1.1. Background of Construction
The construction of a complex structures is a major undertaking. That to in the public sector project feasibility and public support for future projects are partially based on the success of past projects. And in the private sector large complex structures can be financially rewarding or devastating for both the builder and owner. Most complex projects share the common theme that they are brought with risks and uncertainty that can cause cost escalations. For example, that about 80% of all projects begin the construction process with a high level of uncertainty. The construction project manager has a challenging tasks to build a complex project that is on budget. The primary focus of this research is to present a methodology that assist project managers to control cost when constructing a complex structure.
Project management is the application of knowledge, skills, tools, and techniques to project activities in order to meet or exceed stakeholder needs and expectations from a project (PMI 1997). These expectations revolve around the project’s scope, schedule, cost and quality. Project management functions consist of: scope, cost, time, human resources, communications, quality, contract/procurement, risk, and project integration (PMI 1997). This dissertation focuses on the cost control aspect of project management.
Project managers in the civil engineering and shipbuilding professions have long recognized the need for improvements in the area of cost control and managing costs includes estimating, scheduling, accumulating and analyzing cost data, and finally implementing measures to correct a cost problem. Current cost control techniques tend to focus on variances in line items once the co...
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1.5.1.1. The Cost Control Vs the Cost Accounting
The cost controlling shouldn’t been confused with the cost accounting. The cost accounting involves the recording of the cash receipts and their disbursements, accounts payable, accounts receivable, inventory and initial investment, and keeping other general and subsidiary ledger accounts. The cost accounting identifies, defines, measures, and reports the various elements of direct and indirect cost associated with producing goods and services. The main objective of the cost accounting is communicating the financial information to management for planning, controlling, and evaluating. Thus, cost accounting is a main means to an end. This research will not focus on the inner workings of any cost accounting system but instead focus on cost control using data provided by a sound cost accounting techniques
Gray, C., Larson, E. (2008). Project Management: The managerial Process. New York, NY: The McGraw-Hill Companies Inc.
One of the basic parts of cost accounting is to gauge the cost of tangible or intangible product or service. All costing models are attempting to discover the "correct" cost 1.e actual cost without any cost variances for all cost objects, for example, product, profit, segment, and division. costing methodologies all over the world apportion overhead by utilizing volume- driven measure, for example, unit transformed to first gauge a foreordained overhead rate then assign overhead by applying this normal overhead rate to the cost object. Requisition of such models is authentic for offices generating goods with less differing qualities. In any case, as manufactured goods differ, the wide averaging methodology prompts severe cost variations (Johnson and Kaplan, 1987, Cooper and Kaplan, 1988).
Time-phased project work is the basis for project cost control. Work package duration is used to develop the project network. Further, the time-phased budgets for work packages are timetabled to establish fiscal measures for each phase throughout the project. The time-phased budgets are to emulate the real cash needs of the budget, which will be used for project cost control. This information is useful to estimate cash outflows. The project manager's attention is on when the costs are to occur, when the budgeted cost is earned, and when the actual cost materializes. This information is made up to measure project schedule and cost variances (Gray & Larson, 2005). The following are typical types of costs found in a project:
Rishinek, A., 1983. Control Aspects of Standard Costing: Variance Analysis, Inflation Adjustment, The Learning Curve and their Computer Applications. Managerial Finance, 9(1), pp. 14-18.
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.
Project management is said to be completed within time when it completed within the “triple constraints”: cost, time and quality. And in a lot of causes, one them is sacrificed so as to meet the other two. Project managers prioritize which ones are the most important.
While, the project manager is one of the most important participant to keep the project actual cost in line with the estimated project budget through managing and controlling the additional costs resulting from less accurate estimation and unforeseen events that may face the project during the total project life cycle (YANG & CHEN,
Hansen, D., Mowen, M., & Guan, L., Cost Management: Accounting & Control 6th ed., Mason, Ohio: South-Western
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
The overall purpose of cost accounting is to advise top administration and the management team on the most suitable and cost effective methods and actions to employ based on cost, capability and efficiencies of a given product or service. It can be defined as the method where all the expenditures used during execution of business activities are gathered, categorized, examined and noted down (Horngren & Srikant, 2000). Once these numbers are gathered and recorded the information is used to determine a selling price and/or to identify possible investment opportunities. Although the principal aim or function of cost accounting is to help the business administration with their decision making and business planning process, the cost accounting data
The company needs to sustain two cost systems and accounts, one for internal use and another for external reports since the direct use of accounting method in analysis of the ABC data cannot be used. Different reports are required to prepare for different purposes in ABC costing lead to additional works that making the resources not using productively.
In management accounting, cost management has a crucial role and finds its foundations in understanding “cost behaviour”. “Cost behaviour analysis” can be defined as “the study of how cost changes when there is a change in an organisation’s level of activity”. (Definition https://www.accountingcoach.com/blog/what-is-cost-behavior).
The role of a project manager has been the subject of numerous publications that have attempted to provide a precise set of qualities and responsibilities for the job title. However, the job role is so encompassing that there are still many different schools of thought on the subject and much debate over the precise terminology to best describe a project manager. This paper analyzes five such publications, and attempts to rationalize their research into a cohesive and comprehensive description of the roles of project manager. This paper establishes the roles of the project manager in the current setting in order that a newcomer to the subject matter will be able to understand the concepts as it relates to modern technology and business practices.
When planning a new project, how the project will be managed is one of the most important factors. The importance of a managers will determine the success of the project. The success of the project will be determined by how well it is managed. Project management is referred to as the discipline that entails the processes of carefully planning, organizing, controlling, and motivating the organization resources so as to foster and facilitate the achievement of specific established and desired goals and meet the specific criteria of success required in the organization (Larson, 2014). Over the course of this paper I will be discussing and analyzing the importance of project management.
Project management involves all activities that encompass scheduling, planning, and controlling projects. A successful project manager ensure that an organization’s resources are being used both efficiently and effectively. Most projects need to be uniquely developed require a sense of customization and the ability to adapt to any posed challenges. The scope of effective project management includes defining what the project is and what is being expected to be accomplished. Projects are imposed to fulfill a certain need and project managers must have the ability to create the proper definition. Goals and the means used to attain those goals have to be clearly stated. Project Managers must also have the ability to plan