Types of Project Costs

As part of creating business cases and managing projects, business analysts and project managers should be aware of the types of costs to take into consideration.

1.  Costs can be classified as either variable or fixed

Variable costs are dependent on the quantity of output generated. For example, the more finished goods are produced in a manufacturing process, the higher the cost of supplies. Other examples of variable costs include fuel costs, wages, production materials and supplies.

Fixed costs on the other hand, remain the same, regardless of the output generated. Examples include setup costs such as rent.

2.  Another categorization of costs is direct and indirect

Direct costs are linked to the work carried out on the project, such as project materials, travel costs, allowances earned by project team members, etc. For example, if you outsource development to certain professionals, the amount you pay them constitutes part of your project’s direct costs.

Indirect costs are costs incurred by multiple projects. Examples include taxes, general administrative expenses, cleaning services, project manager’s pay, etc.