The term Resource Cost refers to the cost of all the resources required to complete a project. These resources are needed to perform an integral part of the project development process. These resources include the material as well as the human resources. For material resources, it would be the price per unit, such as the bill of electricity, the price of a printer, the total cost of all the devices, and their consumption. HR include the labor, the cost of facilities, and the equipment they need to accomplish certain tasks.
The cost of all the elements needed to perform a certain task to complete a project is called the resource cost. This cost includes all the expenses that a company must bear for completing a project. It includes the people’s salaries, consumption bills, and costs of equipment and tools.
Types of Resource Costs
There are different kinds that could be calculated based on the project type and the resource type:
- Cost per use
- Cost per unit
The cost per use is a one-time cost that is paid when a resource is utilized, such as when new equipment is bought, the payment is done only once, and the company then owns the resources.
The cost per unit is a repeatable cost that depends upon the quantity of the resources and the duration for which it was used. For example, the electricity cost is paid based on its per-unit cost and the amount it was consumed in.
Types of Resources
There are two types of resources that a project could demand:
- Renewable Resources
- Consumable Resources
Renewable resources refer to the resources that could be used several times and renewed once consumed completely. These resources include natural resources such as the fuel to run the machinery.
Consumable resources refer to those resources that could be used within a specified limit, such as the ink in a printer, paper, or anything of the sort.
The resource cost for renewable resources could be measured based on per use. The per-use cost depends upon the resource demand of the task for which it is required. The per-use cost of a consumable resource, on the other hand, is applied from the moment the resource is used.
The consumable resources can be assigned to an activity in two ways:
- Fixed Use: When the per-unit cost is independent of the duration for which it was used, it is called the Fixed Used. For example, the amount of time consumed to build a wall of bricks does not affect the cost of the bricks.
- Variable Use: When the per-unit cost is dependent on the duration for which it was used, it is called the Variable Used. For example, the amount of time for which the electricity was used to operate the machinery directly impacts the electricity bill.
The Need for Resource Cost Estimation
The project managers should do the resource cost estimation to estimate the project cost and budget. All the resources needed to complete a project have some cost associated with it, regardless of its type (i.e., material or human). When it is known to the project managers in advance, it becomes easier for them to manage the project’s finances and let other stakeholders understand how the project’s budget will be consumed.