Estimating cost is nominally a straightforward function based on effort. However, numerous factors complicate the derivation of the cost estimate.
Does your organization allow uncompensated overtime? If so, some percentage of the estimated effort might not contribute toward the cost estimate. Does your organization use hourly staff or contractors who are paid more for overtime hours? If so, some of your estimated effort might contribute more than average toward the cost estimate.
Some organizations base their project costs on the employee's "direct costs," which are the costs directly attributable to a specific employee (payroll, payroll taxes, benefits, and so on). Other organizations base their project costs on "burdened costs," which include corporate overhead that isn't directly attributable to a specific employee (rent, corporate taxes, cost of human resources, sales, marketing, and so on). Depending on the size of the organization, amount of unbillable infrastructure, cost of office space, and other factors, the cost burden as a percentage of the employee's salary can range from 30% to 125% or higher.
Some projects also incur costs for travel, specialized development tools, hardware, and other specific expenses. Those need to be included in the cost estimate as well.
The "Additional Resources" section at the end of this chapter provides pointers to additional information on this topic.