Total Cost Management Framework: An Integrated
Total Cost Management Framework, 1st Ed., RevisedJohn K. Hollmann, PE CCE CEP, Editor1265 Suncrest Towne Centre Dr.Morgantown, WV 26505-1876 USAPhone: 800-858-COST or 304-296-8444Fax: 304-291-5728E-mail: info@aacei.orghttp://www.aacei.orgTOTAL COST MANAGEMENTFRAMEWORKAn Integrated Approach to Portfolio,Program, and Project Management1st Edition, Revised AACE INTERNATIONALThe Authority for Total Cost ManagementTM
Total Cost Management FrameworkAn Integrated Approach to Portfolio, Program, andProject ManagementFirst Edition, RevisedEdited by John K. Hollmann, PE CCE CEP2012 Printing by CreateSpace
Total Cost Management FrameworkFirst Edition, RevisedCopyright 1996-2011byAACE International1265 Suncrest Towne Centre Drive, Morgantown, WV 26505-1876, USAPhone: 1.304.2968444 Fax: 1.304.2915728 E-mail: info@aacei.org Web: www.aacei.org2012 Printing by CreateSpace
A Special Publicationof AACE International – The Association for the Advancement of Cost EngineeringTotal Cost Management FrameworkAn Integrated Approach to Portfolio, Program, andProject ManagementFirst Edition, RevisedEdited by John K. Hollmann, PE CCE CEPA continuing project of the AACE International Technical Board2011/2012 Technical Board Members:Larry R. Dysert, CCC CEP (Chair)Jeffery J. Borowicz, CCC CEP PSPPeter R. Bredehoeft, Jr., CEPRobert B. Brown, PEJohn K. Hollmann, PE CCE CEPTodd Pickett, CCC CEPAsoka K. Pillai, CCE EVPRichard A. Selg, CCEH. Lance Stephenson, CCCKul B. Uppal, PE CEPJames D. Whiteside, II, PEAssociate Members:Stephen M. Jacobson, CCCAmanda M. MadlDan Melamed, CCCAACE Technical and Production Staff:Formatting and Layout: Christian Heller, Staff Director Technical OperationsCover Design: Noah Kinderknecht, Graphic Artist/DesignerCopy Editor, First Edition: Cheryl Burgess
Visual TCM (VTCM)As a web-based companion to TCM, Visual TCM graphically demonstrates the integration of thestrategic asset management (SAM) and project controls (PC) process maps of the TCM Framework. TheVisual TCM application has been designed to provide a dynamic view of the TCM processes, from theoverall strategy process maps to the mid-level processes and detailed activities.The processes are hyperlinked, giving the user the ability to move to and from related process mapsand reference material. This allows for the optimal effectiveness of understanding and utilizing the processand sub-process in the context of and relationship to associated sub-processes that share common strategiesand objectives. Visual TCM allows the user to view and apply TCM section-by-section, at a sub-process orfunctional level.Visual TCM is a product of the AACE Technical Board and is available on the AACE website atwww.aacei.org.The AACE International Technical BoardAACE’s Technical Board is responsible for establishing the scope and definition of cost engineering,approving the Association’s Recommended Practices, and overseeing the technical program of the AnnualMeeting. The Technical Board is responsible for planning, facilitating the development and maintenanceof, promoting, and monitoring the Association’s technical products and activities. It is comprised of aChair, a minimum six and a maximum of fifteen additional voting members, and a Headquarters staffcontact as appointed by the Executive Director.About AACE InternationalAACE International is a 501(c)(3) non-profit professional association. Since 1956, AACEInternational has provided its members with the resources they need to enhance their performance andensure continued growth and success. With over 7,500 members world-wide, AACE International servescost management professionals in the disciplines of project management, estimating, risk management, andclaims. AACE International has members in 87 countries and cover 80 local sections.AACE has been certifying individuals since 1976. AACE offers the following certifications: CertifiedCost Consultant (CCC ) / Certified Cost Engineer (CCE ), Certified Cost Technician (CCT ),Certified Estimating Professional (CEP ), Certified Forensic Claims Consultant (CFCC ), EarnedValue Professional (EVP ), and Planning & Scheduling Professional (PSP ). AACE’s CCC/CCE,CCT, EVP, and PSP certifications are independently accredited by the Council of Engineering andScientific Specialty Boards.
