<P> Budget Determination . At this step of the cost management process, cost spreadsheets are used to develop the budget framework and determine the budget . The project manager can use project cost management software to work in collaboration with the financial department to determine items of the budget and sources of funding and then to allocate the budget . The step entails close cooperation with the project sponsor . </P> <P> Spending Control . It is the step of the project cost management process when the allocated budget is reviewed and spending is tracked . The project manager takes responsibility for control spending and to ensure that the budget allocation is optimized and costs are fully covered with the planned and allocated budget . </P> <P> Project cost management is traditionally a weak area of IT projects . IT project managers must acknowledge the importance of cost management and take responsibility for understanding basic cost concepts, cost estimating, budgeting, and cost control . Project managers must understand several basic principles of cost management to be effective in managing project cost . Important concepts include profits and profit margins, life cycle costing, cash flow analysis, sunk cost, and learning curve theory . Planning cost management involves determining the policies, procedures, and documentation that will be used for planning, executing, and controlling project cost . The main output of this process is a cost management plan . Estimating costs is a very important part of project cost management . There are several types of cost estimates, including rough order of magnitude (ROM), budgetary, and definitive . Each type of estimate is done during different stages of the project life cycle, and each has a different level of accuracy . Several tool and techniques can help you develop cost estimates, including analogous estimating, bottom - up estimating, parametric estimating, and computerized tools . Determining the budget involves allocating costs to individual work items over time . It is important to understand how particular organizations prepare budgets so estimates are made accordingly . Controlling cost includes monitoring cost performance, reviewing changes, and notifying project stakeholders of changes related to cost . Many basic accounting and finance principles relate to cost project management . Earned value management is an important method used for measuring project performance . Earned value management integrates scope, cost, and schedule information . Project portfolio management allows organization to collect and control an entire suite of projects or investments as one set of interrelated activities . Several software products can assists with project cost management . Enterprise project management software and portfolio management software can help managers evaluate data on multiple projects . </P>

What is the cost of a project and how one can calculate it
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