3 Cost Assignment Methods for Project Procurements
In this article, I want to talk about Cost Assignment Methods for projects.
You need to consider the way costs are assigned when establishing the baseline; this is important because the cost should be earned or tracked the same way it is assigned. Here are the methods…
#1 50/50 percent rule
50percent credit is given when the activity begins and the remaining 50percent credit is given when the work is completed.
For example, if an activity costs $3000, the activity will receive the other $1500 when the work is completed.
The basic assumption when using this rule is that activities are approximately the same size. This same method can vary in the percentage values. You can also use 25/75 or 75/25 rule. For instance, some of the variants to the 50/50percent rule include 20/80 and 0/100 rule.
#2 Percentage complete rule
The completion percentage is estimated and assessed at specified reporting intervals. This is perhaps the most commonly used rule.
#3 Weighted milestone
The total work package value is divided up and assigned to milestone intervals within the work package. Each milestone carries a budgeted value. This value is earned when the milestone is achieved. This method works well for long work packages with multiple activities.
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