Actual costs incurred for the week ending June 17, 2011 were $44,200 resulting in a positive variance of $300. We can easily surmise that the savings was achieved from other expenses not related to salaries, since there was no variance between the budgeted and the actual number of hours.
The budget allocation of $43,500 for the second week is lower than the actual expenditures of $44,200 of the first week. Still, it is deemed that the latter amount is more realistic than what was initially projected. Hence, the budget was adjusted for the week ending June 24, 2011 by using the latter amount.
Review of the total projections for the week ending June 24, 2011 disclosed variances for both time and costs. This denotes that the savings of $300 was not maintained because the total number of hours spent (347 hours) was more than the 340 hours allotted. Keep in mind however, that the primary objective is to keep project activities in pace with present conditions, and not the attainment of cost savings.
The project manager can easily investigate as to whom among the team members spent more time in performing the task that was assigned. Was there additional work performed? Were there errors and recalculations made? Or were the concerned members merely slacking off?
Taking up this issue during the weekly meeting will make team members aware of how closely you are monitoring the time schedule. In fact, best practices recommend that for a budget or forecast to be effective, its significance and the rationality of its purpose should be discussed among the direct participants.
In this particular scenario, you can elaborate on how the $300 savings you achieved was voided by the additional hours spent. If the team was working under the same conditions, it would have been possible to maintain the week’s expenditure at the budgeted amount.