Friday, June 12, 2009

How to Use Microsoft Project: Fixed Cost

One of my colleagues ran into a major Project usability problem when he started filling in the cost column manually.  He actually did it by right clicking on a cell in the cost column and selecting “fill down” which he thought might like in excel just copy the formula.  In Project, this copies values and overrides the calculations normally done, e.g. cost = rate * number of hours.

Here is what Project assumes when you type in a cost into the Cost Column:

1. Normally, the cost column is calculated based on the rate (in this example $100 / hr) * the number of hours.

ScreenHunter_01 Jun. 12 08.03

2. If I type in a number into the cost column, I can replace the calculated cost with a new cost – in this case, I have specified it to be $1200.

ScreenHunter_02 Jun. 12 08.05

3. Project takes the cost I typed in and calculates the DIFFERENCE between takes the original calculated cost and what I typed in as a FIXED cost, e.g. in this case $400.  If you insert the Fixed Cost Column, you will see this value.

ScreenHunter_03 Jun. 12 08.08

4. If you do not understand what Project has done, it becomes really confusing as to how to get rid of the fixed cost.  Simply changing the duration or hours doesn’t remove the cost.  For example, if I change the duration to 2 days it doesn’t recalculate the cost to be $1600 – it keeps the $400 in fixed cost and makes the total cost $2000.

ScreenHunter_04 Jun. 12 08.09

5. If you have added a fixed cost my mistake, the simple way to fix the problem is to set the fix cost to $0.00 manually.  This resets to the default behaviour and now your cost is calculated normally.  See below – now that I have changed the fixed cost to $0 I can easily change the duration and the cost is calculated correctly.

ScreenHunter_05 Jun. 12 08.11  

I have been using Microsoft Project for ages and didn’t know this behaviour existed.   I found this problem because one of my colleagues was not an experience Project user and started filling in values like in Excel.  However, this is nothing in Project that warns you or points you to the solution – it took me digging through help and google to figure it out.

If you are new to Project, keep this simple lesson learned in mind – do not manually change the cost column.  Let Project always calculate it for you.  If you have a specific fixed cost for a task, then insert the Fixed Cost column and type it in there.  This will avoid a lot of confusion.


Anonymous said...

Thank you Chris. We have been experiencing the same problem and could not determine the cause. Your explanation is easy to understands.

Tim D.

Anonymous said...

Thank you Chris. We also were having the same problem. Now our project's baselines stop changing with every update. John Carter, PMP, Corpus Chriti, TX