CSM Forum Banner

Direct vs Indirect cost

Exclusive forum for iZenBirdge PMP® clients
pmp_learner
Participant
Participant
Posts: 82
Joined: Fri Dec 02, 2016 10:18 pm

Direct vs Indirect cost

Postby pmp_learner Thu Aug 31, 2017 6:45 pm

Hi,
I came across the following question from Rita:
Qsn: What Type of cost is team training:
a) Direct
b) NPV
c) Indirect
d) Fixed

The correct answer given is A- Direct cost with the below explanation:
"You are training the team on the skills required for the project. The cost is directly related to the project and thus a direct cost."

However Books has the following definition for the direct and indirect cost (Rita 8th edition, page 257)
Direct Costs: These costs are directly attributable to the work on the project. Examples are: team travel, team wages, recognition, and cots material used on the project.
Indirect Costs: Indirect costs are overhead items or costs incurred for the benefit of more than one project. Examples includes taxes, fringe benefits, and janitorial services.

In the question above, cost is for giving training to team on some skill. So if you train team members on any skill, those skilled resources could be used on other projects with in the company. Team grooming, upskilling the team to work more efficiently is also part of project management (HR Mgmt Knowledge area).. So my question here is: even though team is getting trained for a given project, but ultimately its is kind of updating EEF ( skill set with in the company).. , trained resources could contribute towards other projects, so should training not be considered as "Indirect Cost"

Manish/Saket: Your thoughts on this please.

Thanks
Kavita
manishpn
Expert
Expert
Posts: 2210
Joined: Sat Jan 04, 2014 3:55 pm

Re: Direct vs Indirect cost

Postby manishpn Sun Sep 03, 2017 8:36 pm

pmp_learner wrote:Hi,
I came across the following question from Rita:
Qsn: What Type of cost is team training:
a) Direct
b) NPV
c) Indirect
d) Fixed

The correct answer given is A- Direct cost with the below explanation:
"You are training the team on the skills required for the project. The cost is directly related to the project and thus a direct cost."

However Books has the following definition for the direct and indirect cost (Rita 8th edition, page 257)
Direct Costs: These costs are directly attributable to the work on the project. Examples are: team travel, team wages, recognition, and cots material used on the project.
Indirect Costs: Indirect costs are overhead items or costs incurred for the benefit of more than one project. Examples includes taxes, fringe benefits, and janitorial services.

In the question above, cost is for giving training to team on some skill. So if you train team members on any skill, those skilled resources could be used on other projects with in the company. Team grooming, upskilling the team to work more efficiently is also part of project management (HR Mgmt Knowledge area).. So my question here is: even though team is getting trained for a given project, but ultimately its is kind of updating EEF ( skill set with in the company).. , trained resources could contribute towards other projects, so should training not be considered as "Indirect Cost"

[color=#4080FF]You are assuming too much here, to keep it simple the training related to project is direct cost,
yes in future this training may help other projects in org , but you dont know when and how, so it is practically impossible to share that cost with future projects .


[/color]
Manish/Saket: Your thoughts on this please.

Thanks
Kavita
Br,
Manish P
PMP, PMI - ACP, SAFe Agilist
http://www.izenbridge.com/blog/7-effect ... ification/

Return to “PMP® Queries and Tips”

Who is online

Users browsing this forum: No registered users and 5 guests