Cost ,Cost Control in Opx2

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Cost ,cost control in opx2Sobhan Kumar panigrahy


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The dotted line down the middle represents the split between the past and thefuture costs and therefore between the actual costs and the planned costs that aretaken into consideration in the cost calculation.The line in OPX2 Pro is called the end of the accounting period and in the most

simple case, it is the current date, separating the past from the future in the sameway as the current date does for progress.Because it is the date that defines the date from which the cost data is taken intoconsideration, it can be changed in OPX2 Pro from the current date to another datein order to model the way your company organizes its cost data.The part to the left of the line is considered to be the past, where the progress and

cost of the activities are known. The cost up to this point is called the actual cost. InOPX2 the actual cost is modeled by the "actual' objects.

The part to the right of the line is considered to be the future, where the progressand cost of the activities are not known and are estimated. The cost after this pointup to the end of the project is called the estimate to complete. In OPX2 Pro the

estimate to complete is modeled by the "planned" objects. These are the objectscreated first in the scheduling phase of the project to create the estimates for boththe time the project will take and its costs. They are described in Project Schedulingand Cost Estimation.


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When tracking the costs, planned objects that are to the left of the line, andtherefore in the past, are not deleted because they represent a record of thehours and expenditures as they were originally planned, but their costs are nolonger taken into consideration in the calculation.The estimation of the total cost of the project (the estimation at completion) canbe calculated at any point in the project by adding the actual cost and theestimate to complete.At the start of the project, before the time has progressed, there is only planneddata and only an estimate to complete. In this case, estimate at completion(EAC) = estimate to complete (ETC). At the end of the project, when all the

activities have been completed, there only actual data is taken intoconsideration and there is only an actual cost. In this case, estimate atcompletion (EAC) = actual cost.An explanation of cost estimation and how this is calculated depending on yourproject structure, is given in Cost Estimation Details. This is information you willneed to know before setting out the initial estimation for your project.

The costs mentioned above are all calculated automatically by OPX2 Pro fromthe existing object data. There are more types of calculated costs available inOPX2 Pro, which can be used to analyze several different aspects of the costdata. These will be introduced in the course of the guide but are also focusedon in types of costs.


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Creating Cost Accounts (Constructing the CBS)Cost accounts are scheduling objects that you can use to model different categoriesof costs. They can be defined and structured in a cost breakdown structure in anyway you want in order to model, for example, the costs linked to departments in yourcompany, costs linked to different sites in your company, or costs linked to specificcustomers.The definition of a CBS is not necessary. However, it provides you with a differentperspective from which you can view and analyze your cost data. In fact, the costbreakdown structure is specifically designed to help you create a personalizedapproach to cost analysis. The way costs can be viewed and consolidated accordingto the objects in the breakdown structures is introduced in Cost Estimation Details.The CBS is displayed via the main toolbar in Conception mode. The cost accountsthemselves have a Cost account attribute, specifying their parent in the breakdownstructure.Once created, you can allocate planned hours (or summary lines) representingresource usage, resources, cost units and activities to cost accounts via the Cost

account attribute of these objects. The costs for each linked object is thenconsolidated in the costs for the cost account, giving you another perspective toanalyze the costs of your projects.The following procedure describes the basic attributes of cost accounts. Thefollowing sections concentrate on the other parts of the attribute sheet, on the costaccount breakdown structure and on how costs are displayed according to which

cost account they are allocated to.


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Creating a Cost Unit Breakdown Structure

Once you have set up your resources, you will need to set up the units you willmeasure your costs in. These cost units will be the ones displayed in the charts andtables in OPX2 Pro. The cost units can be visualized in the cost unit breakdown

structure.

The cost unit breakdown structure can be as simple or as complicated as you wish.It can be made up of units representing currencies and/or units representing thecost of using a certain category of resource, for example, the hourly rate for anengineer, an assistant, and so on, or the daily rate for renting a machine. The quickstart example is useful to illustrate these two ideas; it contains a simple example ofboth.

Cost units are then allocated to resources and the resource is "valorized" asexplained in Valorizing your Resources. This means that any time a resource isallocated to a task, the cost of the resource usage, in terms of your cost units, iscalculated. Cost units are also used to specify the cost of an expenditure.


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An Example Cost Breakdown Structure:The cost breakdown structure contains cost accounts, objects that enable you toconsolidate the costs in a different way to the other breakdown structures. They can becreated to represent any breakdown you want of the project costs, into costs for

different departments, cost for different sites, different types of costs, and so on.

In our example, we create a cost breakdown structure classified by the type of workcarried out. This will enable our company to analyze, at the end of the year, forexample, how much money was spent on research, manufacturing, and so on. Thecost breakdown structure is created in the CBS common file.

