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Kyle: Hello everyone and welcome to today’s MPUG webinar, “Understanding the Cost Model in Microsoft Project”. My name is Kyle and I’ll be the moderator today. Today’s session is eligible for one PMI PDU in the technical category.
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All right, we’ll go ahead and get started. We’re very happy to welcome back Dale Howard today. Dale is the Director of Education for Projility. He has used Microsoft Projects since version 4.0 for Windows 95 and he has used the Microsoft PPM tools since the first version of release as Project Central in the year 2000. He is the co-author of 21 books on Microsoft Project, Project Server, and Project Online. He is currently one of only twenty-eight Microsoft Project MVP’s in the world, and one of only six in the US. Dale is also a long-time contributor to MPUG, and one of our community’s favorite and most highly requested presenters.
So with that said, I’d like to welcome you back Dale. At this time, I’ll hand it over to you to get started with today’s session.
Dale Howard: Okay, very good. Thank you for that very kind introduction, Kyle. Hi everybody. Good morning, good afternoon, or good evening, depending on where you are in the world. Our webinar, “Understanding the Cost Model in Microsoft Project”, I’ve got to tell you that when I selected this topic it dawned on me that this may not be very interesting to people because I’m just really digging deep into something that may not be of interested to anybody. So, I just want to thank everybody for showing up today, and I hope my webinar is not boring for you.
It is I, your old friend Dale Howard. Currently the Director of Education at Projility. Our number of MVPs I think has actually dropped a little bit. I’m pretty sure currently there’s only 26 of us in the entire world. Four in the US, that number fluctuates, but I think you get the idea, there’s not a whole lot of us. I am now currently the co-author of 22 books on Microsoft Project, Project Online, and Project Server. That’s because at Projility, we just wrote a Project Online book for Project Managers, so you can start looking for that on Amazon. I know the Kindle version just came out yesterday. The paperback version should be released very soon.
Kyle’s right. I’ve been using this tool for a long time. I’m currently working out of an office in my home, even as I speak. I live in Ellisville, Missouri, that’s a west suburb of St.Louis. And just to answer your questions, yes, I have been up in the Gateway Arch a couple times. And yes, I’ve ridden on that river boat a couple times too, up and down the Mississippi River.
Now, a word from our sponsor. I work for Projility. We were founded in 2005, and as such, we’re one of the oldest, and most established PPM consulting firms in the United States. Our headquarters are in the Washington, DC area, but we do have three offices around the country to serve our clients nationally. Our claim to fame is a 98% success rate with delivering projects on time, on budget, and within scope. We align our project management methodologies with PMI. We’ve done over 300 successful deployments of the Microsoft PPM solution, that’s Project Online, and Project Server.
All right, commercial’s over. Let’s dig right into the program for today. And I begin with a big warning. Warning! Everybody keep in mind that Microsoft Project is not accounting software; it is a project management tool. Because of this, you cannot use Microsoft Project to calculate the exact, precise project costs for your projects. But the good news is, Microsoft Project does offer you approximated costs, which you and your organization can use as the cost basis to compare project costs across all projects in your organization’s portfolios. If exact costs are needed, keep this in mind, that means you have to import the cost data from some third party financial software, such as Microsoft Dynamics, for example.
All right, so now we got that out of the way. What I want to talk about today are multiple topics related to the Microsoft Project cost model. The first one is how to create your project resources, so they feed the cost model. When you create work resources, and that’s the most typical kind, the people in our project. If you want to completely plan to supply all cost model information, you would need to enter the following: standard rate for each resource, their overtime rate, cost per use rate if that’s needed, and accrue at values. Also, if your resources need alternate cost rates, beyond the standard and overtime rates that you’ve just entered, you can enter those additional cost rates in the cost rate tables for each resources, wherever needed.
If your project needs to use material resources you’ll need to supply a material label, and the standard rate values. If appropriate, you may also need to create expense cost resources, and the only information needed there is the accrue at value.
Now, little bit of background information because I mentioned standard rate, overtime rate, cost per use, so what’s the difference between those three columns? First of all, let’s know the standard rate, that’s the one we almost always fill in, that’s the cost rate for what we call regular work. Now in the Microsoft Project world, regular work is non-overtime, that’s the generally up to eight hours a day of regular work. Overtime rate is the cost rate for work that is intentionally entered as overtime work.
