In any discussion of a project budget, top management usually begins by asking, “What should this project cost, and is that reasonable?” If the project is optional, the decision to proceed should be based on an estimate of expenses versus future profits. For example, Will the effort reduce operating expenses? Is the project really necessary? The only way to answer these questions is to identify the true cost of the project. Your estimate must include labor expense—the cost of paying members of your project team. This is usually the most significant part of the project budget, but it’s often left out of the budget altogether. Example: A.
