Resource tagging for cost tracking in AWS - Mini Project: Build & Apply

Resource tagging for cost tracking

📖 Scenario: You work in a company that uses AWS cloud services. To keep track of costs, your team wants to tag resources with specific labels. These tags help identify which department or project owns each resource.For this project, you will create AWS EC2 instances with tags that specify the Department and Project. This will help the finance team track spending accurately.

🎯 Goal: Create an AWS CloudFormation template that launches an EC2 instance with the exact tags Department: Finance and Project: Budget2024. This template will be used to deploy tagged resources for cost tracking.

📋 What You'll Learn

Create a CloudFormation template with an EC2 instance resource

Add a parameter for the EC2 instance type

Add tags Department with value Finance and Project with value Budget2024 to the EC2 instance

Use best practices for CloudFormation syntax and structure

💡 Why This Matters

🌍 Real World

Tagging AWS resources helps companies track costs by department or project, making budgeting and billing clearer.

💼 Career

Cloud architects and engineers often create templates with tags to organize resources and enable cost allocation reports.

1

Create the basic CloudFormation template with EC2 instance

Create a CloudFormation template with a resource named MyEC2Instance of type AWS::EC2::Instance. Set the InstanceType property to t2.micro and use the Amazon Linux 2 AMI ID ami-0c55b159cbfafe1f0 for ImageId.

AWS

# Your code here

Hint

Start with the Resources section. Define MyEC2Instance with the correct type and properties.

2

Add a parameter for the EC2 instance type

Add a Parameters section with a parameter named InstanceTypeParam. Set its type to String and default value to t2.micro. Then update the InstanceType property of MyEC2Instance to use this parameter with !Ref InstanceTypeParam.

AWS

Resources:
  MyEC2Instance:
    Type: AWS::EC2::Instance
    Properties:
      InstanceType: t2.micro
      ImageId: ami-0c55b159cbfafe1f0
# Add Parameters section and update InstanceType property to use the parameter
# Your code here

Hint

Define the parameter at the top level. Use !Ref InstanceTypeParam to refer to it in the instance properties.

3

Add tags for Department and Project to the EC2 instance

Add a Tags property under MyEC2Instance with two tags: one with Key as Department and Value as Finance, and another with Key as Project and Value as Budget2024.

AWS

Parameters:
  InstanceTypeParam:
    Type: String
    Default: t2.micro
Resources:
  MyEC2Instance:
    Type: AWS::EC2::Instance
    Properties:
      InstanceType: !Ref InstanceTypeParam
      ImageId: ami-0c55b159cbfafe1f0
      # Add Tags property here
# Your code here

Hint

Tags are a list of key-value pairs under the Tags property.

4

Add Outputs section with the EC2 instance ID

Add an Outputs section with an output named InstanceId. Set its Value to !Ref MyEC2Instance and add a Description of EC2 Instance ID.

AWS

Parameters:
  InstanceTypeParam:
    Type: String
    Default: t2.micro
Resources:
  MyEC2Instance:
    Type: AWS::EC2::Instance
    Properties:
      InstanceType: !Ref InstanceTypeParam
      ImageId: ami-0c55b159cbfafe1f0
      Tags:
        - Key: Department
          Value: Finance
        - Key: Project
          Value: Budget2024
# Add Outputs section below
# Your code here

Hint

The Outputs section helps you see important information after deployment.

Practice

1. What is the main purpose of adding tags to AWS resources for cost tracking?

easy

A. To organize and identify resources for cost allocation

B. To increase the storage capacity of resources

C. To improve the speed of resource deployment

D. To automatically back up resources daily

Solution

1. Step 1: Understand the role of tags in AWS

   Tags are labels that help organize resources by adding key-value pairs.

2. Step 2: Connect tags to cost tracking

   Tags allow grouping resources to see costs clearly in reports.

