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Budget allocation in manufacturing
The allocation of budgets for a project can be done in two ways. In the first, a generic budget is allocated for the final cost, either at the time of contracting or at the time of carrying out work, whichever is most appropriate. Once the start of the work has begun, a progress budget is allocated. However, the real cost of the project may be less than the expected budget, due to some scope creep as the project progresses. In this case, the amount of money retained will be in excess of the amount of money originally allocated.
The allocation of budgets for a project can be done in two ways.
Budget at the time of contract
Budget at the time of carrying out work
The budget is allocated at the time of contracting work, as this will ensure that the project is completed and accepted as expected. However, it is important to be aware that some companies may use the budget as an indicator that their design has been approved for the project.
Alternatively, a budget can be allocated at the start of work, so that it can be reviewed throughout the project.
Project budgets
The most significant problem with the budget allocation at the time of carrying out work is that it is very difficult to track the cost of the project. For this reason, some companies allocate a budget for the project at the time of contracting, at which stage costs are estimated, and this is subtracted from the total project cost.
This method is not suitable if the final cost of the project is very far from the initial estimate, or if the company wants to be able to allocate a budget that is lower than the final cost, for example when the company wants to stop work on the project and reallocate the resources to other projects.
The budget for the project must be at the same level as the budget for the project at the time of carrying out work. This is to ensure that the project is completed on budget and on time.
It is important to set a budget that is equal to the expected cost of completing the project, at the time of carrying out work. Otherwise, if the budget is too low, the project will not be completed as expected. If the budget is too high, the project may be finished in a shorter time, resulting in costs being spent on overtime.
Alternatively, the budget can be allocated at the start of work,
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