Let’s find out
(a) The crash cost per day per activity
(b) Identify the activities that should be crashed to meet a
project deadline of 10 days at minimum cost
(c) Determine the new cost for the project.
The first step in this type of problem is to calculate the crash
cost per day:
Crash cost = (crash cost - normal cost) / (Normal time - crash
time)
ACTIVITY CRASH COST PER DAY
A 800-500/(7-4) = 300/3 = $100
B 350-200/(3-2) = 150/1 = $150
C 900-500/(6-4) = 400/2 = $200
D 500-200/(3-1) = 300/2 = $150
E 550-300/(2-1) = 250/1 = $250
For Part B, you need to find all of the paths and their durations.
These networks are usually smaller than the ones for the AIB questions, and
they will be drawn for you. Remember to use the normal times to calculate
durations.
Path Duration
A-B-E 12 Days
C-D-E 11 Days
By looking at the durations of each path, you learn that both will
need to be shortened in order to make the new scheduled completion of 10 days.
In the calculation for Part A, the denominators are in boldface because that is
the maximum number of days those activities can be crashed. In other words, A
can be crashed up to three days, while E can only be crashed for one day.
To find the minimum crash cost, start substituting numbers until
you get down to the desired scheduled completion.
Rules for crashing:
(1) Look at activities, which are on more than one path
(2) Look at the activities with the cheapest crash cost. In this
case, your cheapest solution is Crash A for two days at a cost of 2x100=$200,
and D for one day at a cost of 1x$150, for a total of $350.
For Part C, the new cost is simply the normal cost for each activity,
along with the additional $350 premium, or 500+200+500+200+300+350=$2,050.
Budgeted Cost of Work Scheduled (BCWS)
Budgeted Cost of Work Performed (BCWP)
Actual Cost of Work Performed (ACWP).
The cost variance is defined as the BCWP minus the ACWP. A
positive CV means that you are under budget. A negative CV means that you are
over budget.
The schedule variance is defined as the BCWP minus the BCWS. A
positive SV means that you are ahead of schedule. A negative SV means that you
are behind schedule.
He needs both positive because that would mean your project is
under budget and ahead of schedule.
The cost performance index (CPI) calculates how cost efficient a
project is. It is defined as CPI = BCWP/ACWP. A low ratio means the project is
NOT cost efficient; a ratio of 1.0 is on budget, a ration closer to 0 is very
inefficient.
·
What is the schedule performance index? How is it calculated?
The schedule performance index (SPI) calculates how time efficient
a project is. It is defined as SPI = BCWP/BCWS. A low ratio means the project
is not time efficient; a ratio of 1.0 is on track, a ratio greater than 1.0 is
very efficient.
The project control process involves regularly gathering data on
project performance, comparing actual performance to planned performance, and
taking corrective actions if actual performance is behind planned performance.
- What is the difference between top-down and bottom-up estimating? When would a PM use each type?
Top-down estimating is used when few details are known about the
project. It is often used in the early stages of a project and is usually less
accurate. Bottom-up estimating is used when most of the details are known about
the project. It is often used in the later stages of a project. Estimators
usually define a cost for each activity and then aggregate the costs together
for a total project cost.
- What is the definition of earned value?
Earned value is the value of the work actually performed. It is a
key parameter that must be determined and reported throughout the project.
- What is the variance which is important to effectively controlling the cost performance of a project?
Cost variance. Cost variance is the difference between the
cumulative earned value of the work performed and the cumulative actual cost.
- What is crashing a schedule? How does it relate to a time-cost trade-off?
Crashing a schedule means expediting the task by increasing the
resources and costs associated with the crashed activities to accelerate the
duration of said activities.
- What is the calculation for the crash cost (i.e., the cost per activity to accelerate the schedule)?
Crash cost = (crash cost - normal cost) / (normal time - crash
time)
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