Silver Aviation assembles small aircraft for commercial use. The majority of Silver's business is with small freight airlines serving those areas where the airport size does not accommodate larger planes. The remainder of Silver's customers are commuter airlines and individuals who use planes in their businesses such as the owners of larger ranches.
Silver recently expanded its market into Central and South America, and the company expects to double its sales over the next three years.
In order to schedule work and keep track of all projects, Silver uses a network diagram. The diagram for the construction of a single cargo plane is shown in Exhibit A.
The diagram shows that there are four altemative paths with the critical path being ABGEFJK.
Bob Peterson, President of Coastal Airiines, 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 thirteen 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 currently 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.
Because Silver Aviation has assembled aircraft on an accelerated basis previously, the company has compiled a list of aash costs for this purpose. Vander used the data shown on the Crash Cost Listing in Exhibit B to develop a plan to cut 1 working days from the schedule at a minimum increase in cost to Coastal Airlines. Upon completing her plan, Vander was pleased that she could report to Peterson that Silver would be able to cut 10 working days from the schedule. The associated increase in cost would be $6,000.
Presented below is Vander's plan for the accelerated delivery of the cargo plane starting from the regulariy scheduled days and cost.

REQUIRED:
Evaluate the accelerated delivery schedule prepared by Grace Vander.
1 .
Explain why Vander's plan as presented is unsatisfactory.
2. Revise the accelerated delivery schedule so that Coastal Airlines will take delivetv of the first plane two weeks ahead of schedule at the least incremental cost to Coastal.
3. Calculate the incremental costs Bob Peterson will have to pay for this revised accelerated delivery.

Transcribed Image Text:

Completion Time Activity Crashed Additional Cost per Day Total Direct Cost 65 days $65,100 64 HJ by one day $400 65,500 63 FJ by one day 400 65,900 61 GH by two days 500 66,900 59 CD by two days 700 68,300 58 EF by one day 800 69,100 56 DE by two days 800 70,700 55 BG by one day 1,000 71,700