| Course | BU 442 Cost and Time Management |
|---|---|
| Unit | Unit 5 |
| Paper type | Budget and contingency |
| Length | About 920 words, 6 pages |
| Format | APA 7 student paper |
| School | Herzing University |
| Program | BS in Project Management |
| Updated | September 2026 |
Free sample paper for BU 442 Unit 5
Money With Dates on It, and Ninety Thousand Dollars Derived Rather Than Guessed: A Budget and Contingency Record for a Composite Fort Wayne Shared Kitchen
Student Name
Business, Herzing University
BU 442: Cost and Time Management
Instructor Name
March 11, 2026
Money With Dates on It, and Ninety Thousand Dollars Derived Rather Than Guessed: A Budget and Contingency Record for a Composite Fort Wayne Shared Kitchen
From Estimate to Budget
The approved cost estimate for the shared kitchen at Fort Wayne Food Works, an invented nonprofit converting a former hardware store, totals $1,317,000. An estimate is a total; a budget is money with dates on it. This record spreads the estimate across the schedule from the critical path analysis, so the board and the lender can see how much is needed each month. It then derives a contingency from the uncertainty the estimate already recorded, and keeps a management reserve outside the baseline, under the board's control.
The PMBOK guide separates the cost baseline, the time-phased budget including contingency for identified risks, from management reserve, which covers unforeseen work within scope and sits outside the baseline (Project Management Institute, 2017). The distinction decides who may spend each pot of money, which is why it is drawn before the first invoice arrives.
The Time-Phased Budget
Each work package's cost is spread evenly across its scheduled working days, and project management is spread across the whole schedule. Working days are grouped by calendar month from the planned start on February 2, 2026.
| Month | Working days in schedule | Planned cost | Cumulative planned cost | Main work |
|---|---|---|---|---|
| February | 0 to 20 | $59,556 | $59,556 | Design |
| March | 20 to 42 | $173,811 | $233,367 | Design ends; permit review; demolition; fabrication begins |
| April | 42 to 64 | $364,324 | $597,691 | Fabrication; electrical, plumbing and mechanical work |
| May | 64 to 84 | $238,142 | $835,833 | Building systems finish; interior begins |
| June | 84 to 106 | $152,244 | $988,078 | Interior; hood and walk-in installation |
| July | 106 to 128 | $311,244 | $1,299,322 | Equipment setting; fire suppression; inspections |
| August | 128 to 135 | $17,678 | $1,317,000 | Inspections end; commissioning |
Two months carry most of the spending. April is heavy because fabrication, which is paid on progress, overlaps the three building-system trades. July is heavy because the $282,000 of kitchen equipment is set that month. June is lighter because interior work, the main activity, costs less per day than the systems and equipment on either side of it. The cumulative figures form the planned value curve that later performance will be measured against.
Deriving Contingency
Contingency covers identified risks within the approved scope. It is derived here from two sources the earlier work already recorded, rather than set as a flat percentage.
The first source is the spread in the eight three-point estimates. For each, the standard deviation is approximated as the pessimistic value minus the optimistic value, divided by six, the convention that came with the original PERT technique (Malcolm et al., 1959). They range from about $3,300 for demolition and walk-ins to $10,000 for interior construction. If the eight elements varied independently, their combined standard deviation would be the square root of the sum of their squares, about $19,700, and a 90 percent confidence allowance would be about 1.28 times that, roughly $25,200. But these elements are not independent. They share the same local labor market, the same general contractor and the same old building, and a surprise in one, such as poor slab or wall conditions, tends to appear in others. If they move together, the combined standard deviation approaches the simple sum, about $52,700, and the 90 percent allowance becomes about $67,400. The budget uses the correlated figure because the evidence points that way, and because underestimating contingency on a renovation is the more common and more expensive mistake.
The second source is discrete risks that sit outside the three-point ranges because their assumptions were excluded from the most likely and pessimistic values. Each is priced by probability times impact.
| Discrete risk | Probability | Impact | Expected value |
|---|---|---|---|
| Rooftop units need roof reinforcement | 25% | $48,000 | $12,000 |
| Sewer line to the street must be replaced | 20% | $35,000 | $7,000 |
| Health department plan review requires a layout change | 30% | $12,000 | $3,600 |
| Total | $22,600 |
Contingency is therefore about $67,400 plus $22,600, or $90,000, about 6.8 percent of the estimate. The cost baseline is $1,407,000. Because the risks behind it fall mostly in building systems and demolition, the contingency is expected to be drawn mainly in March through May and is shown as available from March. Drawing on contingency requires the project manager's written record of which identified risk occurred.
Matching the Budget to the Money Coming In
A dated budget exposes a question a total hides: whether the money arrives before it is spent. Food Works expects a $400,000 grant in March and a construction loan that pays contractors monthly against inspected progress. By the end of April the plan calls for about $598,000 of work, more than the grant alone, so the loan's first draw must be approved by mid-April. The lender's draw schedule was set to the cumulative column above, with each draw sized to the following month's planned cost plus any contingency the project manager expects to use. If the loan closes late, the fabrication orders placed in March are the first payments at risk, and the critical path analysis showed that delaying them would eat most of their float. The budget therefore records the loan closing date as a dependency of the fabrication packages, not only as a finance task.
