Cost planning Assignment#4

docx

School

Centennial College *

*We aren’t endorsed by this school

Course

121451E

Subject

Accounting

Date

Apr 3, 2024

Type

docx

Pages

Uploaded by MateCamel3667

1. Complete the PERT Problem: Solve for 99.9% Surety of Cost outlined in the course page Using PERT in Cost Estimation . Ans: Given : Av cost = (1 + 4(8) + 9)/6 = 42/6 = $7,000 Av cost = (3+4(12) +15)/6 = 66/6 = $11,000 Av Cost = 7,000 Variance of 1 = ((9 – 1) / 6) 2 = 1.77 Variance of 2 = (15 – 3) / 6) 2 = 4 Variance of 3 = 0.444 Total Mean Cost = 25 Total Variance = 6.21 & std dev = 2.49 (in thousands of dollars) This means that we can represent the total Project Costs as a normal curve with a mean of $25,000 and a standard deviation of 2.49 The question asked about the probability of completing this project under $30,000. So 30,000 is 5,000 beyond the mean cost of 25,000. That's approximately 2 sigmas away. 30 – 25 = 5 from the mean and therefor z = 5/2.49 = 2.008 Solution : From the standard normal table, z of 2.008 corresponds to a probability of .977 Hence P (cost <30K) = 97.7% meaning that the probability of completing the project below $30,0000 is 97.7% From standard normal table, The z value which corresponds to a probability of 99.9% is 3.0 Total Mean Cost (Cm) = $25,000 Standard Deviation = $2,490 Required Probability = 99.9% Normal derivation (z) for 99.9% = 3.0 Total Quoted Cost (CQ), z= (CQ – Cm) / standard deviation 3 = (CQ – 25000) / 2490 CQ = $32,470 The quoted cost for 99.9% surety is $32,470.

2. Complete the following from Week 8-9 Problems on Cost Estimation and Budgeting that is available in Week 8 >Text 1. Discussion Questions: 6 2. Problems: 3-7 DISCUSSION QUESTION: Q 6. Think of an example of parametric estimating in your personal experience, such as the use of a cost multiplier based on a similar, past cost. Did parametric estimating work or not? Discuss the reasons why. This is a personal example question and should only be applied to students with some project experience. Ans: An example that I can think of in my past personal experience, is when I was able to find out the cost of waterproofing treatment of a larger project based on the rates of similar treatment in a much smaller previous project. Parametric estimating did work, it costed less marginally less than what was estimated. The reasons why it costed less than the estimated value was because we were dealing with a much larger area than the previous project. More the quantity to be done, lesser will be the expense. PROBLEMS: Q 3. Calculate the direct cost of labour for the project team using the following data. What are the costs for the individual project team members? What is the fully loaded cost of labour? Ans: Name Hours Needed Overhead Charge Personal Time rate Hourly Rate ($/hr) Fully Loaded Labor cost Sandy 60 1.35 1.12 18 $1,632.96 Chuck 80 1.75 1.12 31 $4,860.8 Bob 80 1.35 0 9 $972 Penny 40 1.75 1.12 30 $2,352

Fully loaded cost for Sandy = (Hrs needed) x (OH Charge) x (Personal Time rate) x (Hrly Rate) = 60 x 1.35 x 1.12 x 18 = $1,632.96 Fully loaded cost for Chuck = (Hrs needed) x (OH Charge) x (Personal Time rate) x (Hrly Rate) = 80 x 1.75 x 1.12 x 31 = $4,860.8 Fully loaded cost for Bob = (Hrs needed) x (OH Charge) x (Personal Time rate) x (Hrly Rate) = 80 x 1.35 x 9 = $972 Fully loaded cost for Penny = (Hrs needed) x (OH Charge) x (Personal Time rate) x (Hrly Rate) = 40 x 1.75 x 1.12 x 30 = $2,352 Fully loaded cost of labour = $9,817.76 Q 4: Assume that overhead is charged on a flat-rate basis. Each member of the project is assigned an overhead charge of $150/week. What would the fully loaded cost of labour be for an employee, given that she is assigned to the project for 200 hours at $10.50/hour? Ans: Project time = 200 hrs = 200/8 = 25 days Consider working for 5 days a week = 25/5 = 5 weeks, The project time will be 5 weeks. Total direct labour cost = (Hrly rate x total hrs) + Overhead charge = ($10.5 x 200 hrs) + ($150 x 5 weeks) = $2100 + $750 = $2850 Q 5: Calculate the fully loaded labour costs for members of your project team using the following data. Who is the most expensive member of your team? What proportion of the overall fully loaded cost of labour is taken up by this individual? Ans:

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

Name Hours Needed Overhead Charge Personal Time Rate Hourly Rate ($/hr) Fully loaded Labor cost Todd 150 1.45 1.15 36 $9,004.5 Stan 150 1.7 0 12 $3,060 Mary 120 1.45 0 21.5 $3,741 Alice 100 1.7 1.15 24 $4,692 Fully loaded cost for Todd = (Hrs needed) x (OH Charge) x (Personal Time rate) x (Hrly Rate) = 150 x 1.45 x 1.15 x 36 = $9,004.5 Fully loaded cost for Stan = (Hrs needed) x (OH Charge) x (Personal Time rate) x (Hrly Rate) = 150 x 1.7 x 12 = $3,060 Fully loaded cost for Mary = (Hrs needed) x (OH Charge) x (Personal Time rate) x (Hrly Rate) = 120 x 1.45 x 21.5 = $3,741 Fully loaded cost for Alice = (Hrs needed) x (OH Charge) x (Personal Time rate) x (Hrly Rate) = 100 x 1.7 x 1.15 x 24 = $4,692 Total fully loaded labor cost = $9,004.5 + $3,060 + $3,741 + $4,692 = 20,497.5 Todd’s proportion of total fully loaded cost of labor = (9004.5 / 20497.5) x 100 = 43.92 % The most expensive member of the team is Todd. He takes up to 43.92 % of the overall fully loaded cost of labor. Q 6: Using the following information about work package budgets, complete the overall time-phased budget for your project. (All cost figures are in $ 000’s.) Which are the weeks with the greatest budget expense?

