Project Cost Analysis

Example: A project consists of 4 activities. Their logical relationship and time taken is given along with crash time and cost details. If the indirect cost is Rs. 2000/- per week, find the optimal duration and optimal cost.

1)      Find ΔC = Crash cost – Normal cost

2)      Find Δt = Normal time – Crash time

3)      Find ΔC / Δt = cost slope.

4)      Identify the critical path and underline the cost slopes of the critical activities.

5)      As the direct cost increases and indirect cost reduces, crash such activities whose cost slopes are less than the indirect cost given.

6)      Select the lowest cost slope and crash it first, then next highest and so on.

7)      Do not crash activities on non-critical path until they become critical activities in the process of crashing.

8)      In case any non-critical activity becomes critical activity at the time of crashing consider the cost slopes of both the critical activities, which have same time span and the costs slopes of both activities.

9)      Crashing should be continued until the cost slope becomes greater than the indirect cost.

10)   Do not crash such activities whose cost slope is greater than the indirect cost.

Crashing is done on a graph sheet with squared network drawn to scale.

Though the activity B can be crashed by 3 days, only 2 days are crashed because after crashing 2 days at 11th day, activity 2-4 (C) also becomes critical activity. At this stage if we want to crash one more day we have to crash activity 2–4 i.e. C also along with 2 – 3. Now the cost slopes of activities B and C are to be considered which will be greater than indirect cost. Hence no crashing can be done. 11 days is the optimal period and optimal cost is Rs. 39, 100/-.