3. Final Answer:

   To organize and identify resources for cost allocation -> Option A

4. Quick Check:

   Tags help track costs [OK]

Hint: Tags label resources to track costs easily [OK]

Common Mistakes:

• Thinking tags increase storage or speed
• Confusing tags with backups
• Assuming tags change resource performance

2. Which of the following is the correct syntax to add a tag with key Environment and value Production to an AWS EC2 instance using AWS CLI?

easy

A. aws ec2 tag-instance --id i-1234567890abcdef0 --key Environment --value Production

B. aws ec2 create-tags --resources i-1234567890abcdef0 --tags Key=Environment,Value=Production

C. aws ec2 add-tag --instance i-1234567890abcdef0 --tag Environment=Production

D. aws ec2 set-tags --resource i-1234567890abcdef0 --tags Environment:Production

Solution

1. Step 1: Recall AWS CLI command for tagging

   The correct command is aws ec2 create-tags with resource ID and tags specified as Key=Value pairs.

2. Step 2: Match syntax with options

   aws ec2 create-tags --resources i-1234567890abcdef0 --tags Key=Environment,Value=Production matches the correct syntax exactly.

3. Final Answer:

   aws ec2 create-tags --resources i-1234567890abcdef0 --tags Key=Environment,Value=Production -> Option B

4. Quick Check:

   Correct AWS CLI tag syntax [OK]

Hint: Use 'create-tags' with Key= and Value= pairs [OK]

Common Mistakes:

• Using wrong command names like add-tag or tag-instance
• Incorrect tag format without Key= and Value=
• Mixing resource and instance flags

3. Given the following AWS CLI command, what will be the effect?

aws ec2 create-tags --resources i-0abcd1234efgh5678 --tags Key=Project,Value=Alpha Key=Owner,Value=TeamA

medium

A. The instance will have two tags: Project=Alpha and Owner=TeamA

B. The command will fail due to multiple tags in one command

C. Only the last tag Owner=TeamA will be applied

D. The tags will overwrite existing tags on the instance

Solution

1. Step 1: Understand AWS CLI tagging with multiple tags

   The create-tags command supports multiple tags by repeating the Key=Value pairs.

2. Step 2: Analyze the command effect

   Both tags Project=Alpha and Owner=TeamA will be added to the instance.

3. Final Answer:

   The instance will have two tags: Project=Alpha and Owner=TeamA -> Option A

4. Quick Check:

   Multiple tags added together [OK]

Hint: Multiple tags can be added by repeating Key=Value pairs [OK]

Common Mistakes:

• Assuming only one tag can be added at a time
• Thinking the command fails with multiple tags
• Believing tags overwrite all existing tags

4. You tried to tag an AWS S3 bucket using this command:

aws s3api put-bucket-tagging --bucket my-bucket --tags Key=Environment,Value=Dev

But it failed. What is the likely error?

medium

A. S3 buckets cannot be tagged

B. The bucket name is invalid

C. The command should be run with root user only

D. The --tags parameter is missing the required JSON format

Solution

1. Step 1: Check S3 tagging command syntax

   The put-bucket-tagging command requires tags in JSON format under the --tagging parameter, not --tags.

2. Step 2: Identify the error cause

   Using --tags with Key=Value string causes syntax error; correct usage is JSON with --tagging.

3. Final Answer:

   The --tags parameter is missing the required JSON format -> Option D

4. Quick Check:

   S3 tagging needs JSON format [OK]

Hint: Use JSON format with --tagging for S3 bucket tags [OK]

Common Mistakes:

• Using --tags instead of --tagging with JSON
• Assuming only root user can tag buckets
• Believing S3 buckets cannot be tagged

5. You want to track costs for multiple projects in your AWS account. Which tagging strategy will give the clearest cost reports?

hard

A. Tag only the resources with the highest cost

B. Use different tag keys like Project1, Project2 for each project

C. Use a single tag key Project with unique values for each project on all resources

D. Use tags only on EC2 instances, ignoring other resources

Solution

1. Step 1: Understand best practice for cost tracking tags

   Using one consistent tag key with different values groups costs clearly by that key.

2. Step 2: Evaluate options for clarity

   Use a single tag key Project with unique values for each project on all resources uses a single key Project with unique values, making reports easy to filter and compare.

3. Final Answer:

   Use a single tag key Project with unique values for each project on all resources -> Option C

4. Quick Check:

   Consistent tag keys for clear cost reports [OK]

Hint: Use one tag key with different values for projects [OK]

Common Mistakes:

• Using multiple tag keys for similar data
• Tagging only some resources
• Ignoring tags on non-EC2 resources