10.18 Suppose you are trying to decide whether or not it makes sense to crash your project. You know that normal project duration and direct costs are 60 days and $125,000.

You are worried because you have a very tight delivery schedule and the customer has placed a severe penalty into the contract in the form of $5,000 in liquidated damages for every day the project is late after 50 days. After working with the cost accountant, you have generated the following table of project costs at different completion durations:

Project Duration

(in days)

Direct Costs Overhead Costs Penalty Charges Total Costs 60 $125,000 $15,500 $50,000 57 140,000 13,000 35,000 54 175,000 10,500 20,000 51 210,000 8,000 5,000

a. Complete the table. How many days would you advise the project should be crashed? Why?

b. Suppose direct costs of crashing the project only increased $5,000 per day crashed at a steady rate

(starting with $125,000 on day 60). How many days would you advise that the project be crashed? Show your work.

10.19 When deciding on whether or not to crash project activities,