Problem:
The company decided that the project in has to be expedited in order to optimize (minimize) the project cost. Expediting can be used to trade direct cost for indirect cost, since expediting the project reduces the indirect cost of the project by a fixed amount per day, while expediting an activity increases its total direct cost. The Accounting Department found that indirect costs amount to $100 per day, while activity direct costs as well as their normal and expedited times are given in the table below.
|
Activity
|
Normal
Time
(days)
|
Expedited
Time
(days)
|
Normal
Cost
($)
|
Expedited
Cost
($)
|
|
A
|
32
|
26
|
200
|
500
|
|
B
|
21
|
20
|
300
|
375
|
|
C
|
30
|
30
|
200
|
200
|
|
D
|
45
|
40
|
200
|
800
|
|
E
|
26
|
20
|
700
|
1,360
|
|
F
|
28
|
24
|
1,000
|
1,160
|
|
G
|
20
|
18
|
400
|
550
|
From this table you can compute the direct cost incurred by expediting an activity by one day.
Answer the following questions:
1) What is the optimal time to complete the project?
2) What is the optimal project cost?