Project Costing

[Nate]

Hey guys,

My brother recently went for a job as a Project Manager, and during the interview he was asked if he could cost a project. Funny thing is, he can't! So..do any of you know what you would do to take an idea and make it viable in a business environment?

Think I know about the basics, that it's all about cost. I've done a little google search and come up with these which will probably be helpful:

Project Cost Management
Top 10 Qualities of a Project Manager

 

[Chronictank]

I assume this is based on a proposal, if profit is the main driver you study the feasility of the project in terms of cost/profit. If you plug into google:

1. Payback Period
Initial fixed investment in the project divided by the estimated annual cash income

2. Average Rate of Return (ARR)
Ratio of average annual profit to the initial or average investment in the project.

3. Discounted Cash Flow - Present Value Method
Determine net present value (NPV) of all cash flows by discounting them by the required rate of return (hurdle rate). If the NPV is posotive, it means the project is feasible

4. Profitability Index (benefit-cost ratio)
NPV of all future expected cash flows divided by the initial cash investment.
The project is a go if ratio is greater than 1.0.

After establishing the project is feasible you plan out the project and estimate how much the resources you need will cost.
THen you budget each phase (and later broken further into modules) on the resources you have allocated. personally would draw up a pert diagram and work out where i could save time if time is the most important factor (i.e. fixed deadline), or cost (in which case there is no point as a PERT diagram is used to work out how to decrease time by pumping more resources in) and say how much it would cost to reduce the project to the minimum time needed.
Then draft out a cost analysis, based on the time/budget of the project

I dont know if that answered your question or not, i very likely missed something as it was off the top of my head.
If you are genuinly interested look up PRINCE 2, which is basically a whole course on project management and methodologies

 

[yaruar]

Prince 2 FTW

If you are going to be doing any kind of PM in this country you need to know your prince unfortunately.

 

[Nate]

Thanks a lot guys, will mention this prince thing and get him to have a look at your post Chronic