Cost Overrun for Dummies
noun
What does Cost Overrun really mean?
Cost overrun is a term that we often hear in the world of finance and business. It may sound a little complex, but don't you worry! I'm here to explain it to you in the simplest way possible.
So, imagine you are planning to build a treehouse in your backyard. You sit down with your parents and make a list of all the things you would need to build that awesome treehouse - wood, nails, a ladder, and maybe even some cool paint to decorate it. You estimate that all these materials would cost you $100. Now, that's your initial budget - the amount of money you plan to spend on building the treehouse.
But, sometimes things don't go exactly as planned, right? Sometimes, you run into unexpected surprises or find out that the cost of materials has gone up. That's when a cost overrun happens. It means that the actual cost of a project or building something turns out to be more than what was initially estimated or budgeted.
Let's go back to our treehouse example. You start buying the materials, and guess what? The price of wood went up, and it cost you $20 more than you expected. The nails turned out to be more expensive as well, costing you an extra $10. And don't even get me started on the awesome paint you wanted; it cost an extra $15! The total cost of building the treehouse ended up being $145, which is more than your initial budget of $100. That extra $45 is the cost overrun.
Cost overrun can also happen in bigger projects, like building a house, constructing a bridge, or even sending a rocket to outer space. Sometimes there can be unforeseen expenses or delays that push the project's cost beyond what was planned.
Now, it's important to keep in mind that cost overrun is not something we want to happen. It can cause headaches for the people involved in a project and might even mean that we have to compromise on some things or find extra money to cover the additional costs.
To recap, cost overrun simply means that the actual cost of a project ends up being more than what was originally estimated or budgeted. It's like when you plan to spend a certain amount of money on something, but then things don't go as expected, and you end up spending more.
So, imagine you are planning to build a treehouse in your backyard. You sit down with your parents and make a list of all the things you would need to build that awesome treehouse - wood, nails, a ladder, and maybe even some cool paint to decorate it. You estimate that all these materials would cost you $100. Now, that's your initial budget - the amount of money you plan to spend on building the treehouse.
But, sometimes things don't go exactly as planned, right? Sometimes, you run into unexpected surprises or find out that the cost of materials has gone up. That's when a cost overrun happens. It means that the actual cost of a project or building something turns out to be more than what was initially estimated or budgeted.
Let's go back to our treehouse example. You start buying the materials, and guess what? The price of wood went up, and it cost you $20 more than you expected. The nails turned out to be more expensive as well, costing you an extra $10. And don't even get me started on the awesome paint you wanted; it cost an extra $15! The total cost of building the treehouse ended up being $145, which is more than your initial budget of $100. That extra $45 is the cost overrun.
Cost overrun can also happen in bigger projects, like building a house, constructing a bridge, or even sending a rocket to outer space. Sometimes there can be unforeseen expenses or delays that push the project's cost beyond what was planned.
Now, it's important to keep in mind that cost overrun is not something we want to happen. It can cause headaches for the people involved in a project and might even mean that we have to compromise on some things or find extra money to cover the additional costs.
To recap, cost overrun simply means that the actual cost of a project ends up being more than what was originally estimated or budgeted. It's like when you plan to spend a certain amount of money on something, but then things don't go as expected, and you end up spending more.
Revised and Fact checked by Sophia Wright on 2023-10-28 07:20:23
Cost Overrun In a sentece
Learn how to use Cost Overrun inside a sentece
- When building a house, if the final cost ends up being higher than the initial estimate, it is called a cost overrun.
- If a company plans to launch a new product, but the production expenses exceed the budgeted amount, it is considered a cost overrun.
- If a city wants to construct a new park, but the actual construction expenses go beyond the allocated funds, it is a cost overrun.
- When organizing a school event, if the total expenses end up being more than what was originally planned, it is called a cost overrun.
- If a person hires a contractor to renovate their home and the renovation costs exceed the agreed-upon budget, it is considered a cost overrun.
Cost Overrun Hypernyms
Words that are more generic than the original word.