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 To be able to track a project’s profitability, an accurate estimate of its costs is necessary before tracking the actual costs. You can track the following costs, individually at task level which are rolled up to the summary task level and eventually to the project level.

Labor Cost

A project is executed by its resources and the cost of these resources is represented by Labor Cost. You can specify a per hour cost rate for each resource. For employees or contractors this rate per hour is derived from their salaries. If the resource is say an equipment, the per hour usage rate of the equipment is the labor cost.

Cost(Est,Planned Labor) Cost = User cost rate * Number of hours (in hours or %) the resource is allocated on the task.

Cost(Act, Non-labor) Actual Labor Cost = User cost rate * Hours (Actual) entered by resource (Approved time entries marked as costable).

The estimated labor cost for a task is automatically computed when you assign resources that have an associated User Cost Rate. If multiple resources are assigned to the task, the individual costs of all resources are added to form the total Estimated Labor Cost for the task. 
When the time entered by a resource is approved and marked costable, the actual labor cost of that task is automatically computed. For example, if you take up a project of painting a wall, the labor costs will be the money you pay the resources who are working on this wall.User Cost Rates
User cost rates are used to calculate the Estimated and Actual Costs of a task and defined at a Company level. This can however be overridden at the project level.
To define a user cost rate, you can set the regular and overtime cost rates per user. This defines the labor cost for each of the task’s resource.
Please note that when you change the User Cost Rate:

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Material Cost

When a project requires machinery, equipment such as computers, the cost of purchasing or renting this equipment is the Material Cost. Travel or communication costs also add up as material costs. These can be incurred along the life of the project.
Material costs are entered at a task level. The actual Material Cost is computed automatically when an expense marked costable is approved.

CostPlanned (Est, Non-labor) Cost = Sum of Cost (Est, Material) entered at task level.

Cost (Act,Actual Non-labor Cost) = Approved Expenses entered by the resource (marked costable)

Fixed Costs

This cost represents the cost that is incurred on the project under all circumstances, independent of any activity or progress of the project. The Accrued Fixed Cost is computed automatically when a task % complete is updated.
For example, if you have hired an office to work on a project, the rent and bills add up as its fixed costs.

Fixed Cost (Est, Fixed) = Sum of Cost (Fixed) entered at task level.

CostActual (Accrued, Fixed)Fixed Cost = Actual Fixed Cost = Sum of Cost (Fixed) entered at task level * % Complete of task

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In addition to these costs there is a Projected Cost which is a guesstimate cost that is likely to be incurred by the time a project completes. This is automatically calculated based on the actual costs and progress of the project.

Projected Cost (Projected) = Sum of Cost (Projected) of the topmost tasks

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