Work Packages

The cost is divided into work packages.

For every activity, it is required to define the following in order to calculate the cost:

• Execution time start and finish

• The resources to execute this activity

• The cost to execute the activity

The cost account (CA) records the expenditure of the project’s budgeted activity. Covering everyone responsible in the organiza­tion, it comprises mostly direct costs for materials and labor.

For example, the concrete supervisor will be responsible for executing the following activities: [5]

So, in this case, he or she will be responsible for three cost alloca­tions with a total cost of $610,000.

Note that indirect costs, so far, have not been taken into account under this rubric. Not being costs incurred as part of fulfilling the requirements of the WBS, they are charged to the administrative management of the project or elements of project management. For example, the concrete foreman in the previous example has a salary and consumes equipment and other expenses. These expenses can­not be added or charged to the specific activities, as he will super­vise the foundation, columns, the slabs, and others. Those expenses must be paid on a regular basis nevertheless during the execution of these activities.

Any other expenses of supervision must similarly be taken into account, as well as related administrative expenses such as offices for the engineers, technicians, computers, cars to transport engi­neers, and expenses and salaries of engineers and senior manage­ment. For example, concrete work might continue for a period of six months. Monthly indirect expenses (the concrete former’s sal­ary and miscellaneous expenses) are $10,000. While the cost of con­crete materials and manufacturing from mixing until curing it is accounted a direct cost of around $440,000 (calculated based on the quantity of concrete), the concrete former"s salary for supervising this activity is included in indirect costs and allocated over the six months allotted for this activity. Thus, the total reinforcing concrete budget comprises:

Direct costs = $440,000;

Indirect costs = $60,000;

Total costs = $500,000;