Question
Suppose the normal direct costs for completing a project in 65 days are $75,000. The client wants the project delivered by day 58, and has
Suppose the normal direct costs for completing a project in 65 days are $75,000.
The client wants the project delivered by day 58, and has indicated there will be financial penalties for delivery after day 58.
You have been given the indirect costs and the penalty costs for the project as follows:
| Project duration (days) | Indirect costs | Penalty costs |
| 65 | $10,000 | $5,000 |
| 64 | $9,750 | $4,000 |
| 63 | $9,500 | $3,000 |
| 62 | $9,250 | $2,000 |
| 61 | $9,000 | $1,000 |
| 60 | $8,750 | $500 |
| 59 | $8,500 | $250 |
| 58 | $8,250 | $0 |
You also know that the activities to crash, to complete the project early are as follows: Crash A for up to 2 days at $850/day
Crash J for up to 2 days at $600/day Crash P for up to 4 days at $800/day
What is the most financially beneficial date to complete the project? Demonstrate why by showing your calculations. (5 marks).
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Financial Reporting International Standards
Authors: Graham Eaton
1st Edition
0750662379, 978-0750662376