CONTENTSI. INTRODUCTION TO TOTAL COST MANAGEMENT . 1CHAPTER 1—INTRODUCTION . 11.1 Definition of Total Cost Management . 31.2 Purpose and Uses of the TCM Framework . 51.3 Organization of the TCM Framework . 71.4 Key Introductory Concepts for Total Cost Management . 9CHAPTER 2—THE TOTAL COST MANAGEMENT PROCESS MAP . 112.1 Basis of Total Cost Management Processes . 132.2 Total Cost Management Process Map . 192.3 Strategic Asset Management Process Map . 232.4 Project Control Process Map . 27II. STRATEGIC ASSET MANAGEMENT PROCESS . 33CHAPTER 3—STRATEGIC ASSET PLANNING . 333.1 Requirements Elicitation and Analysis . 353.2 Asset Planning . 433.3 Investment Decision Making . 53CHAPTER 4—PROJECT IMPLEMENTATION . 674.1 Project Implementation. 69CHAPTER 5—STRATEGIC ASSET PERFORMANCE MEASUREMENT . 755.1 Asset Cost Accounting . 775.2 Asset Performance Measurement . 85CHAPTER 6—STRATEGIC ASSET PERFORMANCE ASSESSMENT . 916.1 Asset Performance Assessment . 936.2 Asset Change Management .1016.3 Asset Historical Database Management .1076.4 Forensic Performance Assessment .115III. PROJECT CONTROL PROCESS . 125CHAPTER 7—PROJECT CONTROL PLANNING .1257.1 Project Scope and Execution Strategy Development.1277.2 Schedule Planning and Development .1337.3 Cost Estimating and Budgeting .1437.4 Resource Planning .1517.5 Value Analysis and Engineering .1577.6 Risk Management .1637.7 Procurement Planning.179CHAPTER 8—PROJECT CONTROL PLAN IMPLEMENTATION .1858.1 Project Control Plan Implementation .187
CHAPTER 9—PROJECT CONTROL MEASUREMENT .1939.1 Project Cost Accounting .1959.2 Progress and Performance Measurement .201CHAPTER 10—PROJECT CONTROL PERFORMANCE ASSESSMENT .20910.1 Project Performance Assessment .21110.2 Forecasting .22110.3 Change Management .22910.4 Project Historical Database Management .237IV. TOTAL COST MANAGEMENT ENABLING PROCESSES . 245CHAPTER 11—ENABLING PROCESSES .24511.1 The Enterprise in Society.24711.2 People and Performance Management .24911.3 Information Management .25711.4 Quality and Quality Management .26111.5 Value Management and Value Improving Practices (VIPs) .26711.6 Environment, Health, and Safety Management .273APPENDIX. .281A—AACE INTERNATIONAL RECOMMENDED PRACTICE NO. 11R-88,REQUIRED SKILLS AND KNOWLEDGE OF COST ENGINEERING .281
PREFACEWhat Is the Total Cost Management (TCM) Framework?Total cost management (TCM) is the effective application of professional and technical expertise toplan and control resources, costs, profitability and risk. Simply stated, TCM is a systematic approach tomanaging cost throughout the life cycle of any enterprise, program, facility, project, product or service. TheTCM Framework is a representation of that ‘systematic approach”.The TCM Framework is a structured, annotated process map that for the first time explains eachpractice area of the cost engineering field in the context of its relationship to the other practice areasincluding allied professions. As the book subtitle says, it is a process for applying the skills and knowledgeof cost engineering. A key feature of the TCM Framework is that it highlights and differentiates the maincost management application areas: project control and strategic asset management.The TCM Framework is a significant, original contribution to the cost management professionapplicable to all industries. It is an AACE cornerstone technical document that joins the current body ofknowledge literature for related fields such as project management, operations management, andmanagement accounting. It is also consistent with the latest organizational and portfolio thinking which tiesall practices and processes back to overall business strategies and objectives.As a “framework”, this document is not a “how-to” instructional guide, but a conceptual representationthat provides a structured, integrated overview of cost engineering. As such, it will guide AACEInternational’s development of more detailed technical products including the following: Recommended Practices (RPs): original, peer-reviewed documents that define the specifics ofparticular methods or procedures outlined in the TCM Framework,Professional Practice Guides (PPGs): a set of structured, edited compilations of selectedAACE publications on specific areas of cost engineering,Cost Engineer’s Notebook (CEN): a single structured, edited compilation of selected AACEpublications that provides an overview of all the key fundamental areas of cost engineering.The TCM Framework’s structure will provide consistency and support development of AACEEducation Board (e.g., Skills and Knowledge of Cost Engineering and Certification Study Guide) andCertification Board (e.g., certification examinations) products.Those working in the project management field will find similarities with the Project ManagementInstitute’s (PMI) A Guide to the Project Management Body of Knowledge (PMBOK Guide) as projectcontrol is a subset of the field of project management. With a greater focus on project control, the TCMFramework adds richness in many of the processes. More importantly, the TCM Framework addressesstrategic asset cost management practices in business and capital planning, operations and maintenance,and product cost management, both upstream and downstream of the project processes. Asset ownercompanies will particularly appreciate the enhanced coverage of areas such as historical data management,cost modeling, economic and decision analysis, and value analysis.The intent is that the TCM Framework will be studied, applied, and continuously improved by aworldwide audience from all industries, thereby advancing the profession of cost engineering and costmanagement.The Value of the TCM Framework for AACE InternationalIn 1994, AACE added total cost management to its constitution. The AACE Technical Board wascharged with defining TCM as a systematic approach. Without such an approach, it has been difficult toeffectively describe the scope and purpose of the cost engineering profession. One study described theix
challenges this way: “ for the advancement of the field, more emphasis should be put on the creation ofnovel mental images and the development of a generalized syntactical and conceptual structure.” It addedthat we must have a “clear methodology of what it does and how its data are collected and interpreted,” and“a full, structured set of ideas that is dynamic, developmental, yet consistent.”1 These are the challengesaddressed by the TCM process. The TCM process is a systematic approach designed to promote a unified,structured vision of the common purpose for the many cost engineering practices. It is also designed to beindustry and asset generic in that it applies to any enterprise, program, facility, project, product or service.The Value of the TCM Framework for IndustryCompanies are continually looking for ways to tie everything they do to their strategic missions andobjectives. As they strive for better strategic performance, they are frequently re-engineering theirorganizations. To find efficiencies and improve quality, they are documenting, benchmarking, analyzingand improving business and work processes. For the many enterprises seeking ISO certification a processfocus is required.2 TCM provides a strategic model that can help an organization design its own processesrelated to cost management.Likewise, re-engineering increases the challenges for individual professionals as employers breakdown functional silos and increasingly expect staff and leaders to be competent in many different practices,while also being more knowledgeable of business processes. For individuals, the TCM Framework providesa “map” to help them understand all the practice areas while also helping guide their career planning.In the academic arena, the TCM Framework provides a model for developing cost engineeringeducation and training products and curricula that will serve those individuals and enterprises in need of abroader, more integrated perspective.How to Use the TCM FrameworkBecause the TCM Framework process is based on broadly accepted “first principles” (i.e., theDeming/Shewhart cycle), it applies to all industries. It can be used by all levels of practitioners and in allbusiness, academic, and institutional environments (customers, subcontractors, government, primecontractors, construction managers, design-build, etc.) worldwide. It also applies to the entire life cycle ofasset and project portfolios.It is a generic reference process model or guideline. It is not intended to be used directly “out-of-thebox” in any specific application. Managers, practitioners, educators, and others will need to build their ownprocesses and improve practices in the context of their business, assets, organization, culture, projectsystems, and so on. As a generic reference model, the TCM Framework has already been successfullytested in reengineering consulting and training.The TCM Framework can be read and applied section-by-section at a sub-process or functional level.However, optimal effectiveness of a sub-process requires that it be developed in the context of andrelationship to associated sub-processes that share common strategies and objectives. In that respect, allreaders with limited interest or time should understand the Part 1 overview sections before focusing on thesections and sub-processes of interest.The Visual TCM (VTCM) version now adds hyperlinks amongst the content, enhancing use by givingthe user the ability to easily move to and from related process maps and reference material.1Sik-Wah Fung, Patrick, and Dodo Ka-Yan Ip, “Cost Engineering as an Academic Discipline,” AACE InternationalTransactions, 1998.2International Organization for Standardization ISO 9000 and its family of related standards is focused on an enterprisehaving, maintaining, and following documented process and procedures.x
