5 hours in session 2 361 hours in session 4 and 307 in session 8 This enables

# 5 hours in session 2 361 hours in session 4 and 307

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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. Session Hours V.C. Fixed Cost Total Cost Cum Cost Cum Rev 1 50 \$5,000 \$600 \$5,600 \$5,600 \$5,172 2 42.5 \$4,250 \$600 \$4,850 \$10,450 \$10,344 3 38.6 \$3,865 \$600 \$4,465 \$14,915 \$15,516 4 36.1 \$3,613 \$600 \$4,213 \$19,127 \$20,688 5 34.3 \$3,428 \$600 \$4,028 \$23,155 \$25,860 6 32.8 \$3,285 \$600 \$3,885 \$27,040 \$31,032 7 31.7 \$3,168 \$600 \$3,768 \$30,809 \$36,204 8 30.7 \$3,071 \$600 \$3,671 \$34,479 \$41,376 Total \$34,479 37
4/Budgeting the Project The total cost for the eight sessions is \$34,479 to which your firm adds a 20 percent profit margin to give a bid price 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. Tracking Period Estimate Actual (A t /E t ) - 1 |(A t /E t ) - 1| MAR Signal 1 179 163 -8.9% 8.9% 2 217 240 10.6% 10.6% 0.098 0.170 3 91 67 -26.4% 26.4% 0.153 -1.615 4 51 78 52.9% 52.9% 0.247 1.142 5 76 71 -6.6% 6.6% 0.211 1.027 6 438 423 -3.4% 3.4% 0.181 1.005 7 64 49 -23.4% 23.4% 0.189 -0.276 8 170 157 -7.6% 7.6% 0.175 -0.735 Total -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. Rainy Cloudy Sunny Expected Alternative 0.3 0.2 0.5 Cost a 6 3 4 4.4 b 2 4 5 3.9 c 1 2 7 4.2 d 5 4 3 3.8 16. The worst possible outcomes for Alternatives a, b, c and d are 6, 5, 7 and 5 respectively. Rainy Cloudy Sunny Worst Alternative 0.3 0.2 0.5 Case a 6 3 4 6 b 2 4 5 5 c 1 2 7 7 d 5 4 3 5 Alternatives 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 Project Hours Cost Proj Cost \$1,033,333 Eng Labor 600 48,000 Non Eng Labor 1633 57,167 Matl 130,000 Downtime 112 55,833 Total Cost 1,324,333 There is no solution provided for problem #18. Incidents for Discussion Suggested Answers Incidents for Discussion Included in the Chapter A Budgeting Novice Question: What do you think Alex should show to his boss, so that the boss would feel more comfortable letting Alex 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 addition to 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.