The cost per use rate, I need to tell you everybody, this is probably, at least in my opinion, the least used field in Microsoft Project. I can tell you to date, I’ve never used it even once in any of my projects, and I’ve never had one of my students need to use it either. But I would kindly invite you during the Q&A time at the end of “Creating Project Resources”, we’re going to break four or five times for questions, but if you’ve ever needed to use the cost per use field, go ahead and indicate in the chat section, and just let me know. I’d just be very curious if anybody’s ever used it. Here’s what it’s supposed to be for, it represents an additional cost that is assessed to each task to which you assign the resource. Usually cost per use is similar to the trip charge that you would pay the plumber to come out and fix your broken garbage disposal, for example. You know the trip charge is the fee you pay upfront to get the plumber out there, and then the meter starts running.
Let’s begin first with a demo on creating project resources. Let me flip over to my Microsoft Project schedule. In the sample file, I want you to know that in the interest of time, I’m not going to make you sit here and watch me enter all these resources. So, I want you to notice that for each of the resources listed, these are all human resources or work resources, I’ve supplied standard rate and overtime rate. I do want you to also notice that Henry Baum is a special type of contractor, his rate is higher, 100 and 150 for overtime, but there is also a cost per use of $1000 every time we need to use Henry on a task in our project.
So let me go ahead and put in a few resources and let’s just talk through the process. Let me put in another human resource, her name is Sue Uland, she’s a work resource, her initials are S.U. She works on the help desk actually, but she’s being groomed to move into the IT department and do IT work full-time. Her max units is 100%, we’ll put in her help desk rate of 30 and 45. And we’ll leave everything else set to their defaults.
Now, we need to show an alternate cost rate for Sue for any project work she does that involves IT related tasks. Because she is working part-time now on project work to groom her into that transition. To specify an alternate cost rate, I’ll double click Sue Uland’s name, and then go to the “Costs” tab. In the resource information dialogue on the cost page, ladies and gentleman, what you see here, are the five built in cost rate tables. There’s no default method in Microsoft Project to specify other cost rates beyond the five that are available. I know sometimes people ask for 10 or 15 or 20, but that just isn’t in the cards. I know there may be software add-ons that you could purchase that could extend the power of the cost rate tables, but built-in, know this, you only get five.
Cost rate table A, please notice, carries the name “Default”. That means when you assign a resource to a task, it always defaults initially to the cost rate shown on cost rate table A. B, C, D, and E, are where you can put alternate cost rates. So I’d like to put in the cost rate for Sue for IT work, and that’s going to be 50 an hour and 75 for overtime. Now how’s anybody going to know that? My recommended best practice is that you always add a note to explain what that rate is and when to use it. I’ll put the note in this way, cost rate table B and that’s the cost rate for IT tasks. Bingo.
That’s how to set up the cost rate tables. At least that’s one of the ways. Now we have another situation that’s kind of interesting here. The resource Jerry King is going to have his cost rate bumped up to $60 standard, and $90 overtime. That will happen automatically on May the first. Here’s how to set up that particular scenario so Microsoft Project will just figure out which cost rate to use and which amount and then it’s all good. I’ll double click the name Jerry, and I go to the “Costs” tab. On the A table, the default table, here’s how I can set up the change in cost rate. In the “Effective Date” column, I’ll scroll to May, and I’ll choose Friday, May 1. Then I’ll put in the new cost rate, beginning on May 1.
Now I think that probably also requires a note, so let’s go to the “Notes” tab. By the way, I should just show you, there’s really no limit to how many effective dates and new rates that you can use. If there were automatic increases over time, you could set that up for your resources as needed. So I’ll go to the notes tab, and I’ll say, this automatic cost rate increase on May 1, 2020. Oh my gosh, where’s time gone? 2019’s almost gone, isn’t it? So I’ll click OK. Bingo. Now we’ve worked with the cost rate tables twice, interestingly enough.
After the name Sue Uland, I’d like to put in an expense cost resources in this project. Excuse me, a material resource, not an expense, a material resource. And the name of this material resource is Test Lab. We’ll make this a material resource and then in the material label column, I need to tell Microsoft Project how we measure the consumption of the test labs. Well, think about it, for gasoline, that would be real easy. We’d measure the consumption in gallons or liters, depending on where we live in the world. But, test labs? Hmm… my recommendation is just call them each, just call them each. So the initials will be T.L., the group will be the facilities group, and then standard rate. Our organization requires us to apply $5000 for the use of the test lab for each time we use the resource. For each day we are using the resource. So basically what that $5000 means, is $5000 for each time we use the resource and that’s going to be a per day cost, you’ll see a little bit later in our webinar.
Below the test lab, I’d also like to add an expense cost resource named Software Licenses. This will be a cost resource. I always like when I use cost resources, I like to put dollar sign in the initial’s column. You could use Euros, or whatever sign you would indicate to let people know that isn’t a work resource, something special. And this is going to be part of the finance group. We’ll leave it at pro-rated and bingo. That is how to set up all of the information for the Microsoft Project cost model when you set up your resources.
So Kyle, we are ready. Let me get back to my PowerPoint. We are ready for questions and answers. Kyle, do we have any questions at this point?
Kyle: We have one question that’s come in. Just to remind anyone that may have joined us late, you can chat questions over using the question box there, and we’ll answer them live after each segment.
Edward was just curious, this may be something to address later in the presentation, but he was curious how do you account for the salary of the PM over the course of the project?
Dale Howard: Oh, yeah. And, you know what, my bad. Edward, that’s a really good question. One of the things that I wanted to stress to you, everybody, is never put people’s real salaries or hourly pay rate in the standard and overtime rate columns. Your HR department would probably be very upset with you revealing that kind of information, and frankly, if anybody else can open your project and look at it, there’s no way to hide this information. So, when you enter standard rate and overtime rate, I would recommend that you use what we call a blended or averaged rate. A blended rate is like an average rate across a team, a department, a business unit, or it could be even across an entire corporation.
Edward, in your scenario, what you would probably want to do is, if you need to account for the time and the cost for the project manager managing the project, you would want to create a single long duration tasks that spans the entire life of the project. Assign yourself to that tasks with a units value representing the approximate daily commitment of time you spend on it. So for example, if you know you’re going to average about two hours a day working on the project, managing it, you’d put the units at 25% and then let Microsoft Project calculate the work. Then from the work, it’ll calculate your cost burden basically to the project.
So Kyle, that was a really good question.
Kyle: All right. We have a couple other’s coming in here. Craig was curious about extending the alternate rate tables, if there’s a third party software out there that can help with a company that uses a lot of different rate sheets for different clients.
Dale Howard: Yeah, that’s why I mention it. I do not know, personally, of any but a Google or Bing search would probably tell you if there is or not. I’m not aware of any personally. Could probably be done through custom software development and using an Excel workbook that a company’s each project, or something like that. But I’m not aware of anything right off the shelf.
Kyle: Thanks Dale. I think that was it for that portion.
Dale Howard: Yeah, cool. Okay. Let’s continue on with all this cost excitement.
The next question is, how in the world does Microsoft Project calculate costs for work resources? I can tell you, for most of us, there’s a simple cost formula and that is, standard rate times work. The reason for that is, most people only enter a standard rate. For resources, don’t put in overtime or cost per use. And we don’t intentionally add overtime work. So basically, it’s just standard rate times the work.
But if you want to know the truth, the complete cost formula for the resource assignment for each work resource is actually this: it’s regular work times standard rate plus overtime work times overtime rate plus cost per use multiplied by the units of the resource assigned.
Then for the task, the cost formula for the cost of each task is the total of all the assignment costs for the resources assigned to the task plus the amount in the fixed cost column, if there is any. Now, Microsoft Project uses that preceding formula using the cost rate table for each resource assignment. It’s the cost rate table that you designate. Remember I mentioned cost rate table A is the default, but you can change it for any work resource assignment, you need to apply either task usage or resource usage and then insert temporarily the cost rate table column. In that column, you can select the correct cost rate table value for that resource assignment.
