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PM 7016 Managerial Budgets and Project Management

Published : 14-Oct,2021  |  Views : 10

Question

The corporate chief financial officer (CFO) is requesting a budget to go along with the resource estimates you will acquire from the work breakdown structure. Formulate the resource estimates and budget for the project in a project management spreadsheet. Your spreadsheet should include integrating scope with costs and schedules, management reserves, project baseline, methods used to plan earned value and control account plans.
 
Along with your spreadsheet, prepare a paper that can be shared at the next senior leadership meeting regarding your project. Justify your budgetary needs based on identified resources necessary for project success.

Answer

Working breakdown structure

The working breakdown structure (WBS) for any project is handled by the program and project management unit in association with the project officer. A WBS involves the tasks, activities and various phases that define display graphically and organise the total work that is to be completed with regard to achieving the final target of a project (Jain & Preeti, 2014).

                                                 

Projected working breakdown structure budget for the construction project

Particulars

Year 1

Year 2

Year 3

Year 4

Year 5

Revenues

 

 

 

 

 

Revenues from sale of buildings

 $                   -   

 $             -   

 $             -   

 $             -   

 $    900,000.00

Total revenue

 $                   -   

 $            -   

 $            -   

 $            -   

 $ 900,000.00

Expenses

 

 

 

 

 

Requirement phase

 

 

 

 

 

Project evaluation

 $          5,000.00

 

 

 

 

Developing project charter

 $          3,500.00

 

 

 

 

Reviewing the project charter

 $          1,000.00

 

 

 

 

Approval of project charter

 $            500.00

 

 

 

 

Design phase

 

 

 

 

 

Developing project team

 $          4,000.00

 

 

 

 

Developing project plan

 $        12,000.00

 

 

 

 

Submitting project plan

 $          2,000.00

 

 

 

 

Approval of project plan

 $          3,000.00

 

 

 

 

Construction Phase

 

 

 

 

 

Resource management

 

 $    4,000.00

 $    2,000.00

 $    1,000.00

 

Building construction

 

 $  90,000.00

 $  75,000.00

 $  55,000.00

 

Installation of attachments

 

 

 

 $  42,000.00

 

Testing phase

 

 

 

 

 

Process testing

 

 

 

 

 $        12,000.00

Utility testing

 

 

 

 

 $        17,000.00

Safety and security testing

 

 

 

 

 $        29,000.00

Closeout phase

 

 

 

 

 

calculation of revenue

 

 

 

 

 $          9,000.00

Administrative closure

 

 

 

 

 $        22,000.00

Preparation of closeout checklist

 

 

 

 

 $          6,000.00

Total expenses

 $        31,000.00

 $  94,000.00

 $  77,000.00

 $  98,000.00

 $        95,000.00

Net income

 $      (31,000.00)

 $(94,000.00)

 $(77,000.00)

 $(98,000.00)

 $   805,000.00

 
The procedure of budgeting establishes the means for tracking and developing the goals for cost for all the authorised work under contract. One major objectives of establishing the system for managing the earned value is that all the crucial components of the project shall be baselined and integrated (Lameira et al., 2014). The major apparatus of earned value management involve cost, schedule and scope and their performance are evaluated against the baseline to assist in tracking the project’s progress (Ma, Y., Zhang & Meng, 2015).
Based on the above baseline and the resource availability, the activities under the WBS are scheduled to prepare the schedule baseline with associated cost in each activity.   The summaries of budgets and schedules of the work package are integrated by using the control account plan (CAP) (Sigmund & Radujkovi?, 2014). The CAP is the detail plan at low level that is prepared by the control account manager (CAM) revealing the planning for time phase and the associated budgets for the control account.  The CAP also offer detail package of work and the milestones details that enable CAM to differentiate and clarify the unique requirement of each project work (Zecheru & Olaru, 2016).

CAP of this construction project:

Activities

Year 1

Year 2

Year 3

Year 4

Year 5

Cost

Requirement phase

 Done

 

 

 

 

$ 10,000

Design phase

 Done

 

 

 

 

$ 21,000

Construction phase

 

 Done

 Done

 Done

 

$ 269,000

Testing phase

 

 

 

 

 Done

$58,000

Closeout phase

 

 

 

 

 Done

$ 37,000

 
As per the above table, the 1st and 2nd phase that is the requirement and design phase will be completed in the 1st year with cost of $ 10,000 and $ 21,000 respectively. The construction phase will be carried out over the next 3 years with total cost of $ 269,000. After completion of construction, in the 5th year the testing phase and closeout phase will take place and the associated cost with these activities will be $ 58,000 and $ 37,000 respectively.

Reference:

Jain, M., & Preeti. (2014). Cost analysis of a machine repair problem with standby, working vacation and server breakdown. International Journal of Mathematics in Operational Research, 6(4), 437-451.

Lameira, P. I. D., Braga, E. M., Moraes, H. B., & Soares, G. (2014). Development of a product oriented by work breakdown structure and application of hull block construction method for inland barges. Maritime Technology and Engineering, 361.

Ma, Y., Zhang, W., & Meng, J. (2015). PHM Collaborative Design in Aircrafts Based on Work Breakdown Structure. In Engineering Asset Management-Systems, Professional Practices and Certification (pp. 1663-1673). Springer International Publishing.

Sigmund, Z., & Radujkovi?, M. (2014). Risk Breakdown Structure for construction projects on existing buildings. Procedia-Social and Behavioral Sciences, 119, 894-901.

Zecheru, V., & Olaru, B. G. (2016). Work Breakdown Structure (WBS) in Project Management. Revista de Management Comparat International, 17(1), 61.

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