Ans: Task Budget Week 1 Week 2 Week 3 Week 4 Week 5 Week 6 Week 7 Week 8 A 5 3 2 B 8 1 4 3 1 C 12 2 7 3 D 7 3 3 1 E 14 5 5 2 2 F 6 1 2 3 Plan 52 4 8 13 12 6 3 4 3 Cumulative 4 12 25 37 43 46 50 53 Plan (weekly basis) = ∑ Task A Task F ❑ The weeks with the greatest budget expense = Week 3 has the biggest planned expense($13000) followed by Week 4 ($12000). Q 7: Given the following information, complete a time-phased budget for your project. (All cost figures are in $ 000’s.) What are weekly planned and cumulative costs for the project? Work Package Budget Week 1 Week 2 Week 3 Week 4 Week 5 Staffing 5 4 1 Blueprinting 8 1 6 1 Prototype 12 2 8 2 Full Design 24 4 10 10

Ans: Work Package Budget Week 1 Week 2 Week 3 Week 4 Week 5 Staffing 5 4 1 Blueprinting 8 1 6 1 Prototype 12 2 8 2 Full Design 24 4 10 10 Plan 49 5 9 13 12 10 Cumulative 5 14 27 39 49 Plan (weekly basis) = ∑ Task A Task F ❑ 3. You are working on a project to build a new home. You are now at point of the estimating costs, and immediately after you need to determine your budget. The project plan has listed four estimation techniques (analogous, parametric, bottom-up and three-point estimate PERT) as the techniques to be used. The cost plan also has the level 1 of the WBS as the control accounts and Allowed 5% Management Reserve based on top management decision. There are contingency reserves where applicable that have been added. Determine the total budget based upon below During the estimation process you have gathered the following information: The company where you work has built other houses in the same neighbourhood last year, and the historical data from one of a similar size shows the cost of designing (draft and updates) was $2500 total. The complete landscaping was $1200. The structure will be outsourced to the company that has been building houses in this area this past year and have given you the following estimates: Excavation (inc. Levelling) =$10,000, Foundation =$8,000, Framing =$7,000, Dry walling =$5,000 and Roof (inc. finishes) = $10,000. Each component estimate has an identified risk of $1000, $900, $700, $600 and $1500 (respectively) occurring and a 30% chance of occurring. Be sure to add in these contingencies. For the plumbing , your company will give you a new hire (resource) that makes $80 an hour and has given you an estimated time of completion of 20 hours and material cost of $1800. His overhead is 50% over and above his own hourly rate. As it is your first time working with him, you asked him to give you a pessimistic and optimistic estimate also (28 hrs and 18 hrs). Calculate what contingency amount should be used given that your manager wants 85% certainty in his labour estimate.

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

The electrical piece will be performed by a resource from the company that is currently working on another that should finish before starting working with you. This electrician has given you an estimate of $1,500 for the complete job. A risk has been identified for this activity that was assessed to cost $500. It has a 40% chance of occurring, (What is the contingency put aside for this risk?) Painting: Material = $350, 2 human resources required @ $25 an hour for of 15 hours each. Windows: 3 windows @ $120, 3 windows @ $60 and installation = $500 Ans: Tasks Cost Risk Probability Contingency Total Cost Designing (draft and updates) $2500 $2500 Landscaping $1200 $1200 Excavation (inc. Levelling) $10,000, $1000 30% $300 $10300 Foundation $8,000 $900 30% $270 $8270 Framing $7,000 $700 30% $210 $7210 Dry walling $5,000 $600 30% $180 $5180 Roof (inc. finishes) $10,000 $1500 30% $450 $10450 Plumbing (@ $80/hr) $1680 50% $840 $2,520 Plumbing material $1800 $1800 Electrical $1,500 $500 40% $200 $1700 Painting: Material $350 $350 Painting: 2 human resources (@ $25/hr) $750 $750 Windows: 3 windows (@ $120/no.) $360 $360 Windows: 3 $180 $180

windows (@ $60/no.) Windows: installation $500 $500 Total Cost = $2500 + $1200 + $10300 + $8270 + $7210 + $5180 + $10450 + $2,520 + $1800 + $1700 + $350 + $750 + $360 + $180 + $500 = $53,270 Working calculations: 1) Plumbing labor duration, PERT = (T P +(4T ML ) +T O )/6 = (28 + 4(20) + 18)/6 = 21hrs Plumbing cost = 21 x 80 = $1680 2) Painting: 2 human resources (@ $25/hr), Painting labor cost = (25 x 15) + (25 x 15) = $750 3) Windows: 3 windows (@ $120/no.), Cost = (3 x 120) = $360 4) Windows: 3 windows (@ $60/no.), Cost = (3 x 60) = $180