Management Reserve, Outside the Baseline
Management reserve of $60,000, about 4.5 percent of the estimate, is held by the Food Works board and is not in the baseline. It covers work within scope that nobody identified, such as a structural defect found behind a wall. The project manager cannot spend it; a request goes to the board's finance committee with the reason, and approved amounts move into the baseline, which is then revised. Keeping reserve outside the baseline means earned value measures performance against the plan the team actually committed to. Kerzner (2017) notes that when reserve is folded into activity budgets, overruns are hidden until the reserve is gone, and nobody can tell which risks were real.
Total funding sought is $1,467,000: the $1,407,000 baseline and the $60,000 reserve. That sits just under the earlier parametric figure of roughly $1.47 million, which gives the board a useful check that the bottom-up work did not simply move money out of sight. Food Works and its budget exist only in this course's case.
References
Kerzner, H. (2017). Project management: A systems approach to planning, scheduling, and controlling (12th ed.). Wiley.
Malcolm, D. G., Roseboom, J. H., Clark, C. E., & Fazar, W. (1959). Application of a technique for research and development program evaluation. Operations Research, 7(5), 646-669. https://doi.org/10.1287/opre.7.5.646
Project Management Institute. (2017). A guide to the project management body of knowledge (PMBOK guide) (6th ed.). Project Management Institute.
What the BU 442 Unit 5 instructions ask for
BU 442 Unit 5 asks students to build a time-phased project budget and set contingency. Prompts usually require spreading the approved estimate across the schedule, showing cumulative cost, deriving a contingency amount with a stated method, distinguishing contingency from management reserve and explaining who controls each. Many instructors ask how contingency can be derived without simulation software; methods based on three-point spreads or expected values of identified risks are common. The budget should reconcile with the estimate, and any difference should be explained line by line. Students are often asked how the budget matches funding timing. A monthly table and a contingency calculation, explained in APA 7, are typical deliverables for this unit.
How the BU 442 Unit 5 example is put together
The record starts by distinguishing an estimate from a budget and the baseline from management reserve. A monthly table spreads the estimate from February to August with cumulative totals and the main work each month, followed by an explanation of the peaks. The contingency section calculates PERT standard deviations, combines them two ways, independent and correlated, and chooses the correlated result with reasons. A table prices three discrete risks by expected value. The total contingency, its percentage and when it is expected to be drawn follow. A funding section matches the budget to the grant and loan draws and shows why the loan must close before the April peak. The last section sets out the management reserve and its approval route.
Reading the BU 442 Unit 5 rubric
Budget and contingency rubrics at Herzing generally reward accurate time-phasing, a derived contingency, a clear separation of contingency and reserve, reconciliation with the estimate and professional presentation. Time-phasing earns full credit when costs follow the schedule and cumulative totals are shown. The contingency criterion, often the heaviest, rewards a method that uses recorded uncertainty or identified risks rather than a flat percentage. Separation scores highest when the student explains who controls each pot and why reserve sits outside the baseline. Reconciliation rewards totals that match the estimate. Instructors also credit attention to funding timing, since a budget that runs ahead of available cash causes delays regardless of its total, however carefully it was estimated.
BU 442 Unit 5 help: mistakes that cost points
Budget papers often lose points by presenting a single total rather than money spread over time. Another common problem is setting contingency as a round percentage with no derivation. Students frequently treat uncertain elements as independent, understating the combined risk on projects where problems tend to occur together. Some fold management reserve into the baseline, which hides overruns. Others double count risks already included in pessimistic estimates. Budgets that ignore when funding arrives can look sound while the project runs out of cash. Finally, a budget that does not reconcile to the approved estimate raises questions about which figure the sponsor approved, and those questions tend to arrive at the worst moment.
Get a BU 442 Unit 5 example written to your instructions
Give us the Unit 5 instructions, your BU 442 rubric, the estimate, the schedule dates and any reporting format the assignment fixes. We write a custom example that phases cost against the network, builds the cumulative curve, derives contingency element by element, names control accounts and holds reserve outside the baseline. First custom sample free, back in 24 to 48 hours.
More BU 442 papers and project management samples
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- BU 442 Unit 7: Variance analysis with response
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BU 442 Unit 5 questions, answered
How do I derive contingency without a simulation?
By listing the elements whose basis flagged an assumption, putting a plausible range on each and combining them with the arithmetic visible. A simple weighted calculation across a handful of elements shows the same reasoning a simulation would and is often what the instructions expect at this level. What matters is that the figure traces back to named uncertainty rather than to a habit.
What is the difference between contingency and reserve here?
Contingency covers uncertainty you identified and priced, sits inside the baseline, and is released against the elements it was raised for. Reserve covers what nobody anticipated, sits outside the baseline, and is usually controlled above the project manager. Keeping them apart is what lets you show later that an overrun came from a known risk rather than from scope that was never estimated.
Does the budget need to match the estimate exactly?
It should reconcile, and any difference needs a line explaining it. Rounding, a rate updated since the estimate was written, or an element moved between control accounts are all legitimate and all need saying. A budget whose total silently differs from the estimate submitted earlier is read as carelessness, since a marker holding the two side by side will find it at once.
Where can I find a free BU 442 Unit 5 sample paper?
This page carries the complete BU 442 Unit 5 budget and contingency example for free, including the monthly table, the contingency derivation and margin notes. If your estimate or schedule differs, share the assignment and a custom version is prepared free, usually within two days.
How do I derive contingency in BU 442 Unit 5 without simulation?
Use the spread in three-point estimates and the expected value of identified risks. The sample combines PERT standard deviations at 90 percent confidence and adds three discrete risks priced by probability times impact.