Cost Estimation


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Aproject budget is a summation of all financial requirements for thecompleting of a given purpose in the program. Budgeting may includeentire project or may be broken down to sub-budgets. There areseveral types of budget systems that are aimed at meeting the variouspurposes in the budget. The most common form of budget system is theone that contemplates the development of the business plan on yearlybasis. It does essentially anticipate the pro forma financialstatements got at a particular level of project development alsocalled static budgeting. These considerations are overwhelminglyapplied in the market and utilized in management of the budgetprocess. For success of the project, budgeting plays a major role inaccounting for the project expenditures[ CITATION Emp14 l 1033 ].

Theproject budget estimation follows a set of considerations that aremade on the basis of both the financial and material resources. Theseresources must be accounted for either directly influential to theproject or indirectly. In addition, the budgeting process shouldensure that the entire process is under the scrutiny to ensure thatthe budgeted amount is able t run the project sustainably to itscompletion. There are three major considerations to estimate beforethe commencement of the project. The first consideration is theunderstanding of the total amount set for the specific project. Thatamount is expected to run the project to completion. From thatunderstanding, the second consideration is the duration the projectimplementation is expected to run through formulation of a grantchart as shown in the appendix 1. The resources available determinesthe duration of the project and its success[ CITATION Tom06 l 1033 ].

Theproduction budget is also believed to serve the basis in thepreparation of direct labor budget. The firm`s workforce must includerequired skilled employees necessary in the production of thefinished goods planned for the period. Direct labor budget allows thepersonnel department in planning for the direct labor and to denyemergency hiring that may occur due to labor shortages andretrenchment. Erratic labor employment lowers the employees` sense ofloyalty, lead to increase their insecurity. Moreover, it leads toinefficiency in the process of implementing the project proposal.Stable employment policies also known as labor contracts that protectthe process of laying off the employees. A direct labor budgetenables the firm to identify circumstances when it can eitherreschedule its budgeted amount to other functions in the company[ CITATION Emp14 l 1033 ].

Inconclusion, the process of budget preparation is key to the proposedproject. It clearly illustrates the theories of financing the projectand the criteria used both in the financial and material allocations.Most importantly, the budgeting process should ensure that both thedirect and indirect factors influencing the project are known andanalyzed. The progressive analysis of the cost estimation process isimportant for the success of the project. The measures to beundertaken should provide a critical financial and resources analysisthat enables easier budgeting in the entire budget making process.Furthermore, it helps in the definition and determination of theproject duration that influences the completion of the project. Theduration of the project is arrived at by carrying a breakdown of theevents in the process of implementing the project. Furthermore, it isinfluenced greatly by the availability of funds and materialresources[CITATION Emp14 l 1033 ].


Tom, M. (2006, June 6). Estimate project costs after you have estimated effort and duration. Retrieved from

US Department of Labor. (2014, 1 16). Employment &amp Unemployment. Retrieved 6 16, 2014, from

Appendix1: Example Of A Gant Chart

Source:[ CITATION Emp14 l 1033 ]