The assignment is to answer the question provided above in essay form. This is to be in narrative form. Bullet points should not to be used. The paper should be at least 1.5 - 2 pages in length, Times New Roman 12-pt font, double-spaced, 1 inch margins an

The most common approach to classifying costs is to consider the type. When a cost has a direct impact or is assigned to a specific area of the project, it is regarded as a direct cost (Pinto, 2019). A good example is to contemplate the cost of purchasing construction materials. In such a case, it is possible to directly link these costs to the final product (Kivilä, Martinsuo, & Vuorinen, 2017). However, some costs might not be linked directly to the final product. Such costs are classified as indirect, and often include administrative expenses or the cost of consumable utilities.

How frequently a cost is incurred also determines its classification. For costs that have to be met regularly, they are regarded as recurring (Kivilä et al., 2017). Payment for such costs has to be made throughout the life cycle of the project (Lomas et al., 2013). For example, water bills are recurring because they have to be settled every month. As long as the project uses water, this cost will always be incurred. However, for costs with no established frequencies such that they are only incurred only once, Pinto (2019) calls them non-recurring expenses. Such expenditures include the cost of purchasing the piece of land on where to erect a project.

Another way to classify costs is to consider their schedule. Under this class, costs can either be normal or expedited costs. Normal costs are the ordinary expenses the project team incurs in completing the project and are mostly incurred on the initial schedule at the beginning of the project’s lifecycle (Pinto, 2019). Such costs range from wages paid to workers, electricity bills, and the cost of repairs. However, in case a project meets delays, the project team might opt to incur additional expenses to hire additional staff. Such expenditures are called expedited costs, which ensue when a project needs to be rushed.

The ability of a cost to be adjusted is the fourth classification factor. When a cost remains constant throughout the project’s lifespan, it is considered fixed (Pinto, 2019). These costs are mostly associated with purchases such as leases. On the other hand, the costs that change over time are termed as variable. They change based on factors such as duration and degree of use (Lomas et al., 2018). For instance, the cost of hiring drilling equipment could change based on the nature of the terrain and for how the equipment is leased.

Costs take various forms, and their knowledge is important for project managers. Effective project managers make cost-related decisions based on the nature and type of costs expected to be incurred. Cost management skills enable the project manager to make educated decisions, hence reducing the risks associated with poor costing strategies.

References

Kivilä, J., Martinsuo, M., & Vuorinen, L. (2017). Sustainable project management through project control in infrastructure projects. International Journal of Project Management, 35(6), 1167-1183.

Lomas, J., Gale, C. P., Richardson, G., & Walker, S. (2018). Which costs matter? Costs included in economic evaluation and their impact on decision uncertainty for stable coronary artery disease. Pharmaco Economics Open, 2(4), 403-413.

Pinto, J. K. (2019). Project management: Achieving competitive advantage (5th ed.). Boston: Pearson.