---
title: "Project cost versus product cost"
subject: "ICT Project Management"
chapter: 9
key: "semester_7/ict_project_management:project-vs-product-cost"
source: https://www.bctengineer.com/q/semester_7/ict_project_management/project-vs-product-cost
site: BCT Engineering
---

# Project cost versus product cost

ICT Project Management · Chapter 9: Project Cost Management

- Asked in: year not given
- Answer checked by Claude Opus 5.5 (high effort) on 2026-10-14
- Page: https://www.bctengineer.com/q/semester_7/ict_project_management/project-vs-product-cost
- Whole chapter: https://www.bctengineer.com/md/semester_7/ict_project_management/chapter-9

## Question

What do you mean by project cost? How is it different from product cost?

## Answer

**Project cost** is the total cost of all resources used to complete the project: labour, materials, equipment, services, facilities and overheads, measured from the start of the project to its completion. **Product cost** is the cost of producing or owning a product, often per unit, including its operation and maintenance over its life after it is developed.

| Basis | Project cost | Product cost |
|---|---|---|
| Meaning | Cost to deliver the project | Cost to make, run and own the product |
| Time span | Limited to project duration | Product's useful life (delivery to disposal) |
| Nature | One-time, temporary | Recurring (per unit or per period) |
| Includes | Planning, design, development, testing, training, management, risk reserve | Production, materials, operation, maintenance, support, retirement |
| Basis for estimate | WBS work packages | Unit cost, life cycle cost |
| Managed by | Project manager | Product/operations manager |
| Used for | Budget, cost control, EVM | Pricing, profitability, life-cycle costing |
| Example (accounting software) | Rs 20 lakh for development, installation and training | Rs 2 lakh/year for licence renewal, hosting and support |

#### Relation
Project cost is one part of the total life cycle cost of a product.
```text
Life cycle cost = Project cost (development)
                + Operation + Maintenance + Disposal
```

#### Importance of distinction
- A cheap project may create a product that is expensive to operate; decisions should consider life-cycle cost.
- Project cost is controlled through the cost baseline; product cost through pricing and efficiency.
- Software example: low initial development cost but high maintenance cost if quality is poor.

**Example:** Developing a hotel app costs Rs 8 lakh as a project (project cost), whereas hosting, updates and support cost Rs 1.5 lakh each year (product cost).

## Check yourself

The answer's key points as multiple-choice questions, with the correct option and why.

1. How do the time spans differ?
   A. Both cover disposal
   B. Project cost covers the project duration; product cost covers the product's whole life
   C. Both cover the project only
   D. Project cost covers the whole life; product cost covers the project
   Answer: B. Project cost is one-time and limited to the project; product cost includes operation, maintenance and disposal. (Key point: Time span)

2. How are project cost and life cycle cost related?
   A. Life cycle cost = project cost + operation + maintenance + disposal
   B. Project cost = life cycle cost + operation
   C. Life cycle cost excludes project cost
   D. They are unrelated
   Answer: A. Project cost is one part of total life cycle cost. (Key point: Life cycle cost)

3. Why does the distinction matter?
   A. Product cost is never important
   B. A cheap project may produce a product costly to operate
   C. Project cost is paid yearly
   D. Project cost includes maintenance
   Answer: B. Decisions should consider life-cycle cost, not just development cost. (Key point: Importance of the distinction)

## Related in ICT Project Management

- [Product versus project life cycle](https://www.bctengineer.com/question.md?key=semester_7%2Fict_project_management%3Aproduct-vs-project-life-cycle) — ICT Project Management, chapter 4
- [Project scope versus product scope](https://www.bctengineer.com/question.md?key=semester_7%2Fict_project_management%3Aproject-vs-product-scope) — ICT Project Management, chapter 7
- [Project versus operational work](https://www.bctengineer.com/question.md?key=semester_7%2Fict_project_management%3Aproject-vs-operations) — ICT Project Management, chapter 1
- [Effective versus ineffective project managers](https://www.bctengineer.com/question.md?key=semester_7%2Fict_project_management%3Aeffective-ineffective-managers) — ICT Project Management, chapter 2
- [Cost estimating and types of estimates](https://www.bctengineer.com/question.md?key=semester_7%2Fict_project_management%3Acost-estimating-types) — ICT Project Management, chapter 9
- [Cost budgeting](https://www.bctengineer.com/question.md?key=semester_7%2Fict_project_management%3Acost-budgeting) — ICT Project Management, chapter 9

## Related in other subjects

- [Project proposal; cost benefit analysis for road](https://www.bctengineer.com/question.md?key=semester_7%2Fproject_engineering%3Aproposal-cba-road-project) — Project Engineering, chapter 2
- [Product layout versus process layout](https://www.bctengineer.com/question.md?key=semester_6%2Findustrial_engineering_and_management%3Aproduct-vs-process-layout-differences) — Industrial Engineering and Management, chapter 2
- [Project characteristics versus permanent systems](https://www.bctengineer.com/question.md?key=semester_7%2Fproject_engineering%3Acharacteristics-vs-permanent-systems) — Project Engineering, chapter 1
- [Goal versus objective of a project](https://www.bctengineer.com/question.md?key=semester_7%2Fproject_engineering%3Agoal-vs-objective-example) — Project Engineering, chapter 1