HKSM

A project budget is the formal cost plan for a project that lists expected costs for labor, materials, and all other expenses. It is typically approved by the sponsor(s) to confirm that enough funding has been committed.

Key Points

• Includes all cost components: people, materials, equipment, services, fees, and contingency.
• Acts as the cost baseline used to monitor spending and measure performance.
• Often time-phased to align with cash flow and funding releases.
• Requires sponsor approval and is updated through formal change control when scope or assumptions change.

Example

An agile product team builds a two-quarter budget covering team salaries for 8 developers and 1 Scrum Master, cloud hosting, test devices, a UX contractor, training, and a 10% contingency. The sponsor reviews and approves the budget so finance can allocate funds and release them incrementally each sprint.

PMP Example Question

Which document itemizes labor, materials, and other project expenses and is typically approved by the sponsor to ensure funds are available?

1. Cost management plan
2. Project budget
3. Resource management plan
4. Procurement statement of work

Correct Answer: B — Project budget

Explanation: The project budget summarizes all expected costs and is usually signed off by the sponsor to confirm funding availability, whereas the cost management plan defines how costs are planned, managed, and controlled.