What will be the effect of an incomplete budget
- Shareholders have no risk
- There is a risk of shareholders loosing money
- Profit will always increase
When justifying the budget one of the important factors is to do a work breakdown structure. This way one can establish what needs to be done if one wants the project to be an success.
One of the breakdowns of the project is the cost breakdown. This breakdown one focus on all the different kind of costs that needs to be incurred to invest in the success of the project.
By knowing the total cost needed one can successfully estimate the budget needed for the project.
The following costs makes up a project. Direct cost, indirect cost, fixed and variable costs, labour costs, material costs and unit trusts
To calculate the total costs one must add all the costs together. This might sound easy but there might be hidden costs that only appears later. For example hidden licensing and import costs.
Although cost estimate is part of budgeting it is important to state that it is a forecast of the cost of the work package. the budget is the allocation of funds to complete the work package . The cost estimate is compiled from looking at the scope of work, time scale and method the project will be built. Therefore the project budget is a trade off with the estimated cost to ensure the projects get done.