AACE International and the TCM ProcessAACE International assumes responsibility for the advancement and promotion of scientific principlesand techniques in the practice areas of business and program planning; cost estimating; economic andfinancial analysis; cost engineering; program and project management; planning and scheduling; and costand schedule performance measurement and change control. However, an effective process must alsoensure that the skills and knowledge of cost engineering are advanced in a way that promotes and isconsistent with best business and program cost management practices. Therefore, the TCM Frameworkincludes practice areas for which AACE International is not the primary caretaker, but which interactextensively with cost engineering practices and cost management (e.g., cost accounting). For these areas,the intent is to demonstrate their integration with cost engineering, not take technical ownership of them.AACE will monitor advancements in allied fields to ensure that each supports an effective business andcost management process. Likewise, AACE International educational and certification products will focuson the core skill and knowledge areas while ensuring that professional cost engineers have a solidgrounding in the business and program planning context in which these skills and knowledge are applied.The Development of and Contributors to the Original PublicationThe TCM Framework had its beginnings in 1994 as an effort to develop a professional handbook to becalled AACE International’s Total Cost Management Guide for the 21st Century with Wes Querns as theeditor. A significant and successful effort was made to enlist recognized leading professionals in theirrespective fields as contributing authors and a publisher was lined up.3 However, as the Guide’s scope wasdefined, it became apparent that a book with independent experts covering the traditional cost engineeringtopics in their own ways would not provide the required systematic approach. Therefore, in 1995, theGuide project was re-scoped as the Framework project.1996, the high level TCM process was published in an article in Cost Engineering journal entitled “ANew Look at Total Cost Management.” The Technical Board solicited member comment via a specialsurvey and we drafted the introductory chapters (now Part I). These overview chapters were subjected toconsiderable review and consensus building (during what may be called phase one) until 2002 when theintroductory chapters were formally published.4Completing the remaining 30 sections was not so much a traditional writing process as a processreengineering project for the editor and contributors. The effort consisted of taking common practiceknowledge about cost engineering and allied fields, breaking it down into steps, connecting the steps basedon a time honored management process model, and finishing it with consistent narrative using a singlevoice. Once again, the support of leading professionals was sought to assist in the development. Thenovelty and value of the resulting product is in integration and structure, not new practices, “how-tos,” ornarrative. The detailed parts and pieces of the technical content are generally well-trodden material coveredby many sources. Every reasonable effort was made to appropriately reference material from other sourcesper AACE publication guidelines.The product was then reviewed by AACE’s Technical Committees, the main and associate AACEBoards, and other subject matter experts. Comment was sought from related associations as well. All thesecontributors are acknowledged in the next section. The review and approval process used was the samestringent approach that AACE uses for its Recommended Practices. This multi-stage process requiresformal requests for comment, documented comment disposition, and Technical Board approval to helpensure that general consensus is achieved.3Many of these experts provided early outlines or draft chapters for the cancelled Guide. They are listed in theAcknowledgement section. Some of these experts are also acknowledged as author/key contributors for Framework.4Individuals that commented at that time are included among the contributors listed in the Acknowledgement section.xi
