See Also:
Percentage Completion (POC) Method
Completed Contract Method
Capital Expenditures
Construction Accounting
Work Breakdown Structure Definition (WBS)
The Work Breakdown Structure definition is a technique or method of breaking out different components or pieces of a project. The work breakdown structure chart starts at the highest level of the project and then breaks down the different components.
Work Breakdown Structure (WBS) Explained
Allowed within the Work Breakdown Structure method, a project manager evaluates what is needed to be done initially to make it to the next level of a project. In a way, this allows the manager to start out at the basic level and move up to the more advanced stages. It also allows the project manager to prioritize the different components of the project. Project accountants also like the WBS template because it allows them to calculate the percentage complete if the project is being performed for revenue. Sometimes, you can use the Work Breakdown Structure method for something simple like job hiring for a position. Although, the main benefit from the WBS is that it breaks a large project down into manageable components.
Work Breakdown Structure Example
Now, let’s look at a work breakdown structure example. Tim is managing the construction of an airplane to be sold in the next year. First, Tim evaluates all the tasks he needs to perform. Then he writes them down. Check out the following list for the Work Breakdown structure:
- Level 1 – Construction of Airplane
- Level 2 – Construction of Fuselage, Wings, and Engines
- (Fuselage) Level 3 – Construction of metal frame, purchase of seats, purchase of carpet, construction of cabinetry, and construction of cockpit
- (Wings) Level 3 – Purchase of metal and construction of frame
- (Engines) Level 3 – Purchase and installment of engines from company specializing in airplane engines
You can further break down all of the components in Level 3 into a Level 4, and then even further if required. The key to the Work Breakdown Structure is to make the project simplified and as manageable as possible.
