Activity based costing of project management in the construction of a 2,000 m3 LPG spherical tank project

Abstract

To apply Activity Based Costingtechnique to evaluate and analyse the cost of project management in theconstruction of a 2,000 m('3) LPG Spherical Tank Project. The activity modeling - IDEFO is selected to develop activitiesmodel. Using this technique, the major activities and their sub-activitiesare defined. The direct cost and overhead cost of the organization arecaptured and allocated into the organization elements of the project teamand then allocated into activities that had been listed by activity model.By this methodology, the cost of each activity is defined. The output measures are established to analyse the activity outputand performance in terms of the cost per unit of output and the timeconsumed. Both activity cost and output measures are used to analyse forcost reduction and process improvement. The ABC model is used as a tool for cost simulation to show theresults of the potential commitment in advance. By applying the ABC modeland cost simulation in this study, the total cost of the project managementis expected to be reduced by 30% and the total time of this project isexpected to be reduced by 8 months from the 31 months originally needed.