PROJECT BUDGETING The overall goal in the budgeting process of a project is to determine how much...

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


STEPS


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.


STEPS


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 project 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




Task “B”






$30,000.00 / 3 WEEKS = $10,000.00*


A

B $10,000 $10,000 $10,000

C

D

E

F

G

HPERIOD TOTAL





Task “C”






$26,000.00 / 2 WEEKS = $13,000.00*


A

B

C $13,000 $13,000

D

E

F

G

HPERIOD TOTAL





Task “D”






$48,000.00 / 4 WEEKS = $12,000.00*


A

B

C

D $12,000 $12,000 $12,000 $12,000

E

F

G

HPERIOD TOTAL





Task “E”






$56,000.00 / 4 WEEKS = $14,000.00*


A

B

C

D

E $14,000 $14,000 $14,000 $14,000

F

G

HPERIOD TOTAL





Task “F”






$30,000.00 / 3 WEEKS = $10,000.00*


A

B

C

D

E

F $10,000 $10,000 $10,000

G

HPERIOD TOTAL





Task “G”






$80,000.00 / 5 WEEKS = $16,000.00*


A

B

C

D

E

F

G $16,000 $16,000 $16,000 $16,000

HPERIOD TOTAL



TASK Period 13 Period 14 Period 15

A

B

C

D

E

F

G $16,000

HPERIOD TOTAL





Task “H”






$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




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



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




A

B

C

D

E

F

G $16,000 $16,000 $16,000 $16,000




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


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 project!

Late Start Budget Schedule


Task “A”

Late Start Time - LS 0

Late Finish Time - LF 2




$22,000.00 / 2 WEEKS = $11,000.00*


A $11,000 $11,000

B

C

D

E

F

G

HPERIOD TOTAL





Task “B”






$30,000.00 / 3 WEEKS = $10,000.00*


A

B $10,000 $10,000 $10,000

C

D

E

F

G

HPERIOD TOTAL





Task “C”






$26,000.00 / 2 WEEKS = $13,000.00*


A

B

C $13,000 $13,000

D

E

F

G

HPERIOD TOTAL





Task “D”






$48,000.00 / 4 WEEKS = $12,000.00*


A

B

C

D $12,000 $12,000 $12,000 $12,000

E

F

G

HPERIOD TOTAL





Task “E”






$56,000.00 / 4 WEEKS = $14,000.00*


A

B

C

D

E $14,000 $14,000 $14,000 $14,000

F

G

HPERIOD TOTAL





Task “F”






$30,000.00 / 3 WEEKS = $10,000.00*


A

B

C

D

E

F $10,000 $10,000

G

HPERIOD TOTAL




A

B

C

D

E

F $10,000

G

HPERIOD TOTAL





Task “G”






$80,000.00 / 5 WEEKS = $16,000.00*


A

B

C

D

E

F

G $16,000 $16,000 $16,000 $16,000

HPERIOD TOTAL




A

B

C

D

E

F

G $16,000

HPERIOD TOTAL





Task “H”






$16,000.00 / 2 WEEKS = $8,000.00*


A

B

C

D

E

F

G

H $8,000 $8,000PERIOD TOTAL




A $11,000 $11,000

B $10,000 $10,000 $10,000

C $13,000 $13,000

D

E

F

G




A

B

C

D $12,000 $12,000 $12,000 $12,000

E $14,000 $14,000 $14,000 $14,000

F

G




A

B

C

D

E

F $10,000 $10,000

G $16,000 $16,000 $16,000 $16,000




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 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


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

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PROJECT BUDGETING

PROJECT BUDGETING The overall goal in the budgeting process of a project is to determine how much...

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