Question

In: Operations Management

________ is typically not referred to as a buffer type in critical chain project management. a....

  1. ________ is typically not referred to as a buffer type in critical chain project management.

a. resource buffer

b. free buffer

c. feeding buffer

d. project buffer

  1. A company has to make a choice between two projects, because the available resources in money and kind are not sufficient to run both at the same time. Each project would take 9 months and would cost $250,000.
    1. The first project is a process optimization which would result in a cost reduction of $120,000 per year. This benefit would be achieved immediately after the end of the project.
    1. The second project would be the development of a new product which could produce the following net profits after the end of the project:
      1. year:      $ 15,000
      2. year:      $125,000
      3. year:      $220,000

Assumed is a discount rate of 5% per year. Looking at the present values of the benefits of these projects in the first 3 years, what is true?

a. Both projects are equally attractive.

b.The first project is more attractive by app. 7%.

c. The second project is more attractive by app. 5%.

d. The first project is more attractive by app. 3%.

3. Your project management team includes two external consultants each from a different company.You found that repeated conflicts between the two consultants already slow down project progress and jeopardize achievement of objectives.

Which stage of team development can be difficult to overcome in such a situation?

a Storming from Forming, Storming, Norming, Performing

b Panic from Enthusiasm, Panic, Hope, Solution

c Kickoff from Assignment, Kickoff, Training, Communicating

d Frustration from Direction, Frustration, Cooperation, Collaboration

4. During a project, earned value analysis is performed, resulting in the following numbers:

EV: 523,000; PV: 623,000; AC: 643,000.

Which results are correct?

a CV: 120,000 SV: 100,000

b CV: 100,000 SV: 120,000

c CV: -100,000 SV: -120,000

d CV: -120,000 SV: -100,000

Solutions

Expert Solution

Answer 1: (b) free buffer is typically not referred to as a buffer type in critical chain project management.

Answer 2: (b)The first project is more attractive by app. 7%.

       Explanation:   

Project 1

Project 2

1

120000

15000

2

120000

125000

3

120000

220000

NPV of project 1 = Total discount benefit – Total discount cost

= 120000/(1+0.05)1+120000/(1+0.05)2+120000/(1+0.05)3- 250000

= 326789.7 – 250000 = 76789

NPV of project 2 = Total discount benefit – Total discount cost

= 15000/(1+0.05)1+125000/(1+0.05)2+220000/(1+0.05)3- 250000

= 317708 – 250000 = 67708

Therefore, Project 1 is more attractive to start with as NPV of project 1 is more.

Answer 3: (a) Storming from Forming, Storming, Norming, Performing stage of team development can be difficult to overcome in such a situation.

Answer 4:(d) CV: -120,000 SV: -100,000 results are correct.

Explanation:

Cost Variance (CV) = Earn Value – Actual Cost

= 523000 - 643000

= -120000

Schedule Variance (SV) = Earn Value – Planned Value

= 523000 - 623000

= -100000

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