Kingland Construction Co. has signed a contract to build a hotel on a mountaintop in Arizona. Leroy Kingland, who owns the company, is analyzing the weekly costs he will incur during the life of the project. The initial project schedule sets the estimated duration at 24 weeks. Leroy has hired you as a consultant to assist him with decisions about crashing.
He has secured a construction loan of $500,000 to cover his cash flow needs between progress payments from the customer, and it carries an interest rate of 0.2 percent per week. He will not repay the loan until the end of the project, when he receives final payment from the customer. He also will pay $200 per week for construction insurance. Following some resource leveling, Leroy has determined that he will need 27 workers for the duration of the project. Their salaries, fully burdened for benefits, will result in a weekly cost of $45,000. Other costs to be incurred during the life of the project include rental fees for a construction trailer, portable toilets, and three trucks.
Your assignment is to:
1. Calculate total cost per week for the cost figures given above.
2. Conduct a web search to determine weekly cost estimates for the construction trailer, portable toilets, and trucks. Describe how you conducted your search, cite your sources, and state the assumptions underlying your estimates. (For example, what type of portable toilet and how many will you rent?)
3. Calculate a total cost per week for the project, combining the information provided with information you have gathered through your web search.
4. Prepare a consulting report for Mr. Kingland, advising him how he can use the information generated in Steps 1, 2, and 3 to make crashing decisions. Create an example to illustrate. Assume that he has never heard of project crashing, and use your own words to explain it.