Homework

1186243 - McGraw Hill Education ©

Chapter Chapter 5 5 Estimating Estimating Project Project Times Times and and CostsCosts 155155

Appendix Appendix 5.15.1

Learning Learning Curves Curves for for EstimatingEstimating A A fforecast orecast estimaestimate te ofof the the time time requirrequired ed to to perform perform a a wwork ork package package or or task task is is a a basic basic necessity necessity ffor or scheduling scheduling the the prproject. oject. In In some some casescases, , the the manager manager simplsimply y uses uses judgment judgment and and past past experience experience to to estimaestimate te wwork ork package package timetime, , or or mamay y use use histori-histori- cal cal recorrecords ds ofof similar similar taskstasks.. Most Most manamanagers gers and and worworkers kers intuitiintuitively vely knoknow w thathat t improimprovement vement in in thethe

amount amount ofof time time required required to to perfperfororm m a a task task or or grgroup oup ofof tasks tasks occurs occurs with with repe-repe- tition. tition. A A wworkorker er can can perfperfororm m a a task task better/quicker better/quicker the the second second time time and and eacheach succeeding succeeding time time she/he she/he perfperfororms ms it it (without (without anany y technological technological change). change). It It is is thisthis papattern ttern ofof impr improvovement ement that that is is important important to to the the prproject oject manager manager and and prproject oject schedulerscheduler.. This This imprimprovovement ement from from rrepetition epetition generally generally rresults esults in in a a reduction reduction ofof la labor bor

hours hours ffor or the the accomplishment accomplishment ofof tasks tasks and and results results in in lolower wer prproject oject costscosts. . FFrom rom empirical empirical evidence evidence acracross oss allall industries industries, , the the pattern pattern ofof this this improimprovement vement has has been been quantified quantified in in the the learning learning curvcurvee (also (also known known as as imprimprovovement ement curvecurve, , experience experience curvecurve, , and and industrial industrial prprogress ogress curvcurve), e), which which is is described described by by the the ffollowingollowing relarelationship:tionship:

Each Each time time the the output output quantity quantity doubdoublesles, , the the unit unit labor labor hours hours arare e reduced reduced at at a a constant constant rrate.ate.

FFor or exampleexample, , assume assume that that a a manmanufacturer ufacturer has has a a new new contrcontract act for for 16 16 prprototype ototype units units and and a a total total ofof 800 800 labor labor hours hours wwere ere requirrequired ed for for the the first first unit. unit. PPast ast experience experience has has indicaindicated ted that that on on similar similar types types ofof units units the the improimprovement vement rarate te was was 80 80 percent. percent. This This relarelationship tionship ofof impr improovement vement in in lalabor bor hours hours is is shown shown belobelow:w:

Unit Unit Labor Labor HoursHours

1 1 800 800 2 2 800 800 33 5 5 .80 .80 640 640 4 4 640 640 33 5 5 .80 .80 512 512 8 8 512 512 33 5 5 .80 .80 410 410

16 16 410 410 33 5 5 .80 .80 328 328

By By using using TTabable le A5.1 A5.1 unit unit valuesvalues, , similar similar lalabor bor hours hours per per unit unit can can be be deterdetermined. mined. Looking Looking acracross oss the the 16 16 unit unit level level and and dodown wn the the 80 80 percent percent column, column, we we find find a a rratio atio ofof .4096. .4096. By By multiplmultiplying ying this this raratio tio times times the the lalabor bor hours hours for for the the first first unit, unit, wwe e obtained obtained the the per per unit unit value:value:

.4096 .4096 800 800 328 328 hours hours or or 327.68 327.68 33 55

ThaThat t isis, , the the 16th 16th unit unit should should require require close close to to 328 328 lalabor bor hourshours, , assuming assuming an an 80 80 per-per- cent cent imprimprovovement ement ratioratio..

2. 2. Looking Looking first first at at onlonly y cost, cost, whawhat t decision decision would would yyou ou makmake?e? 3. 3. After After cost, cost, whawhat t other other factors factors should should be be considered considered befbefore ore making making a a decision?decision?