### What do indirect costs refer to?

__Estimating costs and establishing a budget__

A project manager should ensure that a project receives the maximum return on investment and is successful (Source1). If the project manager’s estimate of the project cost is accurate, or close to, he or she is better able to manage the project’s budget (Source1).

A budget should consider 4 types of costs (Source3, Source4 and Source5):

- Direct costs: costs that are directly associated with the project such as travel costs.
- Indirect costs: costs that are associated with more than one project such as office space rent.
- Variable costs: these costs change in accordance with the project’s duration. For example, paying staff over a 10-month period as opposed to 4 months.
- Fixed costs: these costs do not change throughout the project timeline. They involve a once-off charge.

Five approaches to establishing budget estimates (Source2):

- Expert judgement: the cost estimate is determined by subject matter experts (SMEs). Experts take into consideration factors that may not be considered by non-experts.
- Supplier Bid Analysis: the cost estimate is determined by comparing bids from various suppliers.
- Analogous Estimating: the cost estimate is calculated by considering cost history from alike projects.
- Three-point Estimating: the weighted average of 3 estimates (best case, most likely case and worst case) is used to determine the cost estimate.
- Parametric Estimating: the cost estimate is calculated by assessing the statistical relationship between historical data and variables such as a building’s square footage.

__Estimating costs and establishing a budget__

A project manager should ensure that a project receives the maximum return on investment and is successful (Source1). If the project manager’s estimate of the project cost is accurate, or close to, he or she is better able to manage the project’s budget (Source1).

A budget should consider 4 types of costs (Source3, Source4 and Source5):

- Direct costs: costs that are directly associated with the project such as travel costs.
- Indirect costs: costs that are associated with more than one project such as office space rent.
- Variable costs: these costs change in accordance with the project’s duration. For example, paying staff over a 10-month period as opposed to 4 months.
- Fixed costs: these costs do not change throughout the project timeline. They involve a once-off charge.

Five approaches to establishing budget estimates (Source2):

- Expert judgement: the cost estimate is determined by subject matter experts (SMEs). Experts take into consideration factors that may not be considered by non-experts.
- Supplier Bid Analysis: the cost estimate is determined by comparing bids from various suppliers.
- Analogous Estimating: the cost estimate is calculated by considering cost history from alike projects.
- Three-point Estimating: the weighted average of 3 estimates (best case, most likely case and worst case) is used to determine the cost estimate.
- Parametric Estimating: the cost estimate is calculated by assessing the statistical relationship between historical data and variables such as a building’s square footage.

- costs that are directly associated with the project such as travel costs.
- costs that are associated with more than one project such as office space rent.
- these costs change in accordance with the project’s duration. For example, paying staff over a 10-month period as opposed to 4 months
- these costs do not change throughout the project timeline. They involve a once-off charge.

### Estimating costs and establishing a budget

__Estimating costs and establishing a budget__

A project manager should ensure that a project receives the maximum return on investment and is successful (Source1). If the project manager’s estimate of the project cost is accurate, or close to, he or she is better able to manage the project’s budget (Source1).

A budget should consider 4 types of costs (Source3, Source4 and Source5):

- Direct costs: costs that are directly associated with the project such as travel costs.
- Indirect costs: costs that are associated with more than one project such as office space rent.
- Variable costs: these costs change in accordance with the project’s duration. For example, paying staff over a 10-month period as opposed to 4 months.
- Fixed costs: these costs do not change throughout the project timeline. They involve a once-off charge.

Five approaches to establishing budget estimates (Source2):

- Expert judgement: the cost estimate is determined by subject matter experts (SMEs). Experts take into consideration factors that may not be considered by non-experts.
- Supplier Bid Analysis: the cost estimate is determined by comparing bids from various suppliers.
- Analogous Estimating: the cost estimate is calculated by considering cost history from alike projects.
- Three-point Estimating: the weighted average of 3 estimates (best case, most likely case and worst case) is used to determine the cost estimate.
- Parametric Estimating: the cost estimate is calculated by assessing the statistical relationship between historical data and variables such as a building’s square footage.

__Estimating costs and establishing a budget__

A project manager should ensure that a project receives the maximum return on investment and is successful (Source1). If the project manager’s estimate of the project cost is accurate, or close to, he or she is better able to manage the project’s budget (Source1).

A budget should consider 4 types of costs (Source3, Source4 and Source5):

- Direct costs: costs that are directly associated with the project such as travel costs.
- Indirect costs: costs that are associated with more than one project such as office space rent.
- Variable costs: these costs change in accordance with the project’s duration. For example, paying staff over a 10-month period as opposed to 4 months.
- Fixed costs: these costs do not change throughout the project timeline. They involve a once-off charge.

Five approaches to establishing budget estimates (Source2):

- Expert judgement: the cost estimate is determined by subject matter experts (SMEs). Experts take into consideration factors that may not be considered by non-experts.
- Supplier Bid Analysis: the cost estimate is determined by comparing bids from various suppliers.
- Analogous Estimating: the cost estimate is calculated by considering cost history from alike projects.
- Three-point Estimating: the weighted average of 3 estimates (best case, most likely case and worst case) is used to determine the cost estimate.
- Parametric Estimating: the cost estimate is calculated by assessing the statistical relationship between historical data and variables such as a building’s square footage.