Brooke (1997), explains Estimation as the technical procedure of anticipating the value of the project. Building construction estimation is the process of acquiring the construction value for the whole project before the project starts. Thus, construction attaining process depends hugely on financial management to sustain workability and smooth operations. The delay in construction is a global issue which is due to improper preparation of estimates and lack of drawings (Ajanlekoko, 1987). In accordance to Gkritza (2008), the source of delay in a project are identified to be in the initial stages, like bad quantification, errors in design and ground conditions. Thus, the purpose of a proper estimate is to foretell the cost needed to finish the …show more content…
It focusses on the types of estimation used, accuracy level in estimation and the disadvantage of not having a standardized form for estimation. It is known that during the early twentieth century, there has been six methods used for estimation. From then till now the method for estimation is very much the same, but we have noticed differences in preparation of these estimation with respect to each company. The main idea in this paper is to identify if there can be a common source of preparation and find out the various types of estimation techniques used by different types of companies and try to draw a conclusion from that, and to understand the importance of accuracy level in any estimation. Shane et. al (2009) says accuracy is an exquisite issue and can influence estimation in numerous manner. Inaccuracy in estimation can pilot to countless problems like change the order, construction delays and failure of business. Two critical problems such as producing the cost estimate manually and consequences of imprecise estimation are the soul reasons to conduct this study and investigate the problem in estimation (Albogamy et al., …show more content…
Estimates form the basis of tender comparison, so it should be as accurate as possible, if deficient the award settlement becomes arduous (Odusami & Onukwube, 2008). Accurate cost estimate for projects are tremendously essential to both the clients and the contractor. It provides the basis for the contractor to submit the tender and allows the parties to highlight the final cost of the project at an early stage. Essentially it is used for planning the entire project and helps during the execution phase (Akintoye and Fitzgerald, 2000). It has been pointed out that the building cost of the project usually differs from the estimated final cost and this is due to the variations (Oberlender and Trost,
John Deere Component Works (JDCW), subdivision of John Deere and Co. was in charged specifically of the manufacturing of tractor component parts. The demand for JDCW’s products had problems due to the collapse of farmland value and commodity prices. Numerous and constant failures in JDCW’s competition for bids, alerted top management to start questioning their current costing methods. As an outcome, the analysis has to be guided to research on the current costing methods with the intention of establishing legitimacy and to help the company in adopting a more appropriate costing system.
The 'Standard' of the 'Standard'. Combination of project cost forecasts with earned value management. Journal of Construction Engineering & Management, 958-966. Sitnikov, C. (2012). The 'Standard'.
The contained paper has been prepared with objectives of elaborating over the three different costing methods namely, Absorption/Full Costing, Variable/Marginal Costing, and Activity Based accounting. The first segment of the report seeks to define and illustrate the costing methods based on the personal understanding of the writer gained through the class room and the academic readings. Part two of the report takes a form of short essay, written critically to evaluate the application of standard costing and variance analysis to any size of business, and concludes with a verdict that whether or not standard costing and variance analysis is applicable to each business with consideration of its costs and benefits of the system.
When starting construction on a new building, there are plenty of things that can and will go wrong. You will start to lay out the plumbing and find that it clashes with a wall or beam that cannot be moved. To finish your project, you must take more time and more money to adjust to the new layout. Another scenario is the owners won’t let you start construction because they can’t see the end result or where the specific design implements that had asked for are located. For the past few decades the architecture, engineering and construction (AEC) industry has been looking for a solution to this problem. Projects would be set back due to design oversights. Without anything to predict these problems before they happen, these little setbacks were a common occurrence. Once building information modeling (BIM) was born, it was like their prayers had been answered. The future was here.
Software development project managers should prepare several types of cost estimates for most projects. Three basic types of estimates include a rough order of magnitude or ROM, a budgetary estimate, and a definitive estimate.
In general, there are different types of procurement type for various situations, due to no one method can be suitable under the all different construction project. In this case, there are four procurement paths, which are traditional, design and build, management and design and manage, which will be advised to use. However, each method has different advantages and disadvantages. First, traditional path is the tender documents have been prepared and then invite the tender and the employer appoints the contractor to construct the project. There are several advantages of this traditional route in the construction industry.
