Actual Cost for completed activity

You have an agreement with a customer to build a house in 6 months for an amount 1,000,000. You finished the work in 3 months. How much money you will take from the customer? Full or half?.....

I hope this will give you an answer.

Regards

Kannan

Thanks Kannan for your response

It is different, as the actual cost what I actually spent for this activity which shall not be shown to the owner.

So I estimated the cost for this activity and I need to know whether I am over or below and this can not be known unless I know the actual cost spent on this activity.

How in the world would the program know what YOUR actual costs were ? I can ask you the same quesiton but in reverse how do I know that you did not spend MORE than $2,880 ? Just becasue that was your budget does not mean that becasue your actual duration that was less than original duraiton that you did not spend MORE than what you had budgeted. Maybe you worked overtime and have to pay premium time for the hours worked overtime. There is no way for the software to assume that you completed the work under or over budget unless you tell it. 

You budgted $2,880 and the activity is finished so you earned $2,880. So I can say to you if you budgted $2,880 and you finished it sooner will I only have to pay you $2,160 ? if so let me know so I can sign up for this program because thats a good deal. 

To do what you want to do just go to the actual costs and put in $2,160 for the actual and also put in $2,160 for the at completion costs and it will show that you are under budget by $720 for that activity

How in the world would the program know what YOUR actual costs were ? I can ask you the same question but in reverse how do I know that you did not spend MORE than $2,880 ? Just because that was your budget does not mean that because your actual duration that was less than original duration that you did not spend MORE than what you had budgeted. Maybe you worked overtime and have to pay premium time for the hours worked overtime. There is no way for the software to assume that you completed the work under or over budget unless you tell it. 

You budged $2,880 and the activity is finished so you earned $2,880. So I can say to you if you budged $2,880 and you finished it sooner will I only have to pay you $2,160 ? if so let me know so I can sign up for this program because that's a good deal. 

To do what you want to do just go to the actual costs and put in $2,160 for the actual and also put in $2,160 for the at completion costs and it will show that you are under budget by $720 for that activity

Hi Moutaz,

The programme is the agreement between you and the Client to deliver the Project within a time frame and budget as per the Client requirement. The Client may not be interested to know whether you are making profit or not. He will pay you the amount as commited, not less, not more.

So I suggest that in the programme to the Client you can show the actual cost as 2880 when the activity is completed. Internally if you want to track cost management, you can do the exercise in a copy of the programme or in an excel.

This will make the work easy.

Best Regards

Kannan

Earned Value Analysis compares budgeted cost with the actual cost of the same activities.

In this particular case budgeted cost remains $2,880, but actual cost shall be $2,160.

If actual cost is always the same as budgeted Earned Value is not applicable and actual expenses are not controlled.

This may happen if activity cost is set as fixed, not calculated basing on costs of assigned resources.

Hi All,

Yes Kannan you got my point.

I am talking about an internal schedule to controll my actual expenditures against budgeted costs, is there a way that the software can manage it.

As the software automatically calculates the actual cost based on the OD which is 4 days in this example, it should be a way that the software calculates the actual cost based on the actual duration. I know well Zoltan that I should not show my actual costs to the client as this is privacy.

Valdimir is talking about Earned Value Analyis, could you explain to us more how it works in this case?

Moutaz

Hi Moutaz,

please check how an activity cost was defined. If it was set as the fixed cost then it should not depend on activity duration.

If activity cost is calculated basing on costs of assigned resources and resource cost was set as the hour cost then actual cost depends on the activity duration.

In Spider Project costs may be assigned as fixed, per hour or per unit of volume (work quantity or amount). And it usual when contractors manage parallel budgets defining both contract costs of project activities that may be fixed and internal costs that may depend on resource effort, material costs, etc. This way it is possible to manage real expenses, apply Earned Value Analysis and communicate with the Owner using the same project model.

Earned Value Analysis is based on estimating three parameters:

Planned Value or Budgeted Cost of Work Scheduled to current moment in the baseline,

Actual Cost or Actual Cost of Work Performed to the same moment,

Earned Value or Budgeted Cost of Work Performed to current moment that shows the cost of works that were actually performed in the project baseline.

Basing on these three parameters it is possible to estimate current project status and to make forecasts for future performance.

So it is necessary to know real actual cost for applying this method of project performance analysis.

then just accept the earned value equal to the budget.

you have an activity for $100 its 50% complete you have earned 50% regardelss if you spent 1 dollar or 1 million dollars all that  you EARNED is $50 based off the budget of $100

Hi Moutaz,

If you want to control the cost internally, as I suggested use a copy of the original programme. Here in the actual cost section you have to put the value manually. Because P6 doesn't know how much you spent.

Based on that out put you can calculate your Cost Variance and Cost Performance Index (Earned Value Calculations).

Try a simple exercise with 5-10 activities and see how the software is working.

Best Regards

Kannan

Thanks a lot Kannan