Project Management: Prorating the Cost Of A Resource

Project Management Costing

Prorating the cost of a resource is the allocation of portions of the total cost across more than one activity. A common use of proration is the equitable allocation of overhead costs across a project’s areas (PMBOK, 2004). The PMBOK area called project cost management includes cost estimating, cost budgeting, and cost control. The decision to prorate the costs of a resource would be decided there and by using the cost budget the project manager can determine if prorating is applicable based upon the resources outputs and cost. For example, some areas of a project are more labor intensive so by prorating the cost of an overhead resource the burden is shared but loses accuracy in the measurement. This inaccuracy is brought on by the fact that cost is not being shown in a clear light as it would be if the resource bore its own cost individually.

References

Project Management Institute. (2004) A guide to the project management body of knowledge : (PMBOK guide) Project Management Institute, Inc., Newtown Square, PA : pp. 237, 242, 202.

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