This and Future EditionsThe current revision includes two completely rewritten sections; 3.3 Investment Decision Making and7.6 Risk Management. These resulted from work to improve AACE's technical foundation for the Decisionand Risk Management Professional (DRMP) Certification. Other editorial changes resulted from work todevelop Visual TCM (VTCM).The TCM Framework will continue to be a living document and AACE International plans to update itperiodically. As a living document, readers are encouraged to participate in AACE's publically accessibleonline discussion forums where ideas for revisions are generated and discussed. AACE also encouragesthose that apply the concepts presented in this document to share their experiences through articles, papers,and presentations.Special Thanks (Original Publication)The editors would like to thank our past employers, Eastman Kodak and Independent Project AnalysisInc. (particularly Mr. Edward W. Merrow, IPA’s founder and owner) for their support of the editors’ timeand effort on this project and for support of employee professional development in general.Several AACE International members, officers, and Fellows were particularly supportive of thisproduct’s development. Richard E. Westney PE, Past President and Fellow, first coined the term Total CostManagement in 1991 as part of the Board of Director’s “Vision 21” initiative. Subsequently, Larry G.Medley Sr. ECCC, Past President and Fellow, provided early and continuing support including helpingdefine the TCM concept for inclusion in AACE’s Constitution and Bylaws in 1994. Dorothy J. Burton, VPTechnical and Fellow helped get the Framework off the ground and through its sometimes rocky inception.The late Franklin D. Postula PE CCE, Past President and Fellow, provided much welcome encouragementalong the way. Also, the following Technical Board Vice Presidents and Directors since 1995 each had ahand in helping the Framework find its way into your hands: these include Dorothy J. Burton (Fellow), Dr.James E. Rowings Jr. PE CCE (Fellow), James G. Zack Jr., Edward D. Hamm PE CCE (Fellow), JenniferBates CCE (Fellow), Joseph W. Wallwork PE CCE PSP, and Larry R. Dysert CCC.Finally, we would like to thank our wonderful wives Cindy Hollmann and Susan Querns for theirsupport and forbearance during this decade long project.John K. Hollmann, PE CCEEditorSterling, VirginiaWesley R. Querns, CCEEditor-Phase 1Phoenix, Arizonaxii
ACKNOWLEDGEMENTS FOR THE FIRST EDITIONAuthors/Key Contributors for the TCM FrameworkJohn K. Hollmann, PE CCE edited and contributed to all sections.5 The Technical Board would like toexpress its gratitude to the following individuals who provided original text, ideas, or otherwise contributedto or helped technically validate the contents (listed in their order of contribution by section).Author/Key ContributorWesley R. Querns, CCETCM Framework SectionPrefaceChapter 1 IntroductionChapter 2 The Total Cost Management Process9.1 Project Cost Accounting9.2 Progress and Performance Measurement10.1 Project Performance Assessment3.1 Requirements Elicitation and Analysis3.2 Asset PlanningPMO Director, Perot Systems Corporationwesley.querns@chw.edu.Gregory D. GithensCatalyst Management Consulting, LLCgdg@catalystpm.comJohn R. Schuyler, PE CCE3.2 Asset Planning3.3 Investment Decision MakingInstructor/Consultant, PetroSkills-OGCIjohn@maxvalue.com4.1 Project ImplementationLarry R. Dysert, CCCManaging Partner, Conquest Consulting Groupldysert@ccg-estimating.com4.1 Project ImplementationSusan G. Seber, CCEDirector, Lean Manufacturing, Eastman Kodaksusan.seber@kodak.comGary Cokins5.1 Asset Cost Accounting5.2 Asset Performance Measurement6.1 Asset Performance Assessment11.4 Quality and Quality Management6.3 Asset Historical Database Management10.2 Forecasting10.3 Change Management10.4 Project Historical Database Management11.5 Value and Value Improving Practices6.4 Forensic Performance Assessment6.4 Forensic Performance AssessmentStrategist, SAS Institute Inc.gary.cokins@sas.comStephen M. Jacobson, CCCDirector, Project Mgmt, Hilton Hotels Corp.stephen jacobson@hilton.comPaul E. Makris, PE PSPJames G. Zack, Jr.Exec. Director, Corporate Claims Mgmt, Fluorjim.zack@fluor.com7.1 Project Scope & Execution Strategy Dev.7.2 Schedule Planning and Development8.1 Project Control Plan Implementation7.2 Schedule Planning and DevelopmentEarl T. Glenwright, Jr. PE PSPPartner, Koevsky-Glenwright Associatesearl csss@yahoo.comDonald F. McDonald, Jr. PE CCE PSP FellowFluor Enterprises, Inc.Bernard A. Pietlock, CCCDouglas W. Leo, CCC7.3 Cost Estimating and Budgeting7.3 Cost Estimating and BudgetingSr. Project Estimator, Eastman Kodakdoug.leo@censeo.usSarwar A. Samad, CCE7.4 Resource Planning7.7 Procurement PlanningProgram Manager, Federal Aviation Admin.ssamad786@hotmail.com5John K. Hollmann, PE CCE, President, Validation Estimating LLC; jhollmann@validest.comxiii
