There are two elements involved in managing our costs:

Cost Estimate – Expected costs for all resources and other costs required to complete project tasks.

Cost Budget – Approved funding allocated to the project. This is time-phased through the life of the project.

In our Microsoft Project schedule, we will be doing a bottom-up cost estimate by assigning costs to our individual resource assignments.

There are several steps:

• Identifying when and what resources are needed, using the schedule dates with resource assignments.
• Assigning costs to the resources.
• Microsoft Project calculates cost estimates per resource assignment.
• Time-phased cost estimates are now based upon true project requirements.
• The overall estimate can be baselined and as the project progresses, actual costs can be compared to original estimates.

In the next section, we will be working with two ways of applying costs in Microsoft Project at the assignment level, using resource rates and assigning Expense Cost resources.

Microsoft Project allows us to enter a project level budget. We can assign an overall budget, or we can break the budget out into different categories. We will demonstrate how this information is entered into the schedule.