Welcome back to our course on Project 2013.
If you’ve been following me so far, you’ll be familiar with our house build project where
we have a selection of the kind of activities, tasks involved in building a house and we’ve
got to the point here where we’ve got a pretty good sample project for many of the
tasks, but we haven’t looked at all so far at costs.
In this section and the next we’re going to look at costs.
In this section we’re going to look at costs as they relate to resources and then in the
next section we’re going to look at project costs.
So here’s the resource sheet for our project.
Let’s have a look at costs on this sheet.
Now you notice that the resources on this resource sheet basically share the same columns,
but materials and work use different combinations of those columns.
The one that uses the least is the type material.
So let’s put in the cost for the materials first.
To make things a little bit easier I’m going to apply a filter to this view.
So go up to the Data Group on the View tab, and the filter I’m going to use is resources
material.
The material resources that I’ve got are bricks, doors, windows, and the fuel for the
ground pump.
Now when we’re putting in cost of materials, the cost goes in the standard rate column
and basically it’s the cost of one of whatever the unit of the material is.
Now the units are in this material label column.
So when we’re looking at the price of bricks we’re looking at the price of 1,000 of bricks.
Now this obviously greatly depends on the bricks themselves, but pretty much as a going
rate, we’d say for 1,000 bricks it’s going to cost in U.S. currency about 450 U.S. dollars.
Even more variable what a door would cost.
I’ve just put doors in there.
In reality, we’d have exterior doors and interior doors.
Exterior doors, particularly solid wood doors would generally be very much more expensive
than interior ones, and clearly we could be using any number of materials.
We could have UPBC type doors and so on.
But I’m going to come out with a ballpark figure for doors of $250 per door.
Some would be a lot more expensive but you could get some cheaper doors than that.
And then for the windows, again, I’m going to go in for a sort of moderate quality.
We’re going to say $300 per window.
That just leaves us with the price of a liter of fuel for the ground pump and typically
that’s going to be about 60 cents per liter.
So I’ve put in my costs now for the materials.
Now in some cases there may be an additional cost per use.
Often this will be something like a delivery charge.
So for instance, if we were using thousands of bricks, we may need to pay to have them
delivered.
Let’s suppose that we’ve got a delivery charge of $100 associated with the bricks
but the doors and windows there is no delivery charge or cost per use and similarly with
the fuel, there is no delivery charge or cost per use.
Now we come to this very important column, the accrual column, accrue at.
And for each of the resources that we use, we need to decide how the cost is accrued
within the finances of our project.
Now by default costs are accrued prorated, which means prorated throughout the life of
a task.
So if you were using bricks, say, over the course of a task, then the cost of those bricks,
12,000 bricks say over a 12 day task, you’d be incurring the cost of 1,000 bricks per
day and that’s how it would be in the accounts for the project.
But there are alternative accruals.
Basically you can say accrue at start.
If for a particular type of resource, material in this case, you say accrue the cost at start,
then as soon as the task that uses that resource starts the cost of that resource, the full
cost of that resource to that task is accrued.
You can also specify accrue at end and in that case the total cost of the resource that’s
used on that task will be accrued at the end of the task.
Now obviously, it’s impossible to generalize here about what would happen in relation to
bricks, doors, windows, fuel, or anything else and I’m going to leave these all set
at prorated which means that for all of these materials we’ll accrue the cost to the project
as we go along.
To some extent this may agree with the payment profile.
So, for instance, if you have to pay for all of the bricks up front, the merchant that
supplies them to you requires payment in full before you start using them, then you may
decide that the full cost should be accrued at the start of the first task that uses the
bricks.
But that will be very much a local situation and it’s impossible for me to generalize
here so I’m going to leave these all set at prorated for the moment.
So now let’s turn our attention to the work resources.
I’m going to go back to that filter again and this time I’m going to have resources
work and let’s look at the hourly rates for the various people that are working on
this build and also the hourly rate for this ground pump.
So let’s start with a standard hourly rate for a brick layer and something along the
lines of, say, we’re $22 per hour for the generic brick layer resource and then for
an overtime rate we’d expect to pay around about $32 per hour.
Now is there a cost per use?
Well, it might seem a little bit unlikely in relation to a person but there can quite
likely be a cost per use, particularly for a contract resource you may have expenses
that you need to pay, maybe some sort of travel or accommodation allowance for contract staff.
And also if you’re using an agency, there may be some sort of agency fee to pay.
I’m going to leave the cost per use out for most of these but I am going to just briefly
here look at accrual because we exactly have the same issues as we have for materials in
terms of accrual for work resources.
Very often work resources will accrue prorated.
Whether they’re paid day by day, week by week, month by month, we’ll almost certainly
accrue the cost in the accounts for our project on a prorated basis.
Having said that, there will be exceptions.
There will be people where we have to pay for their time up front and there will be
people when they can bill us for their time and we’ll pay it perhaps later on.
But for the people that we’ve got here, I’m going to assume that they are all prorated.
So I’m just going to quickly go through now and put in similar kinds of rates for
the other skills.
So, for carpenter that’s going to be 22 per hour as well and again for the overtime
rate; I’m going to just fill in the rest of these and just join me again in a moment.
So I’ve setup all of those rates and I’ve also setup a rate for the use of the ground
pump.
And with the ground pump, the thing is that the people that supply that to us only need
to be paid at the end.
They basically have a little device on it that measures how many hours it’s been used
for.
Obviously I’ve got to buy the fuel but that’s covered separately as a material.
But we’ll just be charged for that at the end.
So I’m actually going to accrue the cost at the end because I won’t know how much
it is until we’ve finished using it.
The task it’s being used on may take more or less time than I anticipate.
There is also a cost per use of the ground pump which is basically a delivery charge
which is $75.
So I’m going to put that in as well.
So there we are.
That’s my work resources.
Now let me just go back to showing everything with no filter on the resource sheet and I’m
now going to add one more resource, and this resource is going to be called Incidental
expenses.
And very often in a project you’ll want a way of putting in an allowance for incidental
expenses, things that come up.
Maybe you need to get some help with something quickly.
Maybe you need to get somebody to deliver a material from a local hardware store quickly.
Just things you need to buy without going through some huge routine.
And you would normally allow yourself a budget for incidental expenses.
Now the way that budget resources work, where you basically know that you’re going to
need to spend money on something but you’ve got no idea what it’s going to be at the
moment but you do need to allow for it in your budget for your project is to define
it as a cost resource.
I’m going to call it there Incidentals, and then if I double click on that I’m going
to declare it to be a budget resource.
Now when I declare it to be a budget resource, I cannot enter standard rate, overtime rate,
anything like that.
I’ll enter the cost associated with this budget resource via the project summary task
which I mentioned earlier on in the course.
And in the next section, I’m going to show you how we handle a budgetary cost like this.
So that’s it on the costs related to individual resources.
In the next section we’re going to look at project costs so please join me for that.