Explain some of the basic principles of cost management, such as profits, life cycle cost, tangible and intangible costs and benefits, direct and indirect costs, and Reserves.

Profits - These refer to the revenues accrued from a project less the costs of the project.

Life Cycle Cost - Life Cycle Cost is a concept in Cost management where the cost of a project throughout it's entire life is assessed. Costs assessed therefore include; initial capital costs, maintenance costs and operating costs.

Tangible and Intangible Costs - When costs are tangible, quantifying them.is easy as the cost can be stated and directly attributable to a cost object eg, cost of a fixed asset. Intangible cost on the other hand is not easy to quantify and is not easily attributable. For instance, the experience that a Project Manager leaves with if they resign.

Tangible and Intangible Benefits - Like tangible costs, tangible benefits are easily quantifiable and noticeable such as trade discounts from buying in bulk. Intangible benefits on the other hand are not easily quantifiable. An example would be Employee motivation from a safer working Environment.

Direct and Indirect Costs - Direct costs are costs that can be easily traced to a cost object. In other words, the reason for the cost is known e.g labor cost for assembling a product. Indirect Costs are harder to trace to a cost object even though they are related to production. An example would be the Electricity used for production.

Reserves - Cost reserves are monies held for any emergency expenses that may come up. This way the company can deal with them speedily.