How can you tell if your project is on budget? Through cost tracking in Project. Use Project to compare original cost estimates, actual costs, projected costs, and see the variances between costs at any time and at any level of detail.
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What is the cost tracking process?
To best track costs, you should first create a budget by creating and entering cost values for budget resources that are assigned to the project summary task. You can then identify other resources and task costs that you want to track and measure against the budget resources. You can enter pay rates, per-use and fixed costs for tasks, resources, and, if necessary, assignments. Then, specify the estimated work or duration for tasks and assign resources to the tasks.
Only when all of these steps are complete can Project calculate the total estimated costs for the project. You might then want to refine your estimates. When you're done, you can categorize and group all resources to compare them to the budgeted costs. You can also set a baseline with the budgeted costs, and use it to compare with actual costs as your project progresses.
After the project starts, you update task progress — the amount of work done on tasks or the percentage of the tasks that are complete. Project calculates costs for you based on task progress.
Note: You can also choose to turn off automatic calculation of costs and enter actual costs yourself, in addition to task progress.
By combining the actual costs of completed work with the estimated costs for remaining work, Project calculates scheduled (projected) costs. More importantly, it calculates the difference between the scheduled and baseline costs. This difference, or cost variance, tells you whether your project is on budget.
You can do simple cost tracking by viewing the actual and scheduled (projected) costs for tasks, resources, assignments, and the project.
If you've created a budget through a baseline, you can do more extensive tracking by comparing the actual and scheduled costs against the baseline costs.
To determine whether you're on budget or not, you can view the cost variances between scheduled costs and baseline costs. For example, if a task is budgeted to cost $50, but the task is half-way done and already costs $35, the scheduled cost is $60 (the $35 actual costs to date, plus the $25 expected costs for the remaining work on the task). The cost variance is $10 ($60 of actual cost minus the $50 of budget cost).
By monitoring cost variances regularly, you can take steps to make sure that your project stays close to its budget.
Note: You can only view cost variances if you've entered initial costs and saved a baseline. For instance, if you didn't enter pay rates for a resource before you saved the baseline, you won't be able to view cost variances for that resource.
Can you give me an example of cost tracking?
You can enter the task called "Test the program" into your project plan and assign a contract tester to the task at $40 per hour (assume that the tester's pay is the only contribution to the task cost). You enter a duration of 10 days (at 8 hours per day), and then save a baseline.
At the end of 5 days, you determine that the task is half finished, and you mark the task in Project as 50% complete. On the Task Sheet view, you apply the Cost table and see the following:
In the Baseline field, Project displays the baseline cost of the task, $3,200, which it calculated by multiplying your original duration estimate of 10 days (or 80 hours) by the tester's standard rate of $40 per hour.
Because the task didn't incur any unplanned costs in the first 5 days, the Actual field accurately displays the actual cost incurred to date. In this case, actual work is calculated by the formula Actual Work * Standard Rate = Actual Cost, or 40 hours * $40 per hour = $1,600. (Overtime, per-use costs, and fixed costs are not included in this example, but can be included in an actual cost.)
The remaining cost is calculated by the formula Remaining Work * Standard Rate = Remaining Cost, or 40 hours * $40 per hour = $1,600.
In the Total Cost field, Project displays the scheduled cost, which it calculates according to the formula Actual Cost + Remaining Cost = Scheduled Cost, or $1,600 + $1,600 = $3,200. Because the scheduled cost equals the baseline cost, the Variance field displays a cost variance (CV) of $0, which means that the task is exactly on budget.
Where can I view cost information?
In Project, you can see costs for tasks, resources, and assignments. You can also see the project cost, which is generally based on these more detailed costs. You can view both total costs and timephased costs, which are costs distributed over time.
For details and step-by-step procedures for viewing cost information in Project, see View project cost totals.