Question

Clear explanation please ..

Q2. In the image below it is shown the Project Cost - Duration Graph. (9 points) Describe in detail the three costs presented in the graph. Explain what are the ‘Optimum cost-time point and ‘Low-cost plan duration point’. (3 points) Which point is considered when crashing the project? Explain why. (3 points) 60 Total costs 50 Optimum cost-time point 40 Costs 30 30 Low-cost plan duration point Direct costs 20 10 Indirect costs 6 8 14 10 12 Project duration 16 FIG 1. PROJECT COST-DURATION GRAPH

Answer 1

1)Direct Costs - Direct Costs are costs which can be easily attributed to a particular project or product development or functional departments. These include manpower, Software, Hardware like PC's .printers etc. Most of the direct costs are variable costs which increase when resources are increased according to project needs and decrease when resources are decreased.

2)Indirect Costs-Indirect costs are the costs which cannot be associated with or accounted for a specific project or product or a department. For example. Common services such as canteen staff, security, office staff overheads,rents, utilities etc. Most of the indirect costs are fixed costs and do not vary with changes in outputs.

3)Total costs- Total costs is the full expenses incurred by a company or firm to complete a project or to attain certain production levels or to deliver a service. Total costs are the sum of fixed costs and variable costs.

Optimum Cost time point- The optimum cost time point is that point on the graph where the costs are lowest for the project and the corresponding time at that low point in a project. It the time in the project where the project costs are at its lowest. The importance of optimum cost time project is that it helps in determining the optimum project time for which the costs are as minimum as possible.

Low-cost plan duration-The low-cost duration point is the point where the direct costs are at its lowest. This means that the production or the project activities are at its lowest. Therefore, costs have decreased as the project duration increased.

The optimum cost time point is considered the starting point for crashing a project since this is the point where teh costs are lowest for the entire duration of a project. Crashing is used to reduce the time costs associated with project. Therefore, we have to lower costs much more than at this point. Therefore, optimum cost time point is the starting point to crash a project.