15–18 The Alpha Machine Tool Project Acme Corporation has received a contractual order to build a new tooling machine for Alpha Corporation. The project started several months ago. Table 15–11 is the Monthly Cost Summary for June, 2002. Some of the entries in the table have been purposely omitted, but the following additional information is provided to help you answer the questions below:

A. Assume that the overhead of 100% is fixed over the period of performance.
B. The report you are given is at a month end, June 30, 2002.
C. The 80/20 sharing ratio says that the customer (i.e., Alpha) will pay 80 percent of the dollars above the target cost and up to the ceiling cost. Likewise, 80 percent of the cost savings below the target cost go back to Alpha.
D. The revised BCWS is revised from the released BCWS.
E. The ceiling price is based on cost (i.e., without profit).
Answer the following questions by extracting data from the Alpha Machine Tool Project’s monthly summary report.
1. What is the total negotiated target value of the contract? _________________________ 2. What is the budgeted target value for all work authorized under this contract? _________________________ 3. What is the total budgetary amount that Acme had originally allocated/released to the Alpha Project? _________________________ 4. What is the new/revised total budgetary amount that Acme has released to the Alpha Project? _________________________ 5. How much money, if any, had Acme set aside as a management reserve based upon the original released budget? (burdened) _________________________ 6. Has the management reserve been revised, and if so, by how much? (burdened) _________________________ 7. Which level-2 WBS elements make up the revised management reserve? _________________________ 8. Based upon the reviewed BCWS completion costs, how much profit can Acme expect to make on the Alpha Project?
(Hint: Don’t forget sharing ratio) _________________________ 9. How much of the distributed budget that has been identified for accomplishment of work is only indirectly attributed to this contract? (i.e., overhead) _________________________ Answer the Following Questions for Direct Labor Only 10. Of the total direct effort budgeted for on this contract, how much work did Acme schedule to be performed this month? _________________________ 11. How much of the work scheduled for accomplishment this month was actually earned (i.e., earned value)? _________________________ 12. Did Acme do more or less work than planned for this month? How much was the schedule variance (SV)? [$ and %] _________________________ 13. What did it actually cost Acme for the work performed this month? _________________________ 14. What is the difference between the amount that Acme budgeted for the work performed this month and what the actual cost was? (i.e., CV) [$ and %] _________________________ 15. Which WBS level-2 elements are the primary causes for this month’s cost and schedule variances? _________________________ 16. How much cost variance has Acme experienced to date? [$ and %] _________________________ 17. How much schedule variance has Acme experienced to date? [$ and %] _________________________ 18. Is the cost variance improving or getting worse?
19. Is the schedule variance improving or getting worse? _________________________ 20. Does it appear that the scheduled end date will be met? _________________________ 21. What is the new estimated burdened cost at completion? _________________________ 22. How much profitability/loss can Acme expect from the new estimated cost at completion? _________________________ 23. If Acme’s final burdened cost for the program was $3,150,000, how much profit/loss would it experience? _________________________

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TABLE 15-11. MONTHLY COST SUMMARY-JUNE 2002 Contract: PM: Reporting Period: Alpha Machine Tool Gary Jones Negotiated Cost: $2,500,000 Sharing Ratio: 80/20 Target Fee: 12% Ceiling: June 1 - June 30, 2002 Target Price: 2,800,000 Contract: 3,000,000 on cost (= $3.2 M on price) fixed price incentive fee Contract Period: Feb. 1 - Oct. 30, 2002 Current Month, $ Cumulative to Date, $ At Completion, $ Original Level 2 WBS Items BCWS BCWP ACWP SV CV BCWS BCWP ACWP SV CV BCWS Contracted Released Revised BCWS BCWS Var. Program mgt. Subsystem A Subsystem B Subsystem C 0 Manu. support 11600 Quality control 5900 19300 19300 19300 0 0 108000 23000 16600 24200 <6400> <7600> 158000 14000 15200 16800 1200 <1600> 96000 0 0 0 0 10400 12000 <1200> <1600> 6000 6000 100 0 73000 0 5900 6000 0 1300 100 108000 108000 0 0 200000 181700 234700 23700 <53000> 250000 94200 93000 <1800> 1200 200000 0 0 0 300000 74300 75600 <1300> 200000 6000 0 100000 200000 200000 200000 225000 <25000> 200000 200000 275000 275000 190000 190000 100000 100000 TOTAL DIRECT 73800 67500 78300 OVERHEAD, 100% TOTAL 73800 67500 78300 147600 135000 156600 1250000 1250000 1165000 1190000 1165000 1190000 2500000 2330000 2380000