170911 Exercises

Project Management

Dayrine Julianna de la Cruz Aquino

Chapter 5 Exercise A5.1 Norwegian Satellite Development Company Cost Estimates for World Satellite Telephone Exchange Project

 NSDC has a contract contract to produce produce satellites satellites to support support a worldwide worldwide telephone telephone system system (for Alaska Alaska Telecom, Telecom, Inc.) that allows individuals to use a single, portable telephone in any location on earth to call in and out.  NSDC will develop develop and and produce the eight units. NSDC NSDC has estimated estimated that that the R&D R&D costs will will be NOK (Norwegians Krone) 12,000,000. Material costs are expected to be NOK 6,000,000. They have estimated the design and production of the first satellite will require 100,000 labor hours and an 80porcent improvement curve is expected. Skilled labor cost is NOK 300 per hour. Desired profit for all projects is 25 percent of total cost. A: How many labor hours should the eighth satellite require?  Answer:

80% ratio for 8 units = 0.5120 The eight satellite = 100,000 labor hours x 0.5120 = 51,200 labor hours B: How many labor hours for the whole project of eight? Why?  Answer:

The accumulative accumulative ratio for 8 units: 5.346 The whole project: 100,000 x 5.346 = 534,600 labor hours C: What price would you ask for the project? Why?  Answer:

R&D costs: 12,000,000 NOK Material cost: 6,000,000 NOK Skilled labor cost: 300 NOK p/hour = 160,380,000 NOK Total cost: 178,380,000 NOK 25% of total cost = 44,595,000 Price = 222,975,000 NOK

Project Management

Dayrine Julianna de la Cruz Aquino

D: Midway through the project your design and production people realize t hat a 75 percent improvement curve is more appropriate. What impact does this have on the project?  Answer:

75% cumulative = 4.802 accumulative The whole project: 100,000 x 4.802 = 480,200 labor hours Skilled labor cost: 300 NOK p/hour = 480,200 x 300 = 144,060,000 NOK (80%) 160,380,000 NOK - (75%) 144,060,000 NOK = Labor hour cost difference= 16,320,000 NOK  (The cost will be reduced in a 10.17% respect the 89% learning curve cost) E: Near the end of the project. Deutsch telephone AG has requested a cost estimate for four satellites identical to those you have already produced. What price will you quote them? Justify your price.  Answer:

12 unit 75% curve: 6.315 12 satellites: 100,000 x 6.315 = 631,500 labor hours Labor hour for 4 units = 631,500 labor hours - 480,200 labor hours = 151,300 labor hours Skilled labor cost: 300 NOK p/hour = 151,300 x 300 = 45,390,000 NOKS Total cost = 45,390,000 NOKS + (0.5) 6,000,000 NOK = 48,390,000 NOK (using the 75% learning curve since we know it’s more efficient)

Project Management

Dayrine Julianna de la Cruz Aquino

Chapter 6 Exercise 3 Draw a project network from the following information. What activity (ies) is a burst activity? What activity (ies) is a merge activity? ID A B C D E F G H

Description Identify topic Research topic Draft paper Edit paper Create graphics References Proof paper Submit paper

Predecessor None A B C C C D, E, F G

 Answer: D

A

B

C

E

G

H

F

1) Activity C is the burst activity because it has more that one activity immediately following it. 2) Activity G is the merge activity because it has more than one activity preceding it.