Cost Management—Summary of Basic Principles (from Schwalbe, Information
Technology Project Management 4th edition)
1.
2.
Profit
Profit Margin
3.
Life cycle costing
4.
Cash Flow Analysis
5.
7.
8.
Tangible
costs/benefits
Intangible
costs/benefits
Direct costs
Indirect costs
9.
Sunk cost
6.
10. Learning Curve
Theory
11. Reserves
12. Contingency reserves
13. Management reserves
Revenue-costs
Ratio profit:revenue eg $2:$100 yields 2% profit
margin
Total cost of ownership for the life of a project. E.g. for
a software project development plus support costs for
the years that the software will be alive.
Method for determining estimated annual costs and
benefits for a project and the resulting annual cahs flow
Measurable in $ terms
Difficult to measure in $ terms
Directly related to project e.g. salary
Not directly related to project e.g. utilities, janitorial
services, etc.
$ spent in the past…SHOULD BE FORGOTTEN, NOT
CARRIED FORWARD
When many items are produced repetitively, unit cost of
items decreases in a regular pattern as more units are
produced.
$ included in cost estimate for future situations that are
difficult to predict
$ for “known unknowns” (e.g. turnover)
$ for “unknown unknowns” (e.g. illness, supplier out of
business)