Question

Charter Financial Bank operates three branches in a southeastern city. Ray Copper, Vice-President of Information Technology at the bank, has recently been charged by the bank’s

president to develop a Website to promote bank services, to provide access to customer account information, and to allow individuals to apply online for loans and credit cards. Ray decided to

assign this project to Rachel Smith, one of two directors in the information technology group. Since Charter Financial did not currently have a presence on the Web, Ray and Rachel agreed

that an appropriate starting point for the project would be for the project team to benchmark existing Websites in order to gain a better understanding of the state-of- the-art in this area. At the

conclusion of their first meeting, Ray asked Rachel to prepare a rough estimate of how long this project would take and how much it would cost if it were pursued at a normal pace. Noting that

the president appeared particularly anxious to launch the Website, Ray also requested that Rachel prepare a time and budget estimate related to launching the Website as quickly as possible.

During the first project team meeting, the team identified seven major tasks associated with the project. The first task was to benchmark existing Websites. The team estimated that

completing this task at normal pace would likely require 10 days at a cost of $15,000. However, the team estimated that this task could be completed in as few as seven days at a

cost of $18,750 if the maximum allowable amount of overtime was used. Once the benchmark study was completed, a project plan and project definition document

would need to be prepared for top management approval. The team estimated that this task could be completed in five days at a cost of $3,750 working at a normal pace or in three days

at a cost of $4,500.

When the project received the approval of top management, the Website design could begin. The team estimated that Website design would require 15 days at a cost of $45,000 using no

overtime or 10 days at a cost of $58,500 using all allowable overtime.

After the Website design was complete, three tasks could be carried out simultaneously:

(1) developing the Website’s database,

(2) developing and coding the actual Web pages, and

(3) developing and coding the Website’s forms.

The team estimated that database development would require 10 days and cost $9,000 using

no overtime, but could be completed in seven days at a cost of $11,250 using overtime.

Likewise, the team estimated that developing and coding the Web pages would require 10 days and cost $15,000 using no overtime or could be reduced by two days at a total cost of

$19,500. Developing the forms was to be subcontracted out and would take seven days at a cost of $8,400. The organization that was to be used to create the forms does not provide an

option for paying more for rush jobs. Finally, once the database was developed, the Web pages coded, and the forms created, the entire Website would need to be tested and debugged. The

team estimated that this would require three days at a cost of $4,500. Using overtime, the team estimated that the testing and debugging task could be reduced by a day at a total cost of $6,750.

QUESTIONS

1. What is the cost of completing this project if no overtime is used? How long will it take

to complete the project?

2. What is the shortest amount of time in which the project can be completed? What is

the cost of completing the project in the shortest amount of time?

3. Suppose that the benchmarking study actually required 13 days as opposed to the 10

days originally estimated. What actions would you take to keep the project on a

normal schedule?

4. Suppose the President wanted the Website launched in 35 days. What actions would

you take to meet this deadline? How much extra would it cost to complete the project

in 35 days?

Answer 1

1.

Cost of completing the project when no overtime is used :

Let the activities be:

Benchmarking = Activity A

Project Plan and Project definition Doc. = Activity B

Website Design = Activity C

Developing the Website's Database = Activity D

Developing and Coding the actual Web pages = Activity E

Developing and Coding the Website's forms = Activity F

Test and Debugging = Activity G

Activity	Time (days)	Cost($)
A	10	15000
B	5	3750
C	15	45000
D	10	9000
E	10	15000
F	7	8400
G	3	4500
Total		100650

Hence total cost = 100650

Since the critical path is = A –> B –> C –> (D/E) –> G

Total time = 43 days ( critical path) ( the tasks D, E,F are simultaneous )

2.

The shortest time in which the project can be completed is :

The shortest path as can be evaluated from the critical path is A –> B –> C –> (E) –> G

Thus the shortest time is 30 days.

And the project cost will be :

100650+3750+750+13500+2250+4500+2250

( these additional costs are the overtime costs for all the activities where the overtime is possible )

Total Cost = 127650 $

3.

To keep the project on schedule we can :

• Use additional cost and reduce testing and debugging(task G) time to 2 days from 3 days.
• Also the tasks D and E can also be reduced from their time of 10 days to 7 and 8 days respectively and since D,E,F are simultaneous tasks , the maximum time will be 8 days for all three of them to be completed.

Thus the total time saving by paying overtime for tasks G, D,E and the total time that is saved is 1+2 = 3 days thus the total time for the project being the same i.e 43 days

4.

To launch the website in 35 days we can do the following :

• As mentioned above reducing the tasks time for D, E and G to 7, 8 and 2 days respectively by paying the additional overtime costs.
• Also the Website Design = Activity C can be reduced to 10 days from 15 days by paying overtime.

Thus total time saving = 1(G) + 2(D and E) + 5 (C) = 8 days .

Thus total project time = 43 days - 8 days = 35 days

and additional cost = (58500-45000) +(11250-9000) +(19500-15000)+(6750-4500) = 13500+2250+4500+2250

= 22500 $ will be the additional cost .