Case Scenario Analysis:

Managing risks in construction projects has been recognized as a very important management process in order to achieve the project objectives in terms of time, cost, quality, safety and environmental sustainability. A study aims to identify and analyze the risks associated with the development of construction projects from project stakeholder and life cycle perspectives. The study identified following risk factors.

1.Tight project schedule

2.High performance/quality expectations

3.Low management competency of subcontractors

4.Incomplete or inaccurate cost estimate

5.Lack of coordination between project team members

6.Unavailability of sufficient professionals and managers

7.Serious air pollution and noise caused by construction activities

Develop understanding on how and on what level three factors of your choice can generate risk in achieving project objectives. Finally, identify a set of measures that you as a project manager would like to plan and implement to reduce risk and ensure achievement of project objectives and contribute in business development.

Hint: Your answer should include the way the factor develop risk in the achievement of project objectives and its level. Finally, you need to develop measures or actions you would like to implement to manage and/or minimize the risk.

Tiger Equipment Inc., a manufacturer of construction equipment, prepared the following factory overhead cost budget for the Welding Department for May of the current year. The company expected to operate the department at 100% of normal capacity of 8,400 hours.

During May, the department operated at 8,860 standard hours. The factory overhead costs incurred were indirect factory wages, $32,400; power and light, $21,000; indirect materials, $18,250; supervisory salaries, $20,000; depreciation of plant and equipment, $36,200; and insurance and property taxes, $15,200.

Required:

On August 3, Cinco Construction purchased special-purpose equipment at a cost of $7,092,800. The useful life of the equipment was estimated to be eight years, with an estimated residual value of $52,490. a. Compute the depreciation expense to be recognized each calendar year for financial reporting purposes under the straight-line depreciation method (half-year convention). b. Compute the depreciation expense to be recognized each calendar year for financial reporting purposes under the 200 percent declining-balance method (half-year convention) with a switch to straight-line when it will maximize depreciation expense. c. Which of these two depreciation methods (straight-line or double-declining-balance) results in the highest net income for financial reporting purposes during the first two years of the equipment’s use?

On August 3, Cinco Construction purchased special-purpose equipment at a cost of $5,709,200. The useful life of the equipment was estimated to be eight years, with an estimated residual value of $28,920.

a. Compute the depreciation expense to be recognized each calendar year for financial reporting purposes under the straight-line depreciation method (half-year convention).

b. Compute the depreciation expense to be recognized each calendar year for financial reporting purposes under the 200 percent declining-balance method (half-year convention) with a switch to straight-line when it will maximize depreciation expense.

c. Which of these two depreciation methods (straight-line or double-declining-balance) results in the highest net income for financial reporting purposes during the first two years of the equipment’s use?

On August 3, Cinco Construction purchased special-purpose equipment at a cost of $5,756,300. The useful life of the equipment was estimated to be eight years, with an estimated residual value of $49,070.

a. Compute the depreciation expense to be recognized each calendar year for financial reporting purposes under the straight-line depreciation method (half-year convention).

b. Compute the depreciation expense to be recognized each calendar year for financial reporting purposes under the 200 percent declining-balance method (half-year convention) with a switch to straight-line when it will maximize depreciation expense.

c. Which of these two depreciation methods (straight-line or double-declining-balance) results in the highest net income for financial reporting purposes during the first two years of the equipment’s use?

On August 3, Cinco Construction purchased special-purpose equipment at a cost of $7,653,800. The useful life of the equipment was estimated to be eight years, with an estimated residual value of $61,540. a. Compute the depreciation expense to be recognized each calendar year for financial reporting purposes under the straight-line depreciation method (half-year convention). b. Compute the depreciation expense to be recognized each calendar year for financial reporting purposes under the 200 percent declining-balance method (half-year convention) with a switch to straight-line when it will maximize depreciation expense. c. Which of these two depreciation methods (straight-line or double-declining-balance) results in the highest net income for financial reporting purposes during the first two years of the equipment’s use?

Tiger Equipment Inc., a manufacturer of construction equipment, prepared the following factory overhead cost budget for the Welding Department for May of the current year. The company expected to operate the department at 100% of normal capacity of 8,700 hours.

During May, the department operated at 9,080 standard hours. The factory overhead costs incurred were indirect factory wages, $42,268; power and light, $21,520; indirect materials, $18,700; supervisory salaries, $19,800; depreciation of plant and equipment, $35,700; and insurance and property taxes, $18,450.

Amount Descriptions

Factory Overhead Cost Variance Report

Prepare a factory overhead cost variance report for May. To be useful for cost control, the budgeted amounts should be based on 9,080 hours hours. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries. Enter all variances as positive amounts.

Part 2 – Construction Cost

A sub-contractor needs to decide which companies they should hire for each type of building they want to construct.

Below is the estimated time it should take (in hours) for each of the different types of buildings they work on.

Below are the hourly rates for some different construction companies in the area.

1. Input the information in the previous two tables in Excel. Make sure that you label all the information in your spreadsheet.

2. Use matrix multiplication to determine which companies can complete each project at the lowest cost. Label your new matrix with the appropriate labels.

3. Highlight the cells that give the lowest cost for each building project.

4. Make a table that clearly identifies which company should be hired for each project.

A flood control project has a construction cost of $10 million in year 1; $6 million in year 2; and $2 million in year 3, when it is completed. Beginning in year 4, annual O&M costs are $200,000/year. The interest rate is 6%. Benefits also begin accruing in year 4, valued at $1.5 million that year. Thereafter, the benefits grow at a uniform rate of $30,000/year until the end of the project life of 50 years.

1. Make a cash flow table of costs and benefits over the 50-year project life using excel.
2. What are the present worth values of the costs and the benefits?
3. What is the net present value of the project?
4. The project is feasible if the ratio of benefits to costs, (B/C) > 1. Is the flood control project feasible?

Tiger Equipment Inc., a manufacturer of construction equipment, prepared the following factory overhead cost budget for the Welding Department for May of the current year. The company expected to operate the department at 100% of normal capacity of 8,700 hours.

During May, the department operated at 9,080 hours, and the factory overhead costs incurred were indirect factory wages, $42,268; power and light, $22,064; indirect materials, $18,700; supervisory salaries, $19,800; depreciation of plant and equipment, $35,700; and insurance and property taxes, $18,450.

Required: