Post on 12-Jan-2016
PROJECT BUDGETING
The overall goal in thebudgeting process of aproject is to determinehow much money is tobe spent each week or
each month.
PERT / Cost is a modification ofPERT that allows a manager to
plan, schedule, monitor, andcontrol cost as well as time.
Applied Management Science for Decision Making, 2e © 2014 Pearson Learning Solutions Philip A. Vaccaro , PhD
MGMT E-5050
The Budgeting Process
STEPS
Identify all costs associated with each task.
Applied Management Science for Decision Making, 2e © 2014 Pearson Learning Solutions
The Budgeting Process
STEPS
Identify all costs associated with each task.
Convert the budgeted cost per task into a cost per time period. We assume that the cost of completing a task is spent at a uni- form rate over time.
The Budgeting Process
STEPS
Identify all costs associated with each task.
Convert the budgeted cost per task into a cost per time period. We assume that the cost of completing a task is spent at a uni- form rate over time.
Using the earliest and latest start times, we find out how much money should be spent during each week or month to finish the pro- ject by the desired date.
Early Start Budget Schedule
GENERAL FOUNDRY EXAMPLE
Task “A”
Early Start Time - ES 0
Early Finish Time - EF 2
Expected Time - te 2 weeks
Budgeted Task Cost $22,000.00
Budgeted Weekly Cost $11,000.00 *
$22,000.00 / 2 WEEKS = $11,000.00*
TASK Period 1 Period 2 Period 3 Period 4
A $11,000 $11,000
B
C
D
E
F
G
H
PERIOD TOTAL
CUMULATIVE FROM START
Early Start Budget Schedule
Early Start Budget Schedule
GENERAL FOUNDRY EXAMPLE
Task “B”
Early Start Time - ES 0
Early Finish Time - EF 3
Expected Time - te 3 weeks
Budgeted Task Cost $30,000.00
Budgeted Weekly Cost $10,000.00 *
$30,000.00 / 3 WEEKS = $10,000.00*
TASK Period 1 Period 2 Period 3 Period 4
A
B $10,000 $10,000 $10,000
C
D
E
F
G
HPERIOD TOTAL
CUMULATIVE FROM START
Early Start Budget Schedule
Early Start Budget Schedule
GENERAL FOUNDRY EXAMPLE
Task “C”
Early Start Time - ES 2
Early Finish Time - EF 4
Expected Time - te 2 weeks
Budgeted Task Cost $26,000.00
Budgeted Weekly Cost $13,000.00 *
$26,000.00 / 2 WEEKS = $13,000.00*
TASK Period 1 Period 2 Period 3 Period 4
A
B
C $13,000 $13,000
D
E
F
G
HPERIOD TOTAL
CUMULATIVE FROM START
Early Start Budget Schedule
Early Start Budget Schedule
GENERAL FOUNDRY EXAMPLE
Task “D”
Early Start Time - ES 3
Early Finish Time - EF 7
Expected Time - te 4 weeks
Budgeted Task Cost $48,000.00
Budgeted Weekly Cost $12,000.00 *
$48,000.00 / 4 WEEKS = $12,000.00*
TASK Period 4 Period 5 Period 6 Period 7
A
B
C
D $12,000 $12,000 $12,000 $12,000
E
F
G
HPERIOD TOTAL
CUMULATIVE FROM START
Early Start Budget Schedule
Early Start Budget Schedule
GENERAL FOUNDRY EXAMPLE
Task “E”
Early Start Time - ES 4
Early Finish Time - EF 8
Expected Time - te 4 weeks
Budgeted Task Cost $56,000.00
Budgeted Weekly Cost $14,000.00 *
$56,000.00 / 4 WEEKS = $14,000.00*
TASK Period 5 Period 6 Period 7 Period 8
A
B
C
D
E $14,000 $14,000 $14,000 $14,000
F
G
HPERIOD TOTAL
CUMULATIVE FROM START
Early Start Budget Schedule
Early Start Budget Schedule
GENERAL FOUNDRY EXAMPLE
Task “F”
Early Start Time - ES 4
Early Finish Time - EF 7
Expected Time - te 3 weeks
Budgeted Task Cost $30,000.00
Budgeted Weekly Cost $10,000.00 *
$30,000.00 / 3 WEEKS = $10,000.00*
TASK Period 5 Period 6 Period 7 Period 8
A
B
C
D
E
F $10,000 $10,000 $10,000
G
HPERIOD TOTAL
CUMULATIVE FROM START
Early Start Budget Schedule
Early Start Budget Schedule
GENERAL FOUNDRY EXAMPLE
Task “G”
Early Start Time - ES 8
Early Finish Time - EF 13
Expected Time - te 5 weeks
Budgeted Task Cost $80,000.00
Budgeted Weekly Cost $16,000.00 *
$80,000.00 / 5 WEEKS = $16,000.00*
TASK Period 9 Period 10 Period 11 Period 12
A
B
C
D
E
F
G $16,000 $16,000 $16,000 $16,000
HPERIOD TOTAL
CUMULATIVE FROM START
Early Start Budget Schedule
TASK Period 13 Period 14 Period 15
A
B
C
D
E
F
G $16,000
HPERIOD TOTAL
CUMULATIVE FROM START
Early Start Budget Schedule
Early Start Budget Schedule
GENERAL FOUNDRY EXAMPLE
Task “H”
Early Start Time - ES 13
Early Finish Time - EF 15
Expected Time - te 2 weeks
Budgeted Task Cost $16,000.00
Budgeted Weekly Cost $8,000.00 *
$16,000.00 / 2 WEEKS = $8,000.00*
TASK Period 14 Period 15
A
B
C
D
E
F
G
H $8,000 $8,000PERIOD TOTAL
CUMULATIVE FROM START
Early Start Budget Schedule
TASK Period 1 Period 2 Period 3 Period 4
A $11,000 $11,000
B $10,000 $10,000 $10,000
C $13,000 $13,000
D $12,000
E
F
G
HPERIOD TOTAL $21,000 $21,000 $23,000 $25,000CUMULATIVE FROM START $21,000 $42,000 $65,000 $90,000
Early Start Budget Schedule
TASK Period 5 Period 6 Period 7 Period 8
A
B
C
D $12,000 $12,000 $12,000
E $14,000 $14,000 $14,000 $14,000
F $10,000 $10,000 $10,000
G
HPERIOD TOTAL $36,000 $36,000 $36,000 $14,000CUMULATIVE FROM START $126,000 $162,000 $198,000 $212,000
Early Start Budget Schedule
TASK Period 9 Period 10 Period 11 Period 12
A
B
C
D
E
F
G $16,000 $16,000 $16,000 $16,000
HPERIOD TOTAL $16,000 $16,000 $16,000 $16,000CUMULATIVE FROM START $228,000 $244,000 $260,000 $276,000
Early Start Budget Schedule
TASK Period 13 Period 14 Period 15
A
B
C
D
E
F
G $16,000
H $8,000 $8,000PERIOD TOTAL $16,000 $8,000 $8,000CUMULATIVE FROM START $292,000 $300,000 $308,000
Early Start Budget Schedule
Cumulative Budget Schedule
EARLY START TIME
$300,000.
$250,000.
$200,000.
$150,000.
$100,000.
$50,000.
$0.
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 weeks
$308,000.00
Late Start Time Budget
Tasks that are not on the critical path can be started at a later date.
This type of budget will delay the expenditure of funds until the last possible moment.
Unfortunately, the risk is that any subsequent delays in these tasks will delay the entire pro- ject!
Late Start Budget Schedule
GENERAL FOUNDRY EXAMPLE
Task “A”
Late Start Time - LS 0
Late Finish Time - LF 2
Expected Time - te 2 weeks
Budgeted Task Cost $22,000.00
Budgeted Weekly Cost $11,000.00 *
$22,000.00 / 2 WEEKS = $11,000.00*
TASK Period 1 Period 2 Period 3 Period 4
A $11,000 $11,000
B
C
D
E
F
G
HPERIOD TOTAL
CUMULATIVE FROM START
Late Start Budget Schedule
Late Start Budget Schedule
GENERAL FOUNDRY EXAMPLE
Task “B”
Late Start Time - LS 1
Late Finish Time - LF 4
Expected Time - te 3 weeks
Budgeted Task Cost $30,000.00
Budgeted Weekly Cost $10,000.00 *
$30,000.00 / 3 WEEKS = $10,000.00*
TASK Period 1 Period 2 Period 3 Period 4
A
B $10,000 $10,000 $10,000
C
D
E
F
G
HPERIOD TOTAL
CUMULATIVE FROM START
Late Start Budget Schedule
Late Start Budget Schedule
GENERAL FOUNDRY EXAMPLE
Task “C”
Late Start Time - LS 2
Late Finish Time - LF 4
Expected Time - te 2 weeks
Budgeted Task Cost $26,000.00
Budgeted Weekly Cost $13,000.00 *
$26,000.00 / 2 WEEKS = $13,000.00*
TASK Period 1 Period 2 Period 3 Period 4
A
B
C $13,000 $13,000
D
E
F
G
HPERIOD TOTAL
CUMULATIVE FROM START
Late Start Budget Schedule
Late Start Budget Schedule
GENERAL FOUNDRY EXAMPLE
Task “D”
Late Start Time - LS 4
Late Finish Time - LF 8
Expected Time - te 4 weeks
Budgeted Task Cost $48,000.00
Budgeted Weekly Cost $12,000.00 *
$48,000.00 / 4 WEEKS = $12,000.00*
TASK Period 5 Period 6 Period 7 Period 8
A
B
C
D $12,000 $12,000 $12,000 $12,000
E
F
G
HPERIOD TOTAL
CUMULATIVE FROM START
Late Start Budget Schedule
Late Start Budget Schedule
GENERAL FOUNDRY EXAMPLE
