Actual Cost (AC) is the total realized cost incurred for work performed on an activity during a specific time period. It reflects the true expenditure of resources, including labor, materials, and overhead, and is a key metric in project cost management.
Key Aspects of Actual Cost
- Represents Real Spending – Tracks what has been spent on a task or project phase.
- Used in Cost Performance Analysis – Compared against budgeted costs to assess financial performance.
- Includes Direct and Indirect Costs – Accounts for salaries, materials, equipment, and administrative expenses.
- Time-Bound – Measured for a specific reporting period or across the entire project lifecycle.
Example Scenarios
Software Development Project
- Planned Cost for Feature Development: $10,000
- Actual Cost Incurred: $12,500
- Analysis: Over-budget by $2,500, requiring review of scope and resource allocation.
Construction Project
- Planned Cost for Material Procurement: $50,000
- Actual Cost: $48,000
- Analysis: Under budget, potentially freeing resources for other project areas.
Why Actual Cost Matters
- Supports Cost Control – Helps project managers track and manage expenses.
- Improves Budget Forecasting – Provides insights for future cost estimates.
- Feeds into Earned Value Analysis – Used to calculate performance metrics like Cost Performance Index (CPI).
See also: Budget at Completion (BAC), Earned Value (EV), Estimate at Completion (EAC), Estimate to Complete (ETC), Planned Value (PV).