Gantt charts, budgets and contracts

Accounting Ahead | Original study resource | accountingahead.com.au

Gantt charts, budgets and contracts

MODULE 4 | PART D.1 | STUDENT COMPANION

Project planning steps

1. Describe

Activities and tasks in

detail, with resources and

responsibilities

2. Develop

The project budget and

schedule from the work

plans

3. Decide

How to monitor: when,

how often, what reports,

to whom

4. Complete

Prepare for the project's

completion

The management accountant leads on budgeting, scheduling and cost optimisation

Design monitoring and performance measures at the planning stage, so team members know how they will be

judged; the project contract often provides the framework. Scheduling links time and cost, so cost optimisation

must be tied to the schedule.

Reading a Gantt chart

Week 1 Week 2 Week 3 Week 4 Week 5 Week 6 Week 7 Week 8

Site preparation

Foundations

Steel frame (arrives by ship)

Roofing

Electrical work

Flooring

Painting and fit-out

Ship arrives Handover

Imagined school sports hall: if the ship is late, every navy bar slips; overlapping bars run at the same time

STRATEGIC MANAGEMENT ACCOUNTING | M4 PART D.1 | STUDENT COMPANION

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Accounting Ahead | Original study resource | accountingahead.com.au

Gantt charts: features and limits

Feature Detail

Layout Tasks down the side in rough order; bars from start to finish date along a time scale

Extras Actual dates, milestones, colour for late or critical tasks, budget per period on the right

Strengths Simple to understand, build and update; good for expediting, sequencing and reallocating

resources

Limits Complex projects need network analysis (PERT) for dependencies, critical path and slack

The project budget

Topic Remember

Four functions Allocate (approval = approving resources); control through variances; main benchmark

of financial success; deters overspending

Estimate versus budget A budget adds time - costs per week, month or quarter, ideally by activity and

milestone

Content Usually costs only; revenues and cash flows in separate budgets; capture the project

separately in the accounts

Overheads Allocating costs the team cannot control clouds the evaluation

Uncontrollable change A revised budget is the fairer benchmark

Controllable change The original budget stays the benchmark; a revised budget may still guide cash and

cost control

Supplier contracts and control

Contract type Who carries cost risk What the management accountant watches

Fixed price Supplier Quality and timing (supplier cannot pass on overruns)

Payment for work done (hours or days) Buyer Hours and costs, plus quality and time

Cost-plus Buyer Supplier's cost records against the contract; exclude

non-reimbursable costs

Bonuses and profit-sharing (e.g. target

cost)

Shared Whether incentives cut cost and time without heavy

administration

Snowy 2.0 moved from a fixed price to an incentivised target-cost contract in 2023

STRATEGIC MANAGEMENT ACCOUNTING | M4 PART D.1 | STUDENT COMPANION

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Accounting Ahead | Original study resource | accountingahead.com.au

Case notes

Fixed price - the supplier's risk: Boeing's fixed-price contract to develop the US Air Force's KC-46 tanker

made Boeing responsible for costs above US$4.9 billion; by early 2022 its losses on the program exceeded

US$5.4 billion. Changing the contract: in August 2023 Snowy Hydro moved Snowy 2.0's main contract from a

fixed price to an incentivised target-cost model; in October 2026 its chief executive said a fixed price had never

suited a project of that scale.

Sources: Air & Space Forces Magazine, January 2022; Snowy Hydro announcement, 31 August 2023; The Nightly, 23 October 2026.

Practice questions

MODULE 4 | PART D.1 | TRY THESE BEFORE THE WORKED ANSWERS

Question 1 - Read the plan

A railway operator is installing ticket kiosks at five stations (imagined). (a) Which activities overlap? (b) What

happens to go-live if the kiosks arrive two weeks late? (c) What could a Gantt chart not tell you here?

Activity Start (week) Finish (week)

A Survey and design 1 2

B Order kiosks (6-week lead time) 2 8

C Wire stations 3 6

D Install kiosks 8 9

E Train staff 7 9

F Go live 10 10

STRATEGIC MANAGEMENT ACCOUNTING | M4 PART D.1 | STUDENT COMPANION

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Accounting Ahead | Original study resource | accountingahead.com.au

Question 2 - Which benchmark?

For each change, should performance be judged against the original or a revised budget? (a) A supplier's factory

fire doubles a component's price. (b) The team chose an untested design that needed rework. (c) The client

adds two new features.

Question 3 - Choose the contract

Recommend a contract type and the main control focus for (a) a clearly specified fence around a car park, (b)

urgent IT support during a cyber incident, and (c) a first-of-its-kind research prototype.

STRATEGIC MANAGEMENT ACCOUNTING | M4 PART D.1 | STUDENT COMPANION

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Accounting Ahead | Original study resource | accountingahead.com.au

Worked answers

MODULE 4 | PART D.1 | WORKED ANSWERS - ATTEMPT THE QUESTIONS FIRST

Question 1 - Read the plan

(a) B overlaps with A's end and with C and E; D overlaps with E. (b) Kiosks arrive in week 10, so installation (D)

moves to weeks 10-11 and go-live to about week 12 - two weeks late, because B, D and F are in sequence. (c)

Which activities are critical, how much slack C and E have, and the cost of speeding up delivery - these need

network analysis.

Question 2 - Which benchmark?

(a) Revised budget - uncontrollable. (b) Original budget - the design choice was controllable (a revised budget

may still guide cash planning). (c) Revised budget for the new scope - scope changes are negotiated and priced

separately.

Question 3 - Choose the contract

(a) Fixed price - well specified; watch quality and timing. (b) Payment for work done - scope unknowable in

advance; monitor hours, rates and outcomes daily. (c) Cost-plus or a target-cost contract with shared savings -

high uncertainty; audit cost records, exclude non-reimbursable costs, and use incentives for time and cost.

STRATEGIC MANAGEMENT ACCOUNTING | M4 PART D.1 | WORKED ANSWERS

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