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learning rate) would be 50 hours in session 1, 42.5 hours in session 2, 36.1 hours in session 4, and 30.7 in session 8. This enables the total cost per session to be calculated … and thus the total for the eight sessions.SessionHoursV.C.Fixed CostTotal CostCum CostCum Rev150$5,000$600$5,600$5,600$5,172242.5$4,250$600$4,850$10,450$10,344338.6$3,865$600$4,465$14,915$15,516436.1$3,613$600$4,213$19,127$20,688534.3$3,428$600$4,028$23,155$25,860632.8$3,285$600$3,885$27,040$31,032731.7$3,168$600$3,768$30,809$36,204830.7$3,071$600$3,671$34,479$41,376Total$34,47937
4/Budgeting the ProjectThe total cost for the eight sessions is $34,479 to which your firm adds a 20 percent profit margin to give a bidprice of $41,375. The per session price, therefore, is $5,172. Comparing the cumulative revenue with the cumulative cost, your firm will break even in the third session.14. In Fig. 4.3 the mean bias is 11.35% (0.908/8) and the MAR is 0.160. For the new estimates based on the multiplicative model, see the Table below. TrackingPeriodEstimateActual(At/Et) - 1|(At/Et) - 1|MARSignal1179163-8.9%8.9%221724010.6%10.6%0.0980.17039167-26.4%26.4%0.153-1.6154517852.9%52.9%0.2471.14257671-6.6%6.6%0.2111.0276438423-3.4%3.4%0.1811.00576449-23.4%23.4%0.189-0.2768170157-7.6%7.6%0.175-0.735Total-12.9%139.9%The mean bias is -1.61% (-0.129/8) and the MAR is 0.175. Thus, the new model is slightly less accurate, but has significantly less bias.15. As shown in the table below, alternative d has the lowest expected cost and is thus the best alternative.RainyCloudySunnyExpectedAlternative0.30.20.5Costa6344.4b2453.9c1274.2d5433.816. The worst possible outcomes for Alternatives a, b, c and d are 6, 5, 7 and 5 respectively. RainyCloudySunnyWorstAlternative0.30.20.5Casea6346b2455c1277d5435Alternatives b and d have the best (lowest) worst outcome.17. In the spreadsheet shown below the project cost, nonengineering labor hours, material cost, and downtime hours were all modeled using a triangular distribution. The engineering labor hours were modeled using a uniform distribution over the range of 510 to 690 hours. As shown in the spreadsheet below, the project has a 92.37% chance of meeting the firm’s NPV hurdle.38
4/Budgeting the ProjectHoursCostProj Cost$1,033,333Eng Labor60048,000Non Eng Labor163357,167Matl130,000Downtime11255,833Total Cost1,324,333There is no solution provided for problem #18. Incidents for Discussion Suggested AnswersIncidents for Discussion Included in the ChapterA Budgeting NoviceQuestion: What do you think Alex should show to his boss, so that the boss would feel more comfortable lettingAlex determine and monitor the project’s budget?Since the precedent has been set that a top-down approach to budgeting is used at this company, Alex should do the same. In the past, Alex has had autonomy to manage both performance and schedule, but has not been permitted to develop the budget. Thus, it might be helpful for Alex to share documents with his boss that demonstrate his competency in handling both schedule and performance (assuming his boss is not familiar with these). In additionto documenting his previous experience, it would be useful for Alex to share with the boss his WBS and demonstrate how this drove his cost estimates. Finally, Alex might find it useful to share with his boss how having responsibility for only schedule and performance and not budget, limits his effectiveness as a project manager.