PROJECT BUDGETING The overall goal in the budgeting process of a project is to determine how much money is to be spent each week or each month. PERT / Cost is a modification of PERT that allows a manager to plan, schedule, monitor, and control cost as well as time. Applied Management Science for Decision Making, 2e © 2014 Pearson Learning Solutions Philip A. Vaccaro, PhD MGMT E-5050

The Budgeting Process STEPS STEPS Identify all costs associated with each task.  Identify all costs associated with each task. Applied Management Science for Decision Making, 2e © 2014 Pearson Learning Solutions

The Budgeting Process STEPS STEPS Identify all costs associated with each task.  Identify all costs associated with each task.  Convert the budgeted cost per task into a cost per time period. We assume that the cost per time period. We assume that the cost of completing a task is spent at a uni- cost of completing a task is spent at a uni- form rate over time. form rate over time.

The Budgeting Process STEPS STEPS Identify all costs associated with each task.  Identify all costs associated with each task.  Convert the budgeted cost per task into a cost per time period. We assume that the cost per time period. We assume that the cost of completing a task is spent at a uni- cost of completing a task is spent at a uni- form rate over time. form rate over time.  Using the earliest and latest start times, we find out how much money should be spent find out how much money should be spent during each week or month to finish the pro- during each week or month to finish the pro- ject by the desired date. ject by the desired date.

Early Start Budget Schedule GENERAL FOUNDRY EXAMPLE Task “A” Early Start Time - ES 0 Early Finish Time - EF 2 Expected Time - te 2 weeks Budgeted Task Cost $22, Budgeted Weekly Cost $11, * $22, / 2 WEEKS = $11, *

TASK Period 1 Period 2 Period 3 Period 4 A$11,000$11,000 B C D E F G H PERIOD TOTAL CUMULATIVE FROM START Early Start Budget Schedule

GENERAL FOUNDRY EXAMPLE Task “B” Early Start Time - ES 0 Early Finish Time - EF 3 Expected Time - te 3 weeks Budgeted Task Cost $30, Budgeted Weekly Cost $10, * $30, / 3 WEEKS = $10, *

TASK Period 1 Period 2 Period 3 Period 4 A B$10,000$10,000$10,000 C D E F G H PERIOD TOTAL CUMULATIVE FROM START Early Start Budget Schedule

GENERAL FOUNDRY EXAMPLE Task “C” Early Start Time - ES 2 Early Finish Time - EF 4 Expected Time - te 2 weeks Budgeted Task Cost $26, Budgeted Weekly Cost $13, * $26, / 2 WEEKS = $13, *

TASK Period 1 Period 2 Period 3 Period 4 A B C$13,000$13,000 D E F G H PERIOD TOTAL CUMULATIVE FROM START Early Start Budget Schedule

GENERAL FOUNDRY EXAMPLE Task “D” Early Start Time - ES 3 Early Finish Time - EF 7 Expected Time - te 4 weeks Budgeted Task Cost $48, Budgeted Weekly Cost $12, * $48, / 4 WEEKS = $12, *

TASK Period 4 Period 5 Period 6 Period 7 A B C D$12,000$12,000$12,000$12,000 E F G H PERIOD TOTAL CUMULATIVE FROM START Early Start Budget Schedule

GENERAL FOUNDRY EXAMPLE Task “E” Early Start Time - ES 4 Early Finish Time - EF 8 Expected Time - te 4 weeks Budgeted Task Cost $56, Budgeted Weekly Cost $14, * $56, / 4 WEEKS = $14, *

TASK Period 5 Period 6 Period 7 Period 8 A B C D E$14,000$14,000$14,000$14,000 F G H PERIOD TOTAL CUMULATIVE FROM START Early Start Budget Schedule

GENERAL FOUNDRY EXAMPLE Task “F” Early Start Time - ES 4 Early Finish Time - EF 7 Expected Time - te 3 weeks Budgeted Task Cost $30, Budgeted Weekly Cost $10, * $30, / 3 WEEKS = $10, *

TASK Period 5 Period 6 Period 7 Period 8 A B C D E F$10,000$10,000$10,000 G H PERIOD TOTAL CUMULATIVE FROM START Early Start Budget Schedule

GENERAL FOUNDRY EXAMPLE Task “G” Early Start Time - ES 8 Early Finish Time - EF 13 Expected Time - te 5 weeks Budgeted Task Cost $80, Budgeted Weekly Cost $16, * $80, / 5 WEEKS = $16, *

