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EPMS for Business Process Analysis
Published in Vivek Kale, Enterprise Process Management Systems, 2018
In a process context, cost measurement is mainly related to the problem of assigning indirect costs. Direct costs like the purchasing costs of four wheels that are assembled on a car can be easily determined. Indirect labor or machine depreciation are more difficult. In accounting, the concept of activity-based costing (ABC) was developed to more accurately assign indirect costs to products and services as well as to individual customers. The motivation of ABC is that human resources and machinery are often shared by different products and services as well as are used to serve different customers. For instance, the depot of BuildIT rents out expensive machinery such as bulldozers to different construction sites. On the one hand, that involves costs in terms of working hours of the persons working at the depot. On the other hand, machines like bulldozers lose value over time and require maintenance. The idea of ABC is to use activities in a manner so as to help distribute the indirect costs, e.g., those associated with the depot.
Cost Management
Published in Gary L. Richardson, Brad M. Jackson, Project Management Theory and Practice, 2018
Gary L. Richardson, Brad M. Jackson
This strategy emerges in the situation where the required schedule is not met, but more budget funds are available—a time-constrained schedule with money available. This process involves more complexity than the previous two options. Crashing involves the trade-off of budget resources for time. There are various situations in which this option is relevant to the PM. If budget is available and scope is required, then budget can be traded for time through the crashing process. In similar fashion, a contractor may want to crash a project when there are financial incentives to finish the project ahead of schedule. In order to decide whether to crash an activity, one must compare the cost of crashing the activity with the value gained by the reduction in schedule. Another less obvious reason to crash the project is to decrease indirect costs that are more time based. Direct costs are considered to be labor, materials, and equipment associated with a particular project, while indirect or overhead costs cannot be identified and charged specifically to one project. Examples of indirect costs are facilities, utilities, basic infrastructure items, level of effort activities for the project, and so on (Uher, 2003). Some of these are charged to the project monthly, regardless of status, and their effect on the project budget is tangible. Shortening the project time would decrease this class of cost.
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Published in Barney L. Capehart, Wayne C. Turner, William J. Kennedy, Guide to Energy Management, 2020
Barney L. Capehart, Wayne C. Turner, William J. Kennedy
Utilization costs are those required on a routine basis for operating and maintaining the investment. These include energy, maintenance and repair. Utilization costs can be direct or indirect. Direct costs include labor and materials for routine repair and maintenance. Indirect costs are the costs not directly attributable to the project but necessary for conducting business. Energy costs are usually included in this category. Indirect costs are also often referred to as “overhead.” Examples of indirect costs include salaries for staff personnel, janitorial costs, and cleaning supplies. Estimates for utilization costs can be obtained from databases or professional experience.
Dynamic schedule model and algorithm optimization method for linear engineering projects
Published in Engineering Optimization, 2023
When the existing resource allocation cannot meet the completion deadline, it becomes necessary to increase the construction team and decide on the mode and direction of the construction. The problem assumptions are as follows: (1) the same construction team has the same construction direction; (2) once the work team commences construction, it cannot be interrupted; and (3) here, indicates the construction mode at normal construction levels. This module needs to satisfy the constraint equations presented in Section 3.2. The objective is to minimize costs, including direct, indirect and additional costs incurred in forming the construction team (Equation 11). Direct costs encompass labour, equipment and material expenses, whereas indirect costs are management fees during construction (Zhang, Zou, and Qi 2013).
The importance of the activity costs in a shipyard: a case study for floating offshore wind platforms
Published in Ships and Offshore Structures, 2020
Laura Castro-Santos, Vicente Diaz-Casas, Ramón Yáñez Brage
Therefore, in order to identify and assess the cost of the resources of the unit, a systematic procedure called “cost system” will be applied (Yoshimura 2007; Fafandjel et al. 2010). There are many cost systems, but the most popular ones are the traditional costing (cost-by-order) and the activity-based costing (ABC). The traditional system, whose costs are allocated to cost centres and then to products, has been used for years in the shipbuilding sector. It is composed of two types of costs: those derived from materials (MT) and those derived from direct labour (DL), as shown in Figure 1. However, in this scenario direct labour costs also take into account indirect costs, which do not make much sense, since they depend on the type of shipyard (Guneri et al. 2009). Direct cost is the cost directly related to the manufacturing of the product, direct labour and materials are the two main types of direct costs. On the other hand, indirect costs are not directly related to the manufacturing process. Several examples of indirect costs are: amortisation of the machinery, salary of indirect labour (administration, human resources, etc.). The allocation of these costs to the product needs a general method, because it depends on the number and type of products manufacturing in the process.