Cost Aggregation

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All organizations need to have a budget. In conventional definition, the word budget is the total amount of money allocated for a particular project. Building a budget is necessary for project management. Building a budget is the responsibility of the team members or accountants depending on the complexity of the budget and project. There are many project management tools used to determine the budget of a particular project and one of them is cost aggregation.

Cost aggregation is defined as summing the cost for the individual work package to control the financial account up to the project level. This is achieved by the summation of the lower-level cost estimates that are associated with different work packages within the work breakdown structure. The given cost control account can also be used to calculate the cost aggregation. In most cases, the cost aggregation is coupled with other tools to determine the budget such as funding limit reconciliation and reserve analysis.

The main benefit of cost aggregation is that it allows the project management team to see scheduled spending for every time period. This will allow project managers to see the activities as well as the corresponding costs

The main output of cost aggregate is the determination of the cost-performance baseline. This particular output does not only specify how much of the cost will be incurred but it will also allow the organization running this particular project management activity  to plan for cash flow to make appropriate arrangements and also know how to plan the supply of funds during the entire project.

Doing cost aggregation is very important because it allows the project manager to control the use of cost at the working level. This will ensure that the project will be easily funded all throughout its life cycle.

This term is defined in the 5th edition of the PMBOK.

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