Why is project cost important for project managers?

Why is project cost important for project managers?

Introduction
Many books and articles have been written on project management. There are also many articles and books that discuss project cost management and its importance. This is because, aside from other components like Time, scope, and Quality, Project Cost Management has always been considered one of the most important components of project management.
Joe Biden said it rightly
“Don’t tell us what you value. Show me your budget and I’ll tell what you value.”
It’s a basic quality that project managers must have to be able to manage projects within the budget. Project managers are often valued based upon the number of projects they have completed within the budget. This article will discuss the cost of a project, the reasons for it, the types of project costs, how to manage the budget, and how to reduce risk.
What is the Project cost?
The project cost is the cost to purchase all necessary products, services, and resources to complete the project successfully.
Example: A construction project is an example of how to estimate the cost of construction. The cost estimation begins with land acquisition cost, construction cost and materials cost. Labor cost and other indirect costs are also included.
Now you know what project cost is. Let’s now see why it is so important.
It is important.
A budget is essential for any project. The project cost is a key factor in determining the success of a project. It is possible that the project does not reach its budget. This means that the Project Cost may have exceeded Project Profit when compared to Project Cost. It is a sign of a project failure.
It is therefore important to determine the cost estimate for the project.
It is important to understand the costs of the project in order to accurately estimate the cost.
Types of project costs.
There are five types of project costs that can be incurred in any given project. They are
Fixed Cost

Variable cost

Direct Cost

Indirect Cost

Sunk Cost

Fixed Cost:
Fixed costs are not permanent. They can change over time. This is the project fixed cost, which refers to the costs that are set in relation to the delivery and completion of the project. To conclude, “In the short term, the cost are fixed, but they are variable in the longer term.”
Variable cost:
Variable cost is different from fixed cost. It is a cost that changes or varies in proportion to the product or service produced by the project. Let’s look at a simple example to understand it. Imagine you are running a pizza shop. After you have made, boxed, and delivered the pizza to the customers, there are many variable costs. These are the prices (the prices below are for illustration purposes only).
Pizza base: 50cents

Pizza sauce: 10cents

Pizza seasoning: 10cents

Pizza topping (any): $1

Box to deliver:50cents

According to the above information, each pizza costs $2.20. These costs can fluctuate. Selling pizzas less than $2.20 is considered a loss. These costs are directly proportional to how many pizzas are sold. Variable Cost Example 2 – Let’s take the example of a small software business. They need 25 full-time employees to complete a project on time. The company has only 15 FTE. They have decided to hire them.