Types of Project Costs
There are five main types of costs that make up your total project cost. Here’s a quick overview of these types of project costs and how to measure them.
- Direct costs: Direct costs are those that occur in a project and are attached to specific activities. These are generally costs that are easier to accurately estimate. They include raw materials, labor, supplies, etc.
- Indirect costs: Indirect costs in a project are those that are in support of the project, such as administrative fees. These can include everything from rent to salaries of the administrative staff to utilities, etc.
- Fixed costs: Fixed costs, as the name suggests, are those that don’t change throughout the life cycle of a project. Some examples of fixed costs include setup costs, rental costs, insurance premiums, property taxes, etc.
- Variable costs: Variable costs are costs that change due to the amount of work that’s done in the project and are variable in nature. These costs can include hourly labor wages, materials, fuel costs and so on.
- Sunk costs: In project cost estimating, when an investment has already been incurred and can’t be recovered it’s called a sunk cost or retrospective cost. Some examples of sunk costs include marketing, research, installation of new software, etc.
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