COST CHARACTERISTICS

It seems simple you assign a resource to a task. A resource has an assigned cost. As the resource performs the task, a cost is incurred. You compare what you planned for it to cost with what it actually cost that is, budget versus actual. It's more complex than that.

Return to the gardening example and assume that the entire project is one task. In terms of cost, we have to buy plants, seeds, and fertilizer at the start. If you rent a cultivator to break up the ground, then you have a rental fee at the end of the project. If the project takes longer than planned, the rental fee will be more than planned. Let's suppose that you hire someone to do the ground preparation and planting. That person works at an hourly rate, may get overtime, and is paid by the day.

This simple example reveals some of the complexity in costs related to a project. You can have resources that accrue costs:

• At the start of the task. These are typically resources for which payment is required in advance.

• As the task progresses (progress relates in a linear or proportional way to time). This is common for analysis, but can lead to errors since costs are applied discretely in an accounting system.

• At the end of the task. This is the most common. It does not apply to a detailed task that is very long.

• On a per use basis (the cultivator has a flat rate...