Question

why cost estimation is an important part of a project plan for coffee shop project

Answer 1

Meaning of Cost Estimation :

When the company takes up any project the following things are to be kept in mind

• The resources
• The cost and Budget
• The vision and mission.
• The strategies and structure
• Organizational culture

Costing and budget is important factor to be determined in the project. The budget is prepared and thereafter the process is undertaken to determine the cost and other resourced needed to complete the project.

Hence in layman language Cost Estimation means the cost incurred in the whole project or program.

Importance of Cost estimation

• It helps in completing the project successfully. For e.g. in case of Coffee shop project the cost estimation would include the cost starting from selection of place and end at selling the cup of coffee at the predetermined price.
• Cost estimate is important constraint in the project management has it helps in calculating the deviation. For e.g. In the coffee Shop the standard idea is set the resources are quantifiable then the standard project is compared with the cost i.e. the project thought comes under the desired cost estimated or not and if not what are the deviations and how are they need to be sorted.
• The both the types of cost i.e. the direct cost e.g. fixed labor cost or cost of material or equipment and indirect cost i.e.quality check and utilities are taken into account.
• Hence cost estimation helps any company to determine the budget and cost.

Example of coffee Shop

• The coffee shop cost depends upon the cost of following reason
  • the cost of location
  • Cost of rent or lease if any
  • the cost of infrastructure
  • the cost of labor
  • the cost of furniture and fixtures
  • the branding and incidental cost
  • the logo cost
  • the other miscellaneous cost
• Therefore estimation of the above type of cost is necessary in the cost estimation.
• These cost are added together and budget is prepared .
• The coffee shop cost depends from the services to service i.e. along with coffee what are the added beverages or starters.
• The budget can start from $5000 to $350,000. The total cost is inclusive of various other cost.
• The set up cost is also estimated and projected.
• The cost estimated backup is also used to access the risk and make risk assessment plan.

CONCLUSION

Hence the cost estimation is necessary as it helps to know the overall cost of the project. in case of Coffee shop all the cost are estimated and added thereafter the project is prepared . The prepared project is compared with the cost incurred in reality. If there is any deviation the analyst will come to know about it and will also improve its estimation accordingly.

In the growing world where demand for the product keeps on changing therefore the price of the product also changes hence estimation help the organization to forecast the budget and the costing.

Above we have seen that the types of cost that can be incurred in while starting the coffee shop. These estimation was necessary and important project is successful or not depends upon these costing only.