Re: TOTAL COST COLUMN (IN TASK USAGE VIEW)

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From: Steve House [MVP] (sjhouse.remove.this_at_to.send.hotmail.com)
Date: 10/14/04 

Date: Thu, 14 Oct 2004 08:40:32 -0400

You may have misunderstood - What I was saying is that a project is a group
of tasks that work together to produce a cohesive whole. The model is valid
regardless of whether one is talking about building physical items or
creating intellectual property.

You may be thinking of "tasks" in terms of larger blocks of activity than I
am - I'm thinking of the smallest possible incremental blocks of work done
by one skill set usually requiring between 8 and 80 man-hours and resulting
in the creation of the smallest identifiable deliverable in the project, the
project itself being the aggregate of dozens or even hundreds of such
deliverables. In a consulting business, that would be each individual
meeting, each individual interview, each specific report or report section
written, each file analysed, each presentation created, each presentation
delivered (preparation and delivery being separate tasks since their
deliverables are different) and each and every one of the individual detail
tasks that go into those deliverables. A single client presentation might
have dozens of individual items of research, graphic creations, powerpoint
slide show created, slide show proofread, etc , and they are all separate
tasks done by separate resources. Does it makes sense to be concerned
whether we have a 10% profit margin on creating the Powerpoint slide show, a
15% profit margin on an editor proofreading it, and a 20% profit margin on
presenting it at the meeting where it's delivered to the audience or should
we be concerned with the overall? Literally any more granularity and you'd
almost be tracking each individual bathroom visit.

If I'm hired to create an accounts payable system, the profitability of that
project is a function of the system as a whole and not each specifc task
within it. It just doesn't make sense to me to say that writing the user
menu would have X profit margin, writing the numeric to verbal dollar amount
conversion subroutine would have Y profit margin, or that creating the
checque printing routine is more profitable than creating the month-end
summary report or the bank deposit register - after all, it's not like you
can drop the lower profit margin modules from the system to improve your
overall margins. While it might make an impressive presentation to break
out all the costs and revenues for each individual task that each individual
worker does, in terms of the overall management of the project it doesn't
seem especially useful to come up with a separate profit margin for each
report and presentation within it.

