MGT 437 Week 2 DQ 1
MGT 437 Week 2 DQ 1
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Date Created: 11/18/15
Discussion Question 1 What is the function of a project budget Why is it important to include management contingency in a project budget and how you would calculate the amount of contingency needed What is the function of a project budget When undertaking a project a budget must be set to assure spending is under control the act of budgeting is the allocation of scarce resources to the various endeavors of an organization Meredith amp Mantel 2006 p326 The budget is a control mechanism Why is it important to include management contingency in a project budget and how you would calculate the amount of contingency needed As I stated last week according to Murphy39s Law no matter how well something is planned quotAnything that can go wrong will go wrongquot It is important to include management contingency in a project budget to allow for error increased costs or unforeseen costs Halting or ending an entire project due to unforeseen expenses can cost immensely For example if remodeling your home you certainly would not just halt or end the entire project due to a small increase in costs Leaving the project unfinished could cost more in the end than the unforeseen expense To calculate the amount of contingency needed an organization should review past projects Throughout my business dealings I have found that in the past every project tends to run over budget Upon undertaking a new project I review past projects for unforeseen expenses and add a percentage for contingency I have found that generally 10 contingency is acceptable This is merely my own method of calculation according to my own business experiences For example when a piece of equipment goes down I review past experience we have had for similar events I am then able to calculate repair time costs etc Meredith J R amp Mantel Jr S J 2006 Project Management a Managerial Approach 6th ed New York NY Wiley
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