Take a drink of hot tea here, still a little bit of fall allergies. So, let’s go ahead and do another demo. Let’s see the cost calculations for work resources. I think this is probably the most interesting part of the webinar. Let me get my sample file open. Here’s what we’re going to do. Let’s go to the Gantt Chart view. Here’s our project task list as built so far. We see we’ve got tasks that are linked, durations are entered. So that we can actually fully see what’s going on with costs, I want to show you the Task Usage view that I played around with a little bit to show additional information. Right now, you can see I’ve added the columns “Cost” and “Overtime Cost”. Also in the time phased grid, I’m showing regular work, overtime work, total amount of work, and then the cost for the task and the resource assignments as well.
In the time phased grid on the right, I’m going to right mouse click and choose “show split” on the shortcut menu. That takes us into a view where I can assign resources to tasks. So on the first task, “Design”, I’m going to assign Calvin Baker, and I want him to work full-time for the five days of the task. So Microsoft Project calculates 40 hours of work. Now let me bring the information into view, and I want you to notice a couple things. His standard rate is $50 per hour. 40 times 50 is $2000. Notice how the costs are applied at $400 per day, over the life of this task, over those five days. Nothing extraordinary there at all.
So in the Task Form pane, I’ll click the button called “next”. This’ll take me down to the task build. On this task, let’s assign Cindy McNair. This is a 10-day task. We’re going to assign her full-time, so she is now assigned 80 hours of work. Her standard rate is $50 per hour. So everybody, please notice, 50 times 80 is $4000. Also in the time phased grid on the right, you can see her cost per day, like Calvin, is $400 per day, over the 10-day life of the task.
But our directive is to ask Cindy to work overtime to try to get this task done sooner. There’s a couple different ways to intentionally apply overtime work. Let me show you my favorite. In the Task Form pane, if you right mouse click, you see a shortcut menu with the different sets of details, or by details I mean the fields and the columns that are available in the Task Form. If I chose the work set of details, look at that, there is a column here designated as overtime work. This is intentionally planned overtime work. We’re going to ask Cindy to work 16 hours of overtime out of the original 80. So when I click OK, the cost just changed. Everybody now notice the cost of this task is $4400. Notice the overtime cost has been calculated as $1200. Notice the daily cost is now $550.
Now where does this come from? Microsoft Project calculated for Cindy McNair. Let me drag and show you a couple extra columns here. This I had not included initially but notice, I’ve included the columns regular work and overtime work. See work is the total of regular and overtime. So what Microsoft Project just did, is it multiplied 64 times 50, and then it multiplied 16 times 75 because that’s her overtime rate. So that gives us $3200 for regular work, $1200 for overtime work, and a grand total of $4400 for the resource assignment.
So folks, that’s one way that you can intentionally plan for overtime work. The other way is you can insert the overtime work column, as you’ve seen that I did, and you could just type the number there yourself. That is how overtime work works and that’s how to enter it.
Let’s continue on here. Let’s go to the “Test” task. Let me scroll back here. All right, here we go. What we’re going to do here is let me get back to my normal resources and predecessors. By the way, I’m right-clicking resources and predecessors. There, that’s what we’re used to seeing.
This particular task, we need that special consultant, that contractor, Henry Baum. Remember he has a $1000 cost per use that will be applied when we assign him. So let me pick Henry Baum. The units will be 100%. The work is 40. Nothing extraordinary yet. Let me bring his time phased information into view. Here is what I wanted to show you. For Henry Baum, his cost rate, his standard rate is $100 per hour. 100 times 40 is 4000. Plus the cost per use of 1000 gives us a grand total of $5000 for his resource assignment. But wait, there’s more. When we look at the time phased work, notice everybody, that the first day of cost is $1800, while the cost for every other day is 800. What is going on here? The cost per use is always applied on the first day of the task assignment. So it’s $800 for his, $100 times 8 hours in the day, plus the cost per use of 1000.
Okay, now, let’s continue on. We’ll go to the task “Rebuild”. On this task we need Jerry King. Remember he’s the guy that has the cost rate increase on May 1. So we’ll assign Jerry to this 3-day task, 100% units value. Jerry’s cost rate is $50 an hour times 24 hours, in this case. But here is what is very interesting. His first day of work on this task is April 30, where his cost rate is $50 an hour. 50 times 8 is 400. The next day of work on this task occurs on May 1, when the cost rate increase goes into effect. That’s $60 an hour. 60 times 8 is 480. Notice how Microsoft Project just figured out the cost math for me automatically, I didn’t have to intercede in any way. By the way, I really like that, I hope you like it as well.
