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Question 4 Project management (20 marks)

Paige Turned recently purchased a block of land to building a new multi-million dollar manufacturing plant. The current facility (a converted chemical shed) is consistently causing problems. The new purpose-built facility would allow Picasso to increase production and satisfy safety and environmental regulations.

A building consultant has broken the project into a number of separate tasks identified by letters. Preliminary estimates of the normal time and cost have been provided:

Task	Task description	Time (days)	Cost ($)	Crash time (days)	Per day revised costs ($)
A	Preparation of drawings and permits	14	72,500	10	10,000
B	Calling and letting of tenders	68	166,750	66	23,000
C	Site preparation and excavation	6	116,000	4	16,000
D	Pouring the foundation	24	250,000	24	-
E	Framing	40	145,000	30	20,000
F	Plumbing and electrical work	18	159,500	12	22,000
G	Interior finished	16	108,750	12	15,000
H	Exterior finishes	22	175,000	22	-
I	Installing and commissioning new machines	34	101,500	30	14,000
J	Finishing touches and final work through	32	64,000	32	-

The building consultant has advised that the following relationship exists among these tasks:

A and B can be commenced at the same time.

C and D can both be commenced as soon as A is completed.

E cannot be commended until C and D are completed.

F can be commenced once D is completed.

G can be started once F is finished.

H cannot be commenced until E and G are completed.

I cannot start until B and E are completed.

J cannot commence until H and I are completed.

Required:

1. Using an appropriate computer drawing program, draw the network diagram for the project showing the task letter on the activity paths. (3 marks)
2. Identify all the possible pathways and determine the critical path. (2 marks)
3. Calculate the minimum time and associate cost in which the project could be completed. (8 marks)
4. The building is nearing completion, Paige Turner has written into the contract penalty provisions if the work is not finished on time. The only remaining task to complete is J and so far it is on schedule to complete in time however there is still 12 days to go, the cost has increased from $2,000 per day to $3,500 per day. The building consultant, in discussion with Paige, feels that an investigation might be worthwhile. The cost to investigate is $4,000 per day which might show if there is a problem and if this is the case it can be rectified by $10,000. This would lead to the cost being reduced to $2,000 for the remaining days. The probability of being able to rectify the problem is 0.7, should the consultant investigate? (7 marks)

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