TASK Period 9 Period 10 Period 11 Period 12 A B C D E F G$16,000$16,000$16,000$16,000 H PERIOD TOTAL CUMULATIVE FROM START Early Start Budget Schedule

TASK Period 13 Period 14 Period 15 A B C D E F G$16,000 H PERIOD TOTAL CUMULATIVE FROM START Early Start Budget Schedu le

GENERAL FOUNDRY EXAMPLE Task “H” Early Start Time - ES 13 Early Finish Time - EF 15 Expected Time - te 2 weeks Budgeted Task Cost $16, Budgeted Weekly Cost $8, * $16, / 2 WEEKS = $8, *

TASK Period 14 Period 15 A B C D E F G H$8,000$8,000 PERIOD TOTAL CUMULATIVE FROM START Early Start Budget Schedule

TASK Period 1 Period 2 Period 3 Period 4 A$11,000$11,000 B$10,000$10,000$10,000 C$13,000$13,000 D$12,000 E F G H PERIOD TOTAL $21,000$21,000$23,000$25,000 CUMULATIVE FROM START $21,000$42,000$65,000$90,000 Early Start Budget Schedule

TASK Period 5 Period 6 Period 7 Period 8 A B C D$12,000$12,000$12,000 E$14,000$14,000$14,000$14,000 F$10,000$10,000$10,000 G H PERIOD TOTAL $36,000$36,000$36,000$14,000 CUMULATIVE FROM START $126,000$162,000$198,000$212,000 Early Start Budget Schedule

TASK Period 9 Period 10 Period 11 Period 12 A B C D E F G$16,000$16,000$16,000$16,000 H PERIOD TOTAL $16,000$16,000$16,000$16,000 CUMULATIVE FROM START $228,000$244,000$260,000$276,000 Early Start Budget Schedule

TASK Period 13 Period 14 Period 15 A B C D E F G$16,000 H$8,000$8,000 PERIOD TOTAL $16,000$8,000$8,000 CUMULATIVE FROM START $292,000$300,000$308,000 Early Start Budget Schedule

Cumulative Budget Schedule EARLY START TIME $300,000. $250,000. $200,000. $150,000. $100,000. $50,000. $ weeks $308,000.00

Late Start Time Budget   Tasks that are not on the critical path can be started at a later date.  This type of budget will delay the expenditure of funds until the last possible moment.  Unfortunately, the risk is that any subsequent delays in these tasks will delay the entire pro- ject!

Late Start Budget Schedule GENERAL FOUNDRY EXAMPLE Task “A” Late Start Time - LS 0 Late Finish Time - LF 2 Expected Time - te 2 weeks Budgeted Task Cost $22, Budgeted Weekly Cost $11, * $22, / 2 WEEKS = $11, *

TASK Period 1 Period 2 Period 3 Period 4 A$11,000$11,000 B C D E F G H PERIOD TOTAL CUMULATIVE FROM START Late Start Budget Schedule

GENERAL FOUNDRY EXAMPLE Task “B” Late Start Time - LS 1 Late Finish Time - LF 4 Expected Time - te 3 weeks Budgeted Task Cost $30, Budgeted Weekly Cost $10, * $30, / 3 WEEKS = $10, *

TASK Period 1 Period 2 Period 3 Period 4 A B$10,000$10,000$10,000 C D E F G H PERIOD TOTAL CUMULATIVE FROM START Late Start Budget Schedule

GENERAL FOUNDRY EXAMPLE Task “C” Late Start Time - LS 2 Late Finish Time - LF 4 Expected Time - te 2 weeks Budgeted Task Cost $26, Budgeted Weekly Cost $13, * $26, / 2 WEEKS = $13, *

TASK Period 1 Period 2 Period 3 Period 4 A B C$13,000$13,000 D E F G H PERIOD TOTAL CUMULATIVE FROM START Late Start Budget Schedule

GENERAL FOUNDRY EXAMPLE Task “D” Late Start Time - LS 4 Late Finish Time - LF 8 Expected Time - te 4 weeks Budgeted Task Cost $48, Budgeted Weekly Cost $12, * $48, / 4 WEEKS = $12, *

TASK Period 5 Period 6 Period 7 Period 8 A B C D$12,000$12,000$12,000$12,000 E F G H PERIOD TOTAL CUMULATIVE FROM START Late Start Budget Schedule

