Project Costs

Here are the different types of project costs,

1. Direct > Cost that can be directly attributed to a specific project
2. Indirect > Cost that can not be directly attributed to a specific project
3. Fixed > Cost that will not change based on business volume
4. Variable > Cost that will change based on business volume
5. T&M > Cost that will be based on actual efforts spent
6. Stranded/Sunk > Cost that has been incurred and cannot be reversed irrespectively of future events

Here are some important definitions on cost analysis,

• Value Analysis > Cheaper, Better, Faster. Doing the same scope of work for less cost and possibly improving quality and performance
• Law of Diminishing Returns > When additional units of variable input are added to fixed inputs after certain point, the marginal product of the variable input declines
• Marginal Analysis > Spend money on an improvement if the cost of the improvement increases the productivity or revenue