Final PDF to printer Chapter 5 Estimating Project Times and Costs 163 management estimate; this represented about a 20 percent overrun! Furthermore, the bottom-up time estimate based on the project network was four months longer than the top management time estimate. Another meeting was scheduled with the significant stakeholders to check the estimates and to brainstorm for alternative solutions. At this meeting everyone agreed the bottom-up cost and time estimates appeared to be accurate. Following are some of the suggestions from the brainstorming session. ∙ Change scope. ∙ Outsource technology design. ∙ Use the priority matrix (found in Chapter 4) to get top management to clarify their priorities. ∙ Partner with another organization or build a research consortium to share costs and to share the newly developed technology and production methods. ∙ Cancel the project. ∙ Commission a break-even study for the laser printer. Very little in the way of concrete savings was identified, although there was consensus that time could be compressed to the market launch date, but at additional costs. Lauren met with the marketing (Connor), production (Kim), and design (Gage) managers, who yielded some ideas for cutting costs, but nothing significant enough to have a large impact. Gage remarked, “I wouldn’t want to be the one to deliver the message to top management that their cost estimate is $1,250,000 off! Good luck, Lauren.” 1. At this point, what would you do if you were the project manager? 2. Was top management acting correctly in developing an estimate? 3. What estimating techniques should be used for a mission-critical project such as this? Case 5.2 Post-Graduation Adventure Josh and Mike met as roommates during freshman year at Macalester College in St. Paul, Minnesota. Despite a rocky start they became best friends. They are planning a two-week adventure together to celebrate their graduation in June. Josh has never been to Europe and wants to visit France or Spain. Mike spent a semester abroad in Aarhus, Denmark, and traveled extensively in northern Europe. Even though Mike has never been to France or Spain, he wants to go to someplace more exotic, like South Africa or Vietnam. For the past week they have been arguing over where they should go. Josh argues that it will cost too much to fly to South Africa or Vietnam, while Mike counters that it will be much cheaper to travel in Vietnam or South Africa once they are there. They agree that they can spend no more than $3,500 each on the trip and could be gone for only two weeks. One evening when they were arguing with each other over beers with friends, Sara said, “Why don’t you use what you learned in your project management class to decide what to do?” Josh and Mike looked at each other and agreed that made perfect sense. 1. Assume you are either Mike or Josh; how would you go about making a decision using project management methodology? 2. Looking first at only cost, what decision would you make? 3. After cost, what other factors should be considered before making a decision? lar38865_ch05_134-167.indd 163 09/06/19 02:42 PM Final PDF to printer 164 Chapter 5 Estimating Project Times and Costs Appendix 5.1 LEARNING OBJECTIVES After reading this appendix you should be able to: A5-1 Use learning curves to improve task estimates. Learning Curves for Estimating LO A5-1 Use learning curves to improve task estimates. A forecast estimate of the time required to perform a work package or task is a basic necessity for scheduling the project. In some cases the manager simply uses judgment and past experience to estimate work package time or uses historical records of similar tasks. Most managers and workers intuitively know that improvement in the amount of time required to perform a task or group of tasks occurs with repetition. A worker can perform a task better/quicker the second time and each succeeding time she performs it (without any technological change). It is this pattern of improvement that is important to the project manager and project scheduler. This improvement from repetition generally results in a reduction of labor hours for the accomplishment of tasks and results in lower project costs. From empirical evidence across all industries, the pattern of this improvement has been quantified in the learning curve (also known as improvement curve, experience curve, and industrial progress curve), which is described by the following relationship: Each time the output quantity doubles, the unit labor hours are reduced at a constant rate. For example, assume that a manufacturer has a new contract for 16 prototype units and a total of 800 labor hours were required for the first unit. Past experience has indicated that on similar types of units the improvement rate has been 80 percent. This relationship of improvement in labor hours is shown below: Unit 1 2 4 8 16 Labor Hours 800 × .80 = 640 × .80 = 512 × .80 = 410 × .80 = 800 640 512 410 328 By using Table A5.1 unit values, similar labor hours per unit can be determined. Looking across the 16 unit level and down the 80 percent column, we find a ratio of .4096. By multiplying this ratio times the labor hours for the first unit, we obtain the per unit value: .4096 × 800 = 328 hours, or 327.68 That is, the 16th unit should require close to 328 labor hours, assuming an 80 percent improvement ratio. Obviously a project manager may need more than a single unit value for estimating the time for some work packages. The cumulative values in Table A5.2 provide factors for computing the cumulative total labor hours of all units. In the previous example, for the first 16 units, the total labor hours required would be 800 × 8.920 = 7,136 hours lar38865_ch05_134-167.indd 164 09/06/19 02:42 PM College of Administrative and Financial Sciences Assignment 2 Project Management (MGT323) Deadline: 25/03/2021 @ 23:59 Course Name: Project Management Course Code:MGT323 Student’s Name: Semester: II CRN: Student’s ID Number: Academic Year:2020-21, II Term For Instructor’s Use only Instructor’s Name: Students’ Grade: Marks Obtained/Out of 5 Level of Marks: High/Middle/Low Instructions – PLEASE READ THEM CAREFULLY • The Assignment must be submitted on Blackboard (WORD format only) via allocated folder. • Assignments submitted through email will not be accepted. • Students are advised to make their work clear and well presented, marks may be reduced for poor presentation. This includes filling your information on the cover page. • Students must mention question number clearly in their answer. • Late submission will NOT be accepted. • Avoid plagiarism, the work should be in your own words, copying from students or other resources without proper referencing will result in ZERO marks. No exceptions. • All answered must be typed using Times New Roman (size 12, doublespaced) font. No pictures containing text will be accepted and will be considered plagiarism). • Submissions without this cover page will NOT be accepted. • Need References from Peer-reviewed Journals. Assignment Workload: • This Assignment comprise of a Case Study. • Assignment is to be submitted by each student individually. Assignment Purposes/Learning Outcomes: After completion of Assignment-2 students will able to understand the 1. Recognize the steps of planning process in the project management. (L.O-1.2) 2. Estimate the project budget and cost control. (L.O-2.2) 3. Analyze to work effectively and efficiently as a team member for project related cases. (L.O-3.1) Assignment-2-Case Study Assignment Question: (Marks 5) Please read the Case-5.2 “Post-Graduation Adventure.” from Chapter 5 “Estimating Project Times and Costs” given in your textbook – Project Management: The Managerial Process 8th edition by Larson and Gray page no: 164 also refer to specific concepts you have learned from the chapter to support your answers. Answer the questions asked in case study as deliverables where you should consider the milestones and technical requirements. Answers to the questions should be within 500 Words limit. Answers: 1. 2. 3.
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