
Sticking to schedules

Question 6

How can a project manager control fixed costs?

Answer 6

Very difficult for them to influence anything with regards to fixed costs. Main priority is to finish on time.
Use of cost codes to track spending

Question 7

What is absorption costing?

Answer 7

Recovering overheads costs as a levy

Question 8

What are some items that could be on cost management recovery checklist?

Answer 8

• Cost awareness by all involved in the project throughout the cycle
• Work break down and work schedules
• Budgets
• Cost coding and recording system

Question 9

What is the contractors responsibility to the customer/project owner with regards to cost?

Answer 9

• Only legitimate costs are claimed

- Work is carried out as efficiently as possible

Question 10

What are the essential elements of a cash flow schedule?

Answer 10

Work break down structure
Cost estimates and budgets
Project work schedule
Price and charging structure
Schedule of cash inflows
Schedule of cash outflows
Schedule of net cash flows

Question 11

Why is a cash flow schedule vital?

Answer 11

Helping both the contractor and the customer to make the necessary funds available to keep the project afloat and financially viable

Question 12

What is a cash flow schedule?

Answer 12

Provides an entire overview of the operating, investing, and financing activities of a company for a period of time.