Project Management Theory Phase 3 Discussion Board 2 - Essay Example

LHR Products assigned the project manager a specific amount of money for the trade show project he is managing. One of the primary metrics that determine if a project was completed successfully is the overall financial results of the project. A project manager has to complete the project within the budget constraint variable. This paper will describe various budgeting techniques a project manager can utilize. It provides an analysis of the role of the project manager in the budgeting determination within the project.

A budget can be constructed as a zero-based, static, or flexible budget (Garrison & Noreen, 2003). A zero-based budget creates a budget utilizing historic information from the company’s accounting database. The previous project budgets are utilized as a baseline in the creation of the budget, but the manager has to justify each and every expense within the budget. A static budget creates fixed amounts of money allocated to each category within the budget. A disadvantage of static budget is when variances occur the budget does not help auditors evaluate the reason they occurred (Garrison & Noreen).

On the other a flexible budget allows the budget administrator to change the budgeting amount depending on the level of activity. The activity flexibility of the budget allows managers to forecast more realistic costs scenarios. The trade show project is an activity that has occurred in the past at LRH project. After a company determines an overall budget amount for the project it is the responsibility of the project manager to determine if the budget is adequate before proceeding. The first step is to audit the financial results of all previous trade show project the company realized.

He should be analyzing the amounts spend in the different specific tasks within the project. A way to break down the budgets is by category. Categories in this type of project include: rent expense, advertising inventory, labor costs, travel expenses, utilities, presentation set-up costs and other administrative expenses. Variance analysis can be utilized to estimate the inflationary effects of time value of money within the allocated budget. If the budget is adequate the project manager should proceed with the creation of the specific budget for the project.

In case of under-funding the project manager has to justified in a written report his finding and immediately request additional funds for the completion of the project. In the LHR Products trade show project the project manager can create a budget incorporating different concepts. The manager should utilize zero budgeting techniques in the planning stage. Once the money is divided in the different categories each category is labeled as either variable or fixed. The rental category is a fixed since the expense is predetermined in the contract negotiations.

Labor budget is also fixed since the manager already knows exactly how many hours are needed per day and exact schedule was created in the scheduling activities. The advertising inventory costs budget is variable since the marketing handouts depend on the level of customer activities within the project. The company will prepare itself for a certain amount of customers, but if more a coming then additional inventory purchases are a necessary justified expense. Travel expenses are a fixed budget.

The expense can be controlled with specific per diem amounts to the workers and two rental vehicles for transporting materials before the show and for the conclusion. Utilities are a fixed budget that can be easily estimated. The preparation budget is also fixed since it involves the purchases of materials to create the presentation booth and any company banners, logos and artistic work. The other administrative budget is a variable budget. This category will function as a control account. The money allocated to this account can be moved to the other variable accounts if needed.

The project manager is solely responsible in this project for the budgeting allocation. The administrative helpers will serve the function of documenting the expenses. The project manager has to track and monitor the budget though out the duration of the project. References Garrison, R. , Noreen, E. (2003). Managerial Accounting (10th ed.). McGraw-Hill Companies. 482.