Forecasting For Activity Cost Control

Fore Casting for Activity Cost Control

For Project Management & control using only past records of cost & revenue incurred is not sufficient.

Good managers should focus on future revenue, future cost & technical problems.


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Budgeted Cost


Budgeted cost is derived from detailed cost estimate prepared at the start of the project.


Estimated Cost


The estimated cost or forecast total cost in each category is the current best estimate of costs based on progress and any changes since the budget was formed. . Estimated total cost are the sum of cost to date, commitments and exposure.

Cost Overruns:-

Overruns in cost might be due to lower than expected productivity, higher than expected wages rates, higher than expected material cost or any other factor.

Low productivity can be due to inadequate training or lack of required resource such as equipment & tools.


Forecast Total Cost:-

Cf  = ct/pt

Where cf is forecast total cost.

ct  is the cost incurred to time t


Pt is the proportion of the activity completed at time t.


The can be explained with an example :-

If an activity is 50 percent complete with a cost of Rs 40000/-

Then, the total cost is 40000/0.5 = 80000/-


Forecast Cost based on Unit cost:-

cf =WCt

Cf = Forecast total cost

W= total unit of work

Ct= Average cost per unit of work



The above can be broken down to hourly cost of unit

Cf = W ht / ut

In this case Ct is replaced by ht