All right, so let’s go to the next task here. The next task is called “Implement”. We’re going to assign Sue Uland, the young lady from the help desk who’s being groomed to work in IT projects. We’ll assign her to work full-time over the five days of the task. Nothing unusual here. Her current rate for help desk work is $30 an hour. 30 times 40 is $1200. Nothing unusual there.
But, this implement task is IT work. What we need to do is to change the cost rate table for Sue’s assignment to have it use the $50 an hour, shown on cost rate table B. Let me close the Task Form pane. What I’m going to do is I’m going to insert an extra column, and I’ll type cost rate and there it goes to cost rate table. This is what I want you all to see everybody. The default cost rate table applied is always rate table A, when you initially make the resource assignment there is no way to make Microsoft Project apply any other cost rate table initially. So that’s why it’s called “A Default”. But, you can change the cost rate table for any resource assignment at any time. Notice that A is currently selected. Whoops, before we do that, let me bring Sue’s details into view. Here we go. Notice everybody, $1200 cost for her assignment, and the expenditure is 240 per day. Let’s change the cost rate table to rate table B. Boom, look at that. The new cost is 2000. That’s 40 times 50. And the new daily cost rate, $50 an hour times 8, there’s your $400 per day.
That’s how cost rate tables work. That kind of gives you the run of the basics of how Microsoft Project calculates costs for work resources. So Kyle, coming back to you. Questions so far?
Kyle: Dale, nothing in the queue yet. Just waiting to see if anybody is chatting any questions over.
Dale Howard: Everybody, type madly, type madly. That’s the one that I thought would get the most questions, but maybe I explained it in such agonizing detail that everybody gets it.
Kyle: Yeah, I think we might be good. I didn’t see any questions come in.
Dale Howard: Okay, fair enough. Thanks everybody for hanging in there with me. You’ve got to admit, man, we’re diving deep into this cost model.
The next thing I want to talk with you about is how Microsoft Project calculates costs for material resources. Microsoft Project uses a very simple formula to calculate the cost of resource assignments for material resources. And the formula is this: units times standard rate or work times standard rate. You’re going to go, wait a minute Dale, there’s two formulas, I was expecting only to see one. Why are there two formulas? The answer is, because the cost calculation by Microsoft Project depends totally on how you assign the material resource to the task.
There’s actually two ways to assign material resources to tasks. The first method is what we call a fixed consumption rate, and you use that when the amount of material resource consumed does not depend on the duration of the task. It stays the same, regardless of the task duration. Your other option though, is what we call using a variable consumption rate, where the amount of material resource consumed does depend directly on the duration of the task. So the method you select, depends on how you want the material resource consumed and how you want the cost to be calculated.
Let me give you two examples here, just to make sure you understand the difference between fixed and variable consumption rates. Oh look, I just had an update to my Adobe Acrobat, sorry everybody about that! Okay, fixed consumption rate. You assign a resource named paper, the material resource. You assign it at 25 reams. This action will consume 25 reams of paper, regardless of the task duration, and it doesn’t matter if the duration is one day, twenty days, or three months, you’ll still only consume 25 reams.
Variable consumption rate on the other hand. You assign a material resource named gasoline. And you enter the consumption as 100 gallons per day. This action would consume 500 gallons of gasoline in a five day duration or 2000 gallons of gasoline if the task has a 20 day duration. I’d like to show you how to assign material resources, and then let’s see how Microsoft Project calculates the cost.
Let me get back to my project and let me open another sample file. This will be number three, if I’m not mistaken. For the task “Test”, Henry Baum actually needs to use our test lab facility. What I’m going to do is we’ll go to show split, let me scroll this task up so we can see it, and let me pick the test lab resource. Right here ladies and gentlemen, this is where you enter the measurement of consumption, the amount of consumption. If I just want to reserve the test lab for a single day or a single use, I would just put in the number one. And click OK.