Author/Key ContributorDonald E. Parker, PE CCETCM Framework Section7.5 Value Analysis and EngineeringConsultantd@dparker.com7.6 Risk ManagementMichael W. CurranPresident and CEO, Decision Sciences Corp.mcurran@uncertain.com7.6 Risk ManagementKevin M. CurranExec. Vice President, Decision Sciences Corp.kcurran@uncertain.comBonnie L. Halkett11.1 The Enterprise in Society11.4 Quality and Quality Management11.1 The Enterprise in Society11.4 Quality and Quality Management11.1 The Enterprise in Society11.4 Quality and Quality Management11.2 People and Performance ManagementRobert E. Templeton, PE CCE FellowDr. Carl Wolf, CCE FellowDr. Ginger LevinProj. Mgmt. Consultant and Lecturer, Univ. ofWisconsin-Plattevilleginlevin@aol.comKeith WatsonDonald J. Cass, CCE EVP FellowDr. Neil L. Drobny, PE11.3 Information Management11.6 Environment, Health, and Safety11.6 Environment, Health, and SafetyConsultantnld268@rrohio.com11.6 Environment, Health, and SafetyRichard A. Selg, CCE FellowPrincipal Project Controls Engineer, Parsonsrichard.selg@parsons.comContributing Authors of the Draft Guide to Total Cost Management (1995/96)The following individuals submitted draft outlines or chapters for this cancelled precursor handbooktext for which Wesley R. Querns, CCE was the editor. The Technical Board would like to express itsgratitude for their previously unrecognized contribution.Dr. Neil L. Drobny, PEGregory D. GithensDr. Deborah J. Fisher, PEMurray W. JanzenHarvey A. LevineDr. Anthony K. Mason, ECCEGary NelsonNghi M. Nguyen, PEDr. James T. O’Connor, PENeil D. Opfer, CCEDr. Joseph J. Orczyk, PE CCESarwar A. Samad, CCEJohn R. Schuyler, PE CCEJon E. SeidelSam L. ShaferM. Larry ShillitoR. Gary Stillman, PE CCEHenry C. Thorne, ECCE FellowGeorge C. TlamsaKeith WatsonRoy L. Wilson, PE CCEAndrew Youngxiv
CommentorsThe Technical Board would like to express its gratitude to the following individuals and groups whomade formal comments during the various technical reviews. Inclusion in these lists does not imply full orpartial e
About AACE International AACE International is a 501(c)(3) non-profit professional association. Since 1956, AACE International has provided its members with the resources they need to enhance their performance and ensure continued growth and success. With over 7,500 membe
z find out total fixed cost, total variable cost, average fixed cost, average variable cost, average total cost and marginal cost. 18.1 DEFINITION OF COST AND COST FUNCTION Cost is defined as the expenditure incurred by a firm or producer to purchase or hire factors of production in order to produce a product. As you know, factors of
c. Provide information to management for decision making d. Aid in the fixation of selling price 3. The combination of direct material and direct labor is a. Total production Cost b. Prime Cost c. Conversion Cost d. Total manufacturing Cost 4. The cost expended in the past that cannot be retrieved on product or service a. Relevant Cost b. Sunk Cost
EA 4-1 CHAPTER 4 JOB COSTING 4-1 Define cost pool, cost tracing, cost allocation, and cost-allocation base. Cost pool––a grouping of individual indirect cost items. Cost tracing––the assigning of direct costs to the chosen cost object. Cost allocation––the assigning of indirect costs to the chosen cost object. Cost-alloca
Cost Accounting 1.2 Objectives and Functions of Cost Accounting 1.3 Cost Accounting and Financial Accounting — Comparison 1.3 Application of Cost Accounting 1.5 Advantages of Cost Accounting 1.6 Limitations or Objections Against cost Accounting 1.7 Installation of a costing system 1.7 Concept of Cost 1.9 Cost Centre 1.10 Cost Unit 1.11 Cost .File Size: 1MB
Positive overall: 1. One standard is simpler 2. Saves time and cost (no need for 3 to 4 days audits, or six monthly audits) COST SAVINGS HARPS AUDIT COST 245 GST WQA SQF Coles Annual Audit Cost 5,300 WQA Half-Yearly Audit Cost 1,800 Total Annual Cost 7,100 SQFHARPSAudit Cost 5,545 245 Total Annual Cost 5,790 COST SAVINGS
new total cost curve that lies above the original total cost curve at every Q 0. At Q 0, long-run total cost is still zero. Thus, as Figure 8.4shows, an increase in an input price rotates the long-run total cost curve upward.3 2An analogous argument would show that minimized total cost would go down when the price of capital goes down.
Premium cost Estimated cost of retained losses Risk management costs Total Cost of (Insurable) Risk The premium cost is the fixed element of cost of risk. complete This is the cost of claims not covered by insurance. This is the external and internal costs. TCOR is therefore the best measure of the actual cost of any type of insurable risk.
1. Cost Management Section B : Strategic Cost Management Tools and Techniques 50% 2. Decisions Making Techniques 3. Standard Costing in Profit Planning 4. Activity Based Cost Management - JIT and ERP 5. Cost of Quality and Total Quality Management Section C : Strategic Cost Management - Application of Statistical Techniques in Business .
