One budget uncertainty identified for the project is the estimated construction cost per square foot of $70, with a standard deviation of $3.67. What other areas of the project cost and/or revenue are likely to have uncertainty? Identify two potential budget uncertainties and, in the context of PMBOK-defined cost management principles and practices, explain how you think these uncertainties should be handled. The budget submitted by Dr. Link for the new facilitys medical equipment reflects cost estimates that may or may not be inflated. What course of action would you suggest that the project team (i.e., the ALF Project Steering Committee) take to address this potential budgeting concern and why? Given that the project manager and the project team are somewhat lacking in experience in the financial aspects of project management, how would you suggest that they work to control the projects cost once it is actively being executed? Identify one potential means of monitoring and/or controlling costs and, in the context of PMBOK-defined cost management principles and practices, explain why you think it would be particularly useful to the project team.

CHAPTER 4 / BUDGETING THE PROJ ECI 96,330 570.00 are feet Est cost per s ft Construction Costs Building Contingency ear 2 69,571 55,910 73,43 6,177 50,000 50,000 ear ear Purchased services $6,743.000 ilities nsurance 217,516 674,300 600,000 nc Program development & 29,002 78,086 107,960 Total operating equipment costs Fuiture A&e fees @ 5% inancing COStS Capitalized interest Site improvemen Phone & IS system 405,000 400,000 (sce below) 347,000 202,000 135,000 expenscs 899,788 976,515 1,076,535 Income (Loss) Beforc Other Expenses (174,727) 975,640 1,622,616 Other Expenses ome) Depreciation and tchen equiiient 30,000 ota Oranizaioal costs Legal and accounting Initia marketing Projec consultant Foliow-up market srvey Total oraizational costs amortization Intciest expense Interest income Total ocher 560,200 560,700 561,200 (1,226)11,31 47,451 558,974 572,021 608,65 25,000 250,000 $2,500/unit expenses ncone! Net Income (Loss) Internal Ratc of Return $(733,701) $403,619$1,013,965 $10,066,300 Light Asst Average Occupied Units Srudia 15 nits units $4,160uni $3,280 unit 8 units 1 BR/bath 60 units untts $5,460/unit $3,780fit Total The CFO developed an income statenent for the nexi 20 years. The hrst 3 years are shown below. Resident 20u 6,935 7,146 1919 27,380 11,634 26,126 34,315 Total timc St. Dismas Assisted Living tivalent!s Pro Forma Year Year 2 Year 3 Cash Flow: Net income oss (733,701) $ 403,619 $1,013,965 (10,079,000) (5,000 5,500) 560,200 560,700 561,200 130,656 82,500 18,638 Service Revenues $256,662 $ 414,012 $430,572Minus: capital 408,564 1,398,197 2,077,321 nvestment rCKi Additional person Add: depreciation 30,866 72,29 98,84 28,969 62,656 92,417 Add: working and amortization revene Ancillary revenue Total service 725,061 1,952,155 2,699,15 Net cash flow $(10,121,845)$1,041,819 $1,588,302 revenues Operating Expenses Salaries and wages Employee benefits The CFO, Dr. Sharf, and the Projct Stecring Team were ready to combine their individual plans and costs 82,865 142,913 152,401 into a composite plan and budget CHAPTER 4 / BUDGETING THE PROJ ECI 96,330 570.00 are feet Est cost per s ft Construction Costs Building Contingency ear 2 69,571 55,910 73,43 6,177 50,000 50,000 ear ear Purchased services $6,743.000 ilities nsurance 217,516 674,300 600,000 nc Program development & 29,002 78,086 107,960 Total operating equipment costs Fuiture A&e fees @ 5% inancing COStS Capitalized interest Site improvemen Phone & IS system 405,000 400,000 (sce below) 347,000 202,000 135,000 expenscs 899,788 976,515 1,076,535 Income (Loss) Beforc Other Expenses (174,727) 975,640 1,622,616 Other Expenses ome) Depreciation and tchen equiiient 30,000 ota Oranizaioal costs Legal and accounting Initia marketing Projec consultant Foliow-up market srvey Total oraizational costs amortization Intciest expense Interest income Total ocher 560,200 560,700 561,200 (1,226)11,31 47,451 558,974 572,021 608,65 25,000 250,000 $2,500/unit expenses ncone! Net Income (Loss) Internal Ratc of Return $(733,701) $403,619$1,013,965 $10,066,300 Light Asst Average Occupied Units Srudia 15 nits units $4,160uni $3,280 unit 8 units 1 BR/bath 60 units untts $5,460/unit $3,780fit Total The CFO developed an income statenent for the nexi 20 years. The hrst 3 years are shown below. Resident 20u 6,935 7,146 1919 27,380 11,634 26,126 34,315 Total timc St. Dismas Assisted Living tivalent!s Pro Forma Year Year 2 Year 3 Cash Flow: Net income oss (733,701) $ 403,619 $1,013,965 (10,079,000) (5,000 5,500) 560,200 560,700 561,200 130,656 82,500 18,638 Service Revenues $256,662 $ 414,012 $430,572Minus: capital 408,564 1,398,197 2,077,321 nvestment rCKi Additional person Add: depreciation 30,866 72,29 98,84 28,969 62,656 92,417 Add: working and amortization revene Ancillary revenue Total service 725,061 1,952,155 2,699,15 Net cash flow $(10,121,845)$1,041,819 $1,588,302 revenues Operating Expenses Salaries and wages Employee benefits The CFO, Dr. Sharf, and the Projct Stecring Team were ready to combine their individual plans and costs 82,865 142,913 152,401 into a composite plan and budget