Let me bring the numbers into view in the time phased grid. This is what I want you all to notice, we will consume one usage of the test lab. We can see that the total cost would be that $5000. Remember I told you, actually it’s $5000 per day of usage, but if it didn’t have that restriction, if it was just $5000 each time you want to use the test lab no matter how long you use it, you would just put in the consumption of one.
Let me move that resource. Click OK. We’re going to take it off. Let’s re-assign the test lab the way our company requires. If you’re going to use the test lab, you have to put in how many labs you need per day. I need one test lab per day. See that’s that gasoline example. Remember I said we’d consume what, 100 gallons per day. I’d put in 100 per d. So for test labs, we’ll use one per day. Here’s where I wanted to show you the differences. Now notice that the cost of the test lab… whoops! I just got it on the wrong task there. I can do better. Sorry everybody.
All right, here we go. Let me get it, test lab, one per day. That’s what happens when you don’t pay attention to what you’re doing. Okay, that is what I was expecting. The test lab, we’re going to use it for five days. We pay a $5000 cost per day, so the grand total cost would be $25000. There’s the utilization for each day of the test lab.
That is how to assign material resources to tasks, and how you see the consumption. Before we go back to question and answer, what would happen if I changed the duration to seven days? Let’s find out. I click OK. Boom, now look. It says we’re going to use it seven each, meaning seven total over the seven day duration and the cost now would be $35000. So, that’s how that works. Kyle, we’re back to you. Do we have any questions about costs for material resources?
Kyle: Let’s see if anything comes in. We’ve had a couple trickle in on the past topics. David was curious is the time phased grid is a custom view in project?
Dale Howard: Yeah, it certainly is. The time phased grid in either the Task Usage or Resource Usage view, can be customized by right mouse clicking in the grid and choosing “detail styles”. What you could actually do David, is you could make a copy of Task Usage or Resource Usage, and then go in and modify the time phased grid to include the rows that you want to show. In this particular test project or sample project, look I’m showing work and cost over on the left, you will see dozens and dozens of row that you could add to the time phased grid. Most of them are these extra baselines and so forth that you can use, but I’ll show you here, where did I get regular work? Right there. There’s regular work. And where did I get overtime work? Well, there it is.
So yes David. You can make a copy of the Task Usage or Resource Usage, right-click in the time phased grid, and then add the rows that you want to display in that particular custom view. That was a good question. Kyle, any other questions?
Kyle: Thanks Dale. David said thanks as well. Joan was looking for clarification if fixed units task type is required for all of these examples?
Dale Howard: No, no. The examples that I’m using here with fixed units, is I’m supplying units and duration and Microsoft Project is calculating work. If you used fixed work on the other hand, then I would either need to supply units and work, and let the software calculate duration. Or I’d need to supply work and duration, and let the software calculate units.
On a fixed duration task, I can put in units and Microsoft Project will calculate the work. So no, not required, but we do need to know the behavior of the three task types when we’re making task assignments. And which two of the three numbers we should supply so the third number will be recalculated. So that was a good question.
Kyle: Good, thanks Dale.
Dale Howard: Okay folks, let’s go ahead and keep a going back to my PowerPoint. Now let’s talk about fixed cost. There is a column, a task column called fixed cost, that you can use to track additional costs that go beyond the cost of the resources assigned on the task. For example, maybe a task cost needs to include the cost of software licenses.
There are some major limitations of the fixed cost column, I will tell you. Number one, you do not see totals for any of the summary tasks for the fixed task column, including the project summary task. That’s because you can apply a fixed cost at any level of the project. You can put fixed cost on milestones, detailed tasks, summary task. You could even put a fixed cost on the project summary task, row zero or task zero, to show a fixed cost associated with the project as a whole. So you don’t get totals for the fixed cost column.
Also, a big miss, in my opinion, is Microsoft never included a column called “Actual Fixed Cost”. So there’s no way to enter your actuals. What you have to do is if the actuals are different than the planned fixed cost, you have to just type over what the fixed cost amount was originally. So that’s a big miss.
The third one, there’s no way to identify the reason for the fixed cost amount, other than adding a task note. We’ll take a look at that in just a moment.
I also want to talk with you about cost accrual methods. The cost accrual method that you select determines how and when costs are charged to either a task or to a resource assignment. The cost accrual is used with both resources, and that’s the column called “Accrue At” that you see in the resource view, and fixed cost amounts, and that’s that column we’ll be seeing in a moment called “Fixed Cost Accrual”.
