Chapter 8 discussed the impact of crashing activities and the relationship of schedules to cost. The assumption was that as activity duration was decreased, the direct cost increased owing to the increase in direct labor rates from overtime.

Overhead rates also may vary, although the overhead rate is often lower for overtime work. For example, the overhead rate may be 100 percent for regular time but only 20 percent for overtime. In both cases, the overhead rate is associated with the wage rate being used.

Suppose that in the MARS project in Table 9-2, 1,000 direct hours of labor are required at $50 per hour, and the associated overhead rate is 100 percent for regular time. Now suppose for overtime, the wage rate is time-and-a-half and the overhead rate is 10 percent.

Compare the project cost if it were done entirely on regular time with the cost if it were done entirely on overtime. Which is less expensive?