Exercise 8-3 Good Homes Construction Company is about to begin the construction of a large new home. The company's president, Michael Dean, is currently planning the schedule for this project. Michael has identified the five major activities (labeled A, B,..., E) that will need to be performed according to the project network shown next, followed by a table giving the normal point and crash point for each of these activities. These costs reflect the company's direct costs for the material, equipment, and direct labor required to perform the activities. In addition, the company incurs indirect project costs such as supervision and other customary overhead costs, interest charges for capital tied up, and so forth. Michael estimates that these indirect costs run $5,000 per week. He wants to minimize the overall cost of the project. Therefore, to save some of these indirect costs, Michael concludes that he should shorten the project by doing some crashing. to the extent that the crashing cost for each additional week saved is less than $5,000. (a) Use marginal cost analysis to determine which activities should be crashed and by how much to minimize the overall cost of the project. Under this plan, what is the duration and cost of each activity? How much money is saved by doing this crashing? START B E Activity Normal Time Crash Time Normal Cost Crash Cost FINISH ABCD 3 weeks 2 weeks $54,000 $60,000 4 weeks 3 weeks 62,000 65,000 5 weeks 2 weeks 66,000 70,000 3 weeks 1 week 40,000 43,000 4 weeks 2 weeks 75,000 80,000