Reporting Performance

14–1 Do cost overruns just happen, or are they caused?

14–2 What impact would there be on BCWS, BCWP, ACWP, and cost and schedule variances as a result of the:

1. Early start of an activity on a PERT chart?

2. Late start of an activity on a PERT chart?

14–3 Alpha Company has implemented a plan whereby functional managers will be held totally responsible for all cost overruns against their (the functional managers’) original estimates. Furthermore, all cost overruns must come out of the functional managers’ budgets, whether they be overhead or otherwise, not the project budget. What are the advantages and disadvantages of this approach?

14–4 What would be the result if all project managers decided to withhold a management reserve? What criteria should be used for determining when a management reserve is necessary?

14–5 Consider a situation in which several tasks may be for one to two years rather than the 200 hours normally used in the work-package level of the WBS.

1. How will this affect cost control?

2. Can we still use the 50-50 rule?

3. How frequently should costs be updated?

14–6 Complete the table below and plot the EAC as a function of time. What are your conclusions?

	Cumulative Cost, in Thousands	Variance $
Week	BCWS	BCWP	ACWP	Schedule	Cost	EAC
1	50	50	25
2	70	60	40
3	90	80	67
4	120	105	90
5	130	120	115
6	140	135	130
7	165	150	155
8	200	175	190
9	250	220	230
10	270	260	270
11	300	295	305
12	350	340	340
13	380	360	370
14	420	395	400
15	460	460	450

14–7 Calculate the total price variance for direct labor and the labor rate cost variance from the following data:

	Direct Material	Direct Labor
Planned price/unit	$ 10.00	$ 22.00
Actual units	9,300	12,000
Actual price/unit	$ 9.25	$ 22.50
Actual cost	$86,025,00	$270,000

14–8 Companies usually estimate work based upon man-months. If the work must be estimated in man-weeks, the man-month is then converted to man-weeks. The problem is in the determination of how many man-hours per month are actually available for actual direct labor work.

Your company has received a request for proposal (RFP) from one of your customers and management has decided to submit a bid. Only one department in your company will be required to perform the work and the department manager estimates that 3,000 hours of direct labor will be required.

Your first step is to calculate the number of hours available in a typical man-month. The Human Resources Department provides you with the following yearly history for the average employee in the company:

· Vacation (3 weeks)

· Sick days (4 days)

· Paid holidays (10 days)

· Jury duty (1 day)

1. How many direct labor hours are available per month per person?

2. If only one employee can be assigned to the project, what will be the duration of the effort, in months?

3. If the customer wants the job completed within one year, how many employees should be assigned?