Silver Aviation assembles small aircraft for commercial use. The majority of Silver’s business is with small freight airlines serving areas where the airport does not accommodate larger planes. The remainder of Silver’s customers are commuter airlines and individuals who use planes in their businesses. Silver recently expanded into Central and South America and expects to double its sales over the next three years.

To schedule work and keep track of all projects, Silver uses the program evaluation and review technique (PERT). The PERT diagram for the construction of a single cargo plane is shown on the following page. The PERT diagram shows that there are four alternative paths, with the critical path being ABGEFJK.

Bob Peterson, president of Coastal Airlines, has recently placed an order with Silver Aviation for five cargo planes. At the time of contract negotiations, Peterson agreed to a delivery time of 13 weeks

(five working days per week) for the first plane, with the balance of the planes being delivered at the rate of one every four weeks. Because of problems with some of the aircraft Coastal is using, Peterson has contacted Grace Vander, sales manager for Silver Aviation, to ask about improving the delivery date of the first cargo plane. Vander replied that she believed the schedule could be shortened by as much as ten working days, or two weeks, but the cost of construction would increase as a result.

Peterson said he would be willing to consider the increased costs, and they agreed to meet the following day to review a revised schedule that Vander would prepare.

Required:

a. PERT is a form of network analysis.
1. Explain how the expected regular times for each activity are derived in using PERT.
2. Define the term critical path and explain why path ABGEFJK is the critical path in this situation.

b. Evaluate the accelerated delivery schedule prepared by Grace Vander.
1. Explain why Vander’s plan as presented is unsatisfactory.
i) Revise the accelerated delivery schedule so that Coastal Airlines will take delivery of the first plane two weeks (ten working days) ahead of schedule at the least incremental cost to Coastal.
Calculate the incremental costs Bob Peterson will have to pay for this revised accelerated delivery.