GENERAL FOUNDRY EXAMPLE Task “E” Late Start Time - LS 4 Late Finish Time - LF 8 Expected Time - te 4 weeks Budgeted Task Cost $56, Budgeted Weekly Cost $14, * $56, / 4 WEEKS = $14, *

TASK Period 5 Period 6 Period 7 Period 8 A B C D E$14,000$14,000$14,000$14,000 F G H PERIOD TOTAL CUMULATIVE FROM START Late Start Budget Schedule

GENERAL FOUNDRY EXAMPLE Task “F” Late Start Time - LS 10 Late Finish Time - LF 13 Expected Time - te 3 weeks Budgeted Task Cost $30, Budgeted Weekly Cost $10, * $30, / 3 WEEKS = $10, *

TASK Period 9 Period 10 Period 11 Period 12 A B C D E F$10,000$10,000 G H PERIOD TOTAL CUMULATIVE FROM START Late Start Budget Schedule

TASK Period 13 Period 14 Period 15 A B C D E F$10,000 G H PERIOD TOTAL CUMULATIVE FROM START Late Start Budget Schedule

GENERAL FOUNDRY EXAMPLE Task “G” Late Start Time - LS 8 Late Finish Time - LF 13 Expected Time - te 5 weeks Budgeted Task Cost $80, Budgeted Weekly Cost $16, * $80, / 5 WEEKS = $16, *

TASK Period 9 Period 10 Period 11 Period 12 A B C D E F G$16,000$16,000$16,000$16,000 H PERIOD TOTAL CUMULATIVE FROM START Late Start Budget Schedule

TASK Period 13 Period 14 Period 15 A B C D E F G$16,000 H PERIOD TOTAL CUMULATIVE FROM START Late Start Budget Schedule

GENERAL FOUNDRY EXAMPLE Task “H” Late Start Time - LS 13 Late Finish Time - LF 15 Expected Time - te 2 weeks Budgeted Task Cost $16, Budgeted Weekly Cost $8, * $16, / 2 WEEKS = $8, *

TASK Period 13 Period 14 Period 15 A B C D E F G H$8,000$8,000 PERIOD TOTAL CUMULATIVE FROM START Late Start Budget Schedule

TASK Period 1 Period 2 Period 3 Period 4 A$11,000$11,000 B$10,000$10,000$10,000 C$13,000$13,000 D E F G H PERIOD TOTAL $11,000$21,000$23,000$23,000 CUMULATIVE FROM START $11,000$32,000$55,000$78,000 Late Start Budget Schedule

TASK Period 5 Period 6 Period 7 Period 8 A B C D$12,000$12,000$12,000$12,000 E$14,000$14,000$14,000$14,000 F G H PERIOD TOTAL $26,000$26,000$26,000$26,000 CUMULATIVE FROM START $104,000$130,000$156,000$182,000 Late Start Budget Schedule

TASK Period 9 Period 10 Period 11 Period 12 A B C D E F$10,000$10,000 G$16,000$16,000$16,000$16,000 H PERIOD TOTAL $16,000$16,000$26,000$26,000 CUMULATIVE FROM START $198,000$214,000$240,000$266,000 Late Start Budget Schedule

TASK Period 13 Period 14 Period 15 A B C D E F$10,000 G$16,000 H$8,000$8,000 PERIOD TOTAL $26,000$8,000$8,000 CUMULATIVE FROM START $292,000$300,000$308,000 Late Start Budget Schedule

Cumulative Budget Schedule LATE START TIME $300,000. $250,000. $200,000. $150,000. $100,000. $50,000. $ weeks $308,000.00

Cumulative Budget Schedule EARLY START TIME $300,000. $250,000. $200,000. $150,000. $100,000. $50,000. $ weeks $308,000.00

Cumulative Budget Schedule FEASIBLE BUDGET RANGES $300,000. $250,000. $200,000. $150,000. $100,000. $50,000. $ weeks $308, EARLY START TIME LATE START TIME AREA AREA AREA

PERT / CPM with QM for WINDOWS

We Select The COST BUDGETING Sub Program

The Data Table Is Completed As Previously Shown

The Expected Project Completion Time ( 15 weeks )

The EARLY START BUDGET ( 1 st 11 weeks )

The EARLY START BUDGET ( 5 th through 15 th week )

The LATE START BUDGET ( 1 st 8 weeks )

The LATE START BUDGET ( 8 th through 15 th week )

The Feasible Budget Region

Excel cannot do project budgeting

PROJECT BUDGETING