During project cost planning, what is true about the allocation of funds?

During project cost planning, it is essential to understand that both costs and funding must be accurately estimated and allocated to ensure the project's financial health and viability. When funds are allocated, it essentially means that resources are designated to specific activities or cost elements within the project. This process helps in tracking expenditures, ensuring that the project stays within budget, and managing cash flows effectively.

Estimating costs involves predicting what resources will be needed and how much they will cost. Once estimated, those costs must be allocated to ensure that funds are available when needed, thus supporting the execution of project activities. Accurate allocation also aids in financial reporting and accountability, allowing for performance analysis against the budget.

In contrast, other options suggest scenarios that overlook the importance of either funds distribution or accurate estimation, thereby neglecting key components of proper project budgeting and financial management. Therefore, the correct acknowledgement that both costs are estimated and allocated is vital for effective project cost planning.