Just one opinion, your mileage may vary <grin> 

-- 
Steve House [MVP]
MS Project Trainer/Consultant
Visit http://www.mvps.org/project/faqs.htm for the FAQs
"Adele" <anonymous@discussions.microsoft.com> wrote in message 
news:400101c4af8e$87d92bb0$a601280a@phx.gbl...
> Hi Steve
>
> Thanks for your comments.  Our company is a "consulting"
> company.  We don't have physical items that we sell and
> therefore our entire pricing model is based on resource
> and intellectual property.  That is why we work out our
> profit on how much we charge the client vs. how much it
> costs us to do the analytical work.
>
> I have done what you said below before I posted the
> question and when I wanted it in the task usage view that
> was when I realised it didn't work.  Currently we are
> doing this in Excel, which is time consuming and that is
> why I have decided to go down this route.
>
> Thanks anyway.
>
> Kind regards
>
> Adele
>>-----Original Message-----
>>You can do it in the Gantt chart views but not in the
> usage views as best I
>>can figure.  Take the task field Cost 1 and use it to
> hold the charge out
>>rate.  Take task Cost 2 and set it a formula [Cost2] =
> [Cost 1]*[Work] / 60
>>(work is stored in minutes).  That will give you the
> total revenue per task
>>and from there you can create your other fields.  Usage
> views give values
>>distributed over time which doesn't seem appropriate to
> me for this sort of
>>calculation anyway - would waxing the widgets have a 15%
> profit margin on
>>Monday but a 22% profit margin on Tuesday?  Doubtful -
> OTOH, waxing widgets
>>could have a 15% profitablility while polishing fids
> could have a 20%
>>margin.  Surely you don't bill your client based on the
> specific resource
>>you assign to the task?  If I'm paying to have some
> widgets waxed, all I
>>care about is that they're done on time and according to
> spec.  I'm not
>>going to be a happy camper if you adjust my cost based on
> the specific
>>widget waxer you happen to have available that day.
>>
>>I have to wonder what the benefit is of this sort of
> analysis though.
>>Whether tasks are done or not is usually not dependent on
> their
>>profitability.  A task is something required to build the
> deliverable -
>>including it or not including it is rarely an option.  If
> you don't do it,
>>the deliverable doesn't get built and your project's
> reason to exist
>>evaporates.   Analysis the overall profitablity of the
> project, revenue
>>generated from creating the final product for the client
> versus your
>>internal total cost of doing the project plus overheads
> makes a lot of
>>sense.  But to say that Task A has margin X and Task B
> has margin Y, or for
>>that matter, Resource A's time has margin X while
> Resource B's has margin Y
>>seems to be generating a lot of numbers that have little
> or no meaning in
>>actually managing the firm, the project, or the
> resources.  Just one
>>iconoclasts view, I suppose.
>>
>>Actually, I confess to having a vested interest that
> makes me a bit
>>sensitive to the issue of tracking profitability by
> resource these days.  I
>>work on contract.  One of my employers charges their
> clients the same rate
>>regardless of who they send to the job, as they should.
> They have some
>>junior staff who have a lower hourly rate than the one
> they been paying me
>>who are now being preferentially booked to assignments
> because it raises
>>their profit margin.  Makes me furious and is something I
> consider highly
>>unethical. :(
>>
>>-- 
>>Steve House [MVP]
>>MS Project Trainer/Consultant
>>Visit http://www.mvps.org/project/faqs.htm for the FAQs
>>
>>
>><anonymous@discussions.microsoft.com> wrote in message
>>news:103001c4ab74$13b4d270$a601280a@phx.gbl...
>>> Hi John
>>>
>>> Thanks for your answer.  Not sure if it will help
>>> though.  Let me explain rather what we are trying to do
>>> here.  (Perhaps I shouldn't have asked about Overtime
>>> Rate, because I don't think this field is going to help
>>> me anyway)
>>>
>>> In the task view the total cost column is giving me
>>> answers for the standard rate x by hours worked in Rands
>>> (we have worked out a cost rate and a charge out rate
> for
>>> each resource and from that we want to work out %
>>> profitability).
>>>
>>> - Task usage view only shows total cost column (our
>>> standard rate which is our cost rate x by number of
> hours
>>> worked)
>>> - I want to add in another column which will show me
>>> total revenue (our charge out rate x by number of hours
>>> worked) and then;
>>> - I want to add in another column which will show me
>>> Revenue less cost and then;
>>> - I want to add in another column which will show me %
>>> profit.
>>>
>>> I can do all this using custom fields in the resource
>>> ***, but I want to see the cost at a task level not at
>>> a resource level.
>>>
>>> In the past we have been copying from Task usage ***
>>> into excel template which has all the formulas in it,
> but
>>> it seems silly to do it that way when MS Project carrys
>>> these fields and fields can be customised.
>>>
>>> I'll go back and try your suggestions though.  Please
>>> investigate further for me.
>>>
>>> Kind regards
>>>
>>> Adele
>>>>-----Original Message-----
>>>>
>>>>Adele,
>>>>The first question is, why? Why not simply change the
>>> base rate to be
>>>>the same as the overtime rate and you're done, the Cost
>>> field will then
>>>>give the value you want.
>>>>
>>>>However, what you want to do raises a couple of issues.
>>> A custom field
>>>>can be created with the necessary formula so the value
>>> you want is
>>>>available on Task views. Although this is relatively
>>> straightforward if
>>>>each task has only one resource, things get a little
>>> more complicated
>>>>when more than one resource is assigned to a task. If
>>> indeed your file
>>>>has just one resource assigned to each task, take a look
>>> at FAQ 37 -
>>>>Custom Fields in Tables on the MVP website at:
>>>>http://www.mvps.org/project/faqs
>>>>
>>>>If more than one resource is assigned to one or more
>>> tasks, my
>>>>suggestion is to use a little more advanced form of the
>>> short macro
>>>>detailed in the FAQ. Namely, it would be relatively easy
>>> to develop a
>>>>macro that took the Overtime Rate for each resource and
>>> apply it as
>>>>necessary to each resource assigned to each task. The
>>> value can be put
>>>>into a spare field called "Total Cost", or whatever.
>>>>
>>>>Hope this helps.
>>>>John
>>>>.
>>>>
>>
>>
>>.
>>
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