Question

In: Operations Management

You are the manager of a project to improve the healthcare insurance claims auditing process.  For each...

You are the manager of a project to improve the healthcare insurance claims auditing process.  For each day that the claims auditing process takes, there is an associated cost of $1,700 so this cost is saved for each day reduction in the project completion time.  Following is the information for the healthcare claims auditing process. The normal time and crash time are the times it will take to complete each activity under each of those scenarios (normal and crash).  The Total Normal Cost and the Total Crash Cost are the total costs for completing that activity in that time.

Activity

Normal Time (days)

Crash Time (days)

Total Normal Cost

Total Crash Cost

Immediate Predecessor(s)

A

6

4

$4,000

$6,000

--

B

4

2

$4,000

$7,000

--

C

6

3

$3,000

$6,000

B

D

6

5

$4,500

$5,000

A

E

3

3

$10,000

$10,000

C

   

  1. Considering all of the cost, what is the cost of the project if all of the activities are crashed to their Crash Times?
  2. Based on the information provided, what is the minimum-cost schedule?  For this minimum-cost schedule, identify the critical path, the time for each activity and the total cost for completing the project?

Solutions

Expert Solution

slope of an activity = crash cost - normal cost / normal time - crash time

activity slope
A 1000
B 1500
C 1000
D 500
E Na

BCE is the critical path with duration 13.

crashing schedule

(a) The cheapest activity to crash on the critical path is C which can be crashed by 1 day at a cost of 1000.

Now there are 2 critical paths BCE and  AD with duration 12 each.


(b) Now, the two cheapest activites to crash on CP are D and C, which can be crashed for one day each at a cost of 1500. Duration is now 11.

(c) Now, the two cheapest activites to crash on CP are A and C, which can be crashed for one day each at a cost of 2000. Duration is now 10.

(d) Now, the two cheapest activites to crash on CP are A and B, which can be crashed for one day each at a cost of 2500. Duration is now 9.

No more crashing is possible now.

cost with different durations

Duration Direct cost Crash cost saving net cost
13 25500 0 0 25500
12 25500 1000 1700 24800
11 25500 2500 3400 24600
10 25500 4500 5100 24900
9 25500 7000 6800 25700

least cost duration is 11.


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