To test the financial feasibility and plan acceptability, there must be information on the magnitude, and share of estimated project cost that are reimbursable. This information can be derived from cost allocation. Also where cost sharing is required in the multipurpose planning process cost allocation can be applied. Cost allocation also provides information necessary for allocating the real expenditures ensuring that the cost account are maintained in line with plan formulation and allocation principles during the subsequent c...
Cost Accounting: Its role and ethical considerations Introduction: Accounting is the process of identifying, measuring, and communicating economic information about an entity for the purpose of making decisions and informed judgements. The major areas of within the accounting are: Financial Accounting, Managerial Accounting/Cost Accounting and Auditing- Public Accounting Managerial accounting is concerned with the use of economic and financial information to plan and control the activities of an entity and to support the management in planning and decision-making process. Cost accounting is the subset of managerial accounting and it helps management in determination and accumulation of product, process or service cost. Role of Cost Accounting: Increased competition and uncertain business conditions have put significant pressure on corporate management to make informed business decisions and maximize their company?s financial performance. In response to this pressure, a range of management accounting tools and techniques has emerged.
In order to estimate the environmental impact of a construction material, it is necessary to consider all stages
current way to estimate cost needs to be changed. The current models are too dependent
The current cost accounting presents the economic status of the business in relation to the economic which present the reality of the transaction which in turn provides better and more useful information than historical costing. As business environment are rapidly changing and current cost accounting will show the underlying business performance in align to the economy to present a fair value in the balance sheet. As the information acquired is debatable it can provide much more meaningful information to the user as it reflects the current price. Another advantage is that current cost accounting provides better measurement of efficiency. The rapid development and abundance use of contract based business means that under cost-based system there are some assets and liabilities are not included in the balance sheet at all because it has not been incurred or are not showed due to circumstances like the exchange rate, interest rate and even tax rates. Current cost is the only way to get these changes in prices to be record as it reflects on the market price. The disadvantage of current cost accounting is that understanding current cost accounting and interpreting it to useful and relevant data can be much more difficult to be achieved as it requires much more in depth knowledge. Some investor thinks that the financial information report is too little as they are no
Accurately forecasting the cost of projects is vital to the survival of any business or organization. Cost estimators develop the cost information that business owners or managers, professional design team members, and construction contractors need to make budgetary and feasibility determinations. From an Owner's perspective the cost estimate may be used to determine the project scope or whether the project should proceed. According to the U.S. Department of Labor there were about 198,000 cost estimators in 1994. That of which 58% work in the construction industry, 17% employed in manufacturing industries, and the remaining 25% elsewhere. From this we could conclude that a great deal of cost estimation lies in the construction industry, where multi-million dollar contracts are formed after a thorough cost estimation.
Spohr, J. (2002). The quality of accounting and earnings: The role of accrual estimation errors. Swedish school of economics and business administration dept of accounting. Vol. 7, p. 3-19.
In its current practice, the roles and functions of cost accounting includes additional functions. More specifically, it can be described as more than an inventory tracking system. This is because cost accounting entails defining the charges of activities and goods (Horngren & Srikant, 2000). Because of its many roles and functions, this accounting method has been of great help to growth and expansion of business planning and management. Again, the reports offer assistance in the planning and growth projections for different business functions and units within the organization. The information cost accountants offer different uses, some of which aid in the controllership function, as well as the industrial
Today manufacturing environment is rapidly changing. Alteration stimulates the necessity of manufacturing companies’ owners and managers to make fast and smart decisions, going through the global variance of business, management, accounting techniques, high technologies and science. Management accounting destined to produce useful information about product cost, budgeting and performance report. There was significant influence in management accounting system because of changes, such as import tariffs reduction, employment practices and implementation of new practices. In order to succeed each company chooses its own way of guiding business through different ways of management accounting techniques. In the last few decades new tools and techniques of management accounting were developed through information and the latest manufacturing technologies. Investigation of new methods consequently became an occasion for partly losing the previous necessity of traditional techniques of management accounting system. The modern techniques like TQM (Total Quality Management), ABC (Activity Based Costing), JIT (Just in Time) were introduced and started to achieve popularity of usage among many manufacturing organizations. The presented assignment investigates either the traditional or modern methods of management accounting are useful in today’s era of global competition.