Your choices for cost accrual are as follows: Start. If you select that, the cost is applied on the first minute of either the task or the assignment to which it applies. Prorated is the default. Prorated means the cost is applied proportionately and evenly over the entire duration of the task or the assignment. The third choice is called end, and when you select that, the cost is applied on the last minute of the task or the assignment.
Let’s go ahead and take a look now at how to use fixed cost and cost accrual methods. I’ll go ahead and close my sample file. Let me get another one open. I think we’re up to number four at this point. I’m going to select the task “Design”. Let’s scroll those numbers into view in the time phased grid. I’m also going to apply the cost table. Now ladies and gentlemen, if you didn’t know this trick, immediately above row zero, there is a blank button, no words on it. It’s the “Select All” button, like in Excel. But if you right mouse click on the “Select All” button, you get the list of most frequently used tables. And I need to see the cost table. The cost table, by the way, displays the fixed cost and fixed cost accrual columns.
On the task “Design”, Calvin Baker needs to use specialized software that requires a software license. The cost of the software license, one way to approach this would be using the fixed cost column. So I’m going to put in 995, that’s the cost of the software license. Notice the total task cost has jumped from 2000 to 2995. That’s $2000 for Calvin’s assignment cost plus 995 for the fixed cost. Also notice, that you can see the task daily cost is calculated at 599 per day… Excuse me everybody, little bit of a cough there. Basically, that’s the cost for Calvin plus the 995 divided up by five days of the task.
Now, there’s no way in the world that anybody would know why did I type 995 in the fixed cost column? So if you use fixed cost, I recommend you double click the task, go to the “Notes” tab, and enter a note like this, fixed cost amount of 995 for software license and we could even name the piece of software there if it wasn’t entirely fictitious. That’s how you can use the fixed cost column. It has major limitations, as I just pointed out.
Let’s also take a look at the cost accrual methods. First with fixed cost. Everybody notice that the fixed cost accrual method right now is set at prorated, which means that extra cost is divided up by the duration of the task and it’s applied at a rate, we can see it. Calvin’s cost is 400, so 599 minus 400. That puts 199 per day of fixed cost amount over the life of the task.
Our organization has specified that any fixed cost amount should be applied at the start of the task. Because we’d be getting the software license right at the beginning so he could start work. So I want to show you what Microsoft Project does if I chose start. Boom. Look at that. The 995 was just applied, in its entirety, on the first day of the task, and all the rest of the days it’s just Calvin’s assignment cost.
Now just for yuks, everybody, I’m going to take you for a ride. I’m going to zoom in as far as Microsoft Project will let me using the default zoom buttons. Here’s what I wanted to show you. I am now in the first 15-minute time period on day one. This is between 8:00am and 8:15am on the task. We can see that the total cost for the task is $1007.50. Where’s that come from? 1250 from Calvin and 995 for the fixed cost amount.
I’m not going to put you through the agony of changing it end and then trying to go to the last 15-minute time period. Let me just pick end when I’m at the weeks over days level of zoom, and look. There it is. It got applied at the end of the task, on the last day. You could use fixed cost accrual to determine when the cost will hit the task.
We’ll do another one. Let’s go ahead and we’ll go to the “Test” task. Let me bring the numbers into view. Then I’m going to do something really unusual here. In the bottom pane, I’m going to right click on “Task Form”. I’m going to choose “Resource Sheet View”. What this allows me to do is I can change the cost accrual method for the test lab, if I need to do. Or even for Henry Baum.
Right now, notice that the cost of using the test lab is prorated. So what we see is $5000 per day, but in our organization, they require the use of the test lab to be applied to the project on the last day you use it, so you get the grand total right at the end. Watch this everybody. Let me scroll over to the right here, where you can see the last day. Okay, I’m going to change this to end. Boom! Look at that. Everybody notice the cost for the test lab is zero the other four days and the entire cost is applied at the end of the task.
Now just to humor you, what if we changed Henry Baum to start? Whoa, check this out. Henry Baum’s costs are applied at the very beginning on day one of the task, and the test lab is on the very last day. That just shows you the capabilities of the cost accrual methods. And I just had some fun with you there. Kyle, let’s go ahead and pause and see if we have any more questions.