Task “E”
Late Start Time - LS 4
Late Finish Time - LF 8
Expected Time - te 4 weeks
Budgeted Task Cost $56,000.00
Budgeted Weekly Cost $14,000.00 *
$56,000.00 / 4 WEEKS = $14,000.00*
TASK Period 5 Period 6 Period 7 Period 8
A
B
C
D
E $14,000 $14,000 $14,000 $14,000
F
G
HPERIOD TOTAL
CUMULATIVE FROM START
Late Start Budget Schedule
Late Start Budget Schedule
GENERAL FOUNDRY EXAMPLE
Task “F”
Late Start Time - LS 10
Late Finish Time - LF 13
Expected Time - te 3 weeks
Budgeted Task Cost $30,000.00
Budgeted Weekly Cost $10,000.00 *
$30,000.00 / 3 WEEKS = $10,000.00*
TASK Period 9 Period 10 Period 11 Period 12
A
B
C
D
E
F $10,000 $10,000
G
HPERIOD TOTAL
CUMULATIVE FROM START
Late Start Budget Schedule
TASK Period 13 Period 14 Period 15
A
B
C
D
E
F $10,000
G
HPERIOD TOTAL
CUMULATIVE FROM START
Late Start Budget Schedule
Late Start Budget Schedule
GENERAL FOUNDRY EXAMPLE
Task “G”
Late Start Time - LS 8
Late Finish Time - LF 13
Expected Time - te 5 weeks
Budgeted Task Cost $80,000.00
Budgeted Weekly Cost $16,000.00 *
$80,000.00 / 5 WEEKS = $16,000.00*
TASK Period 9 Period 10 Period 11 Period 12
A
B
C
D
E
F
G $16,000 $16,000 $16,000 $16,000
HPERIOD TOTAL
CUMULATIVE FROM START
Late Start Budget Schedule
TASK Period 13 Period 14 Period 15
A
B
C
D
E
F
G $16,000
HPERIOD TOTAL
CUMULATIVE FROM START
Late Start Budget Schedule
Late Start Budget Schedule
GENERAL FOUNDRY EXAMPLE
Task “H”
Late Start Time - LS 13
Late Finish Time - LF 15
Expected Time - te 2 weeks
Budgeted Task Cost $16,000.00
Budgeted Weekly Cost $8,000.00 *
$16,000.00 / 2 WEEKS = $8,000.00*
TASK Period 13 Period 14 Period 15
A
B
C
D
E
F
G
H $8,000 $8,000PERIOD TOTAL
CUMULATIVE FROM START
Late Start Budget Schedule
TASK Period 1 Period 2 Period 3 Period 4
A $11,000 $11,000
B $10,000 $10,000 $10,000
C $13,000 $13,000
D
E
F
G
HPERIOD TOTAL $11,000 $21,000 $23,000 $23,000CUMULATIVE FROM START $11,000 $32,000 $55,000 $78,000
Late Start Budget Schedule
TASK Period 5 Period 6 Period 7 Period 8
A
B
C
D $12,000 $12,000 $12,000 $12,000
E $14,000 $14,000 $14,000 $14,000
F
G
HPERIOD TOTAL $26,000 $26,000 $26,000 $26,000CUMULATIVE FROM START $104,000 $130,000 $156,000 $182,000
Late Start Budget Schedule
TASK Period 9 Period 10 Period 11 Period 12
A
B
C
D
E
F $10,000 $10,000
G $16,000 $16,000 $16,000 $16,000
HPERIOD TOTAL $16,000 $16,000 $26,000 $26,000CUMULATIVE FROM START $198,000 $214,000 $240,000 $266,000
Late Start Budget Schedule
TASK Period 13 Period 14 Period 15
A
B
C
D
E
F $10,000
G $16,000
H $8,000 $8,000PERIOD TOTAL $26,000 $8,000 $8,000CUMULATIVE FROM START $292,000 $300,000 $308,000
Late Start Budget Schedule
Cumulative Budget Schedule
LATE START TIME
$300,000.
$250,000.
$200,000.
$150,000.
$100,000.
$50,000.
$0.
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 weeks
$308,000.00
Cumulative Budget Schedule
EARLY START TIME
$300,000.
$250,000.
$200,000.
$150,000.
$100,000.
$50,000.
$0.
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 weeks
$308,000.00
Cumulative Budget ScheduleFEASIBLE BUDGET RANGES
$300,000.
$250,000.
$200,000.
$150,000.
$100,000.
$50,000.
$0.
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 weeks
$308,000.00
EARLY START TIME
LATE START TIMEAREA
AREA
AR
EA
PERT / CPM with QM for WINDOWS
We Select TheCOST BUDGETING
Sub Program
The Data Table IsCompleted As
Previously Shown
The ExpectedProject Completion
Time( 15 weeks )
The EARLY START BUDGET ( 1st 11 weeks )
The EARLY START BUDGET( 5th through 15th week )
The LATE START BUDGET( 1st 8 weeks )
The LATE START BUDGET( 8th through 15th week )
TheFeasible BudgetRegion
Excelcannot do
projectbudgeting
PROJECT BUDGETING