Question

You are currently working as a contractor building state of the art airports. One of the managerial accountants of the company you work for comes to talk to you about the budget for a project on which you have taken the lead. He wants to know your estimate for the cost of the project. You know that your future with the company depends on your performance in relation to this budget. Your best guess for this project is that it will cost $2,000,000.

What do you say to your boss and why?

Answer 1

I would communicate to my boss about my findings and my estimate. My estimate for cost for the project is $2,000,000 and the same will be communicated to my boss, without any manipulation. However, I will put in a disclaimer that this estimate depends on the level of monitoring of the project, cost control and schedule overruns (if any).

I will communicate my estimate cost of $2,000,000 to my boss with a baseline reference and associated cash flow estimates. This will ensure that there is subsequent project monitoring and control. I will also communicate possible overruns in particular cost categories. Lastly I will communicate to my boss possible savings on particular items that can be achieved during the course of the project. The savings and the overruns can occur due to changes in unit prices, labor productivity and the amount of material that will be consumed during the course of the project.