This CBS is designed to have activities allocated to it, basedon their nature. It is particularly designed for a multi-projectscenario, because it is placed in a common file and willconsolidate costs from several different projects.The level 2 cost accounts, INTERNAL and EXTERNALenable us to split the cost further depending on whether thework was carried out by resources in the company of byexternal resources.Cost accounts can be created in a project file; however, thiswill not allow you the same power of consolidation as a cost

breakdown structure in a common file.


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Cost units have other more advanced features that enable you to plan their valuesthrough time. For the moment, we will concentrate on getting familiar with how thecost unit breakdown structure works and how cost units are defined. Theseadvanced features are explained in Advanced Cost Control Features.

The cost unit breakdown structure has a very important function, which differsslightly from the others, because it defines the value of one cost unit in terms ofanother.

The cost unit breakdown structure can be set up like the other breakdownstructures. For example, you can create parent cost units describing thecharacteristics of its child units, in order to group different types of cost units. In ourquick start example we have two cost units called CURRENCIES and RES_RATES,for example. All monetary units are grouped below CURRENCIES and all cost unitsthat define a specified resource working rate are grouped below RES_RATES.

However, the parent and child relationships define also the rate of exchangebetween the units; the child cost unit is worth X amount of its parent unit where X isdefined by the Default value attribute. This is explained further in Conversion Rule.The following procedure introduces the basic attributes needed to define your costunits.


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Cost Estimation DetailsWhen you create your resource usage and expenditures in OPX2 Pro, you alwayshave the choice at which level in your WBS hierarchy you create them at.

You could define them:

At the most detailed level, by specifying costs for each task

At a macroscopic level, for WBS elements higher up in the breakdown structure.Such costs are called blanket costs.

A WBS element can therefore have both consolidated costs and blankets costs.Entering costs at the higher level is often referred to as the top down cost estimationmethod. It is useful to model costs for each WBS element in very long projects, astemporary cost estimation for WBS elements that will be planned in more detail later.

Entering costs at the detailed level is often referred to as the bottom up estimationmethod. It is useful for cost visibility at all levels of the work breakdown structure andis the method that will return the most accurate cost data in the tracking phase.


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Specifying the Cost Account for a Cost Unit

For each cost unit, you are able to specify a default cost account. This is the defaultcost account in which all costs expressed in the selected cost unit are aggregated.

However, the default cost account for a cost unit may be overridden individually foreach cost expressed in the particular cost unit (expenditures, or planned hours of theresource).

You are able to define the default cost account for a cost unit directly in the CBS, ifrequired. To do this you specify that the cost units are displayed in the CBS, and thendrag each cost unit to the required cost account as though it were its child object.

Note: If you specify a default cost account for a cost unit then its child cost units willautomatically be assigned the same default, with the exception of any child resourcesthat have already been assigned another cost account.


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The actual cost (or ACWP), which is the total cost of the actual hours, the actualexpenditures, and the expenditure commitments (if the parameter Take intoaccount commitments in actual cost computation is selected) until the end of the

accounting period. This figure is effectively the actual cost of work performed. Theparameter mentioned above is found in Data > Parameters sets > Otherparameters, under the grouping Cost computation.

The estimate to complete which is the estimation of the cost left to be incurredin order to accomplish an activity. This is the sum of any expenditures and

costs associated with planned hours that are scheduled after the end of theaccounting period.The estimate at completion (or EAC) that is the sum of the actual cost and theestimate to complete. The formula for calculating this is: EAC = S actual cost +S estimate to complete

Budget at completion: Estimate at completion of the budget reference.The planned value (or BCWS), which is the fraction of the budget thatcorresponds to the work that should have been carried out by the date inquestion, if everything had gone according to plan. This figure is onlycalculated if the budget reference is defined (i.e., if the budget at completionhas been calculated). The planned value is also referred to as the budgeted

cost of work scheduled.


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Budget at completion: Estimate at completion of the budget reference.The planned value (or BCWS), which is the fraction of the budget that correspondsto the work that should have been carried out by the date in question, if everythinghad gone according to plan. This figure is only calculated if the budget reference is

defined (i.e., if the budget at completion has been calculated). The planned value isalso referred to as the budgeted cost of work scheduled.

The Earned Value or BCWP: Budgeted cost of work performed.Archived estimate at completion: Total Sum of the planned expenditures and hours,regardless of the end of the accounting period. This is the same calculation as for

the Estimates to complete except that the Estimates to complete only takes intoaccount planned expenditures and planned hours after the end of the accountingperiod. It represents the estimate at completion as it was when there was onlyplanned data (plus any modifications made in the re-estimation phases of thetracking.)

The cost variance (CV) at a given time t, is the difference between the actual cost(ACWP) and the earned value (BCWP). It represents the project drift in terms ofcost. CV = ACWP - BCWP = actual cost - earned value

The schedule variance (SV) at a given time t, is the time difference between theearned value (BCWP), and the planned value (BCWS). It represents the project drift

in terms of time lag.

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Cost ,Cost Control in Opx2