Kyle: No new questions have come in yet Dale.
Dale Howard: Well, that’s probably good because I’ve got one little section left to do then we can wrap ‘er up and try to be done by noon.
Let me go ahead and let me close this sample file. I’ll get my next one open right away here. That should be number five. Let me get back to my PowerPoint. The last topic I wanted to talk to you about in the Microsoft Project cost model is using expense cost resources. Microsoft introduced cost resources as a new feature of the 2007 version of Microsoft Project. How do I know this? I went back and looked in the “What’s New” books that I used to co-author with Gary Chefetz.
They introduced two kinds of cost resources known as budget cost and expense cost. Budget cost resources allow you to specify budgetary amounts for your entire project, while expense cost resources allow you to track non-labor additional costs on a task. Quite frankly, expense cost resources are an alternative that allow you to avoid using the fixed cost column to specify those additional costs.
What’s nice about expense cost resources, you can assign them to any type of task, including milestones, detailed tasks, and summary tasks. You probably want to use expense cost resources when you need to get totals of how much you’re spending for these additional, non-labor categories. For example, let’s say you have a project that requires business travel. You would want to use an expense cost resource named “Travel Expense”, assign it to tasks, put in the amount of travel expense, and then you could see a grand total of all travel expenditures for the entire project.
Let’s take a quick, final look at our last topic, using expense cost resources. I wanted you to all notice that I initially added a cost resource named software licenses, it is an expense cost resource. I’ll go to the Take Usage View again. Here’s the deal. The task “Design” and the task “Redesign”, each require a software license. We’ve got two different people, Calvin and Mickey, each of them needs their own software license.
I’ll bring up the assign resources dialogue, and in this dialogue I’ll select the software licenses cost resource and click “Assign”. Now let me click “Close”. Widen things up here. Let’s go to the cost column. I wanted to show you here, for software licenses for Calvin that’s going to be 995. And for the software license for Mickey Cobb, that’ll be 995. Boom. That is how you enter the cost information for expense cost resources. Later, when the project is gone live and you’re in a real production project, you can enter the actual expenditure in the column called “Actual Cost”. That is how to use expense cost resources.
Let me just show you one final thing. If I go to the Resource Sheet view, and I apply the cost column, here’s what I wanted you to see. There, my friends, is the line item total of how much we are spending for software licenses in the entire project. Imagine that we had a project with thousands of tasks, and using expense cost resources, the Resource Sheet view, plus the cost table, would give you the line item totals you would see.
Kyle, do we have any final questions as we wrap it up?
Kyle: I think that takes us right up to the end point here, Dale. If anyone did have questions that we didn’t get to during this session, you can post those as a comment on the recording, which you’ll receive a link to a bit later today. We’ll have those available online. But Dale, back to you before we close out.
Dale Howard: Hey everybody. Thank you very much for coming to my webinar today. I hope I didn’t bore you with all of this information about Microsoft Project’s cost model. There’s the information in case you want to reach out to Projility. Thanks everybody, it was great being with you today. Kyle, back to you.
Kyle: Thanks so much Dale. We appreciate it. For those of claiming the PDU code for today, I’ll get that info back on the screen now. Today’s session is eligible for one technical PDU and the code to claim that is “mpugwebnlearn111319”. If you missed any of this session or would like to go back and review anything Dale demoed for us today, the recording will be posted at mpug.com in just a couple of hours, and you’ll receive an email with a link to that. That’s also a great place to post any questions you may have about the session. MPUG members have full access to our PDU eligible library of on demand webinars.
We do have a few great sessions on the calendar that are open for registration. I’ll chat over a link so you can register for those. Look for that in the chat box there. Those are now open for registration. One item to point out is we will be covering the new release of Microsoft Project on December 18th. So be sure to sign up for that one, if you want to check out what the new offering includes.
That does it for today. I want to thank everyone that joined us live or is watching this session on demand. Thanks again Dale. It was great to have you back for a session today. We really appreciate it. We hope everyone has a great rest of your day. We’ll see you back next week for our next live presentation. Thanks.
Dale Howard: Bye.