Elements of cost

Costs involved in project management can be

classified into 2 categories. They are:
Direct cost or Variable cost
Indirect cost or Fixed cost
Direct cost
Direct costs are those that vary directly with the
volume of our output.
It includes:-
Labor wages
Overtime premium
Materials
Subcontractors
Freight
Sales tax
Indirect cost
Indirect costs are those that doesnt change with the
change in level of output.
It includes:-
Insurance
Security
Goodwill
marketing
Activity crashing
Activity crashing is a method for shortening the
activity duration by reducing the time of one or more
of the critical activities less than its normal activity
time.
The main objective of doing this is to reduce activity
duration.
Criteria for selecting activities to crash
Must be on the Critical Path:-Crashing noncritical activities
that already have slack only buys more slack and doesnt
shorten the project duration. Only critical path activities drive
the project and crashing them will shorten the project duration.
Precedes multiple activities:-When an activity bottlenecks
numerous succeeding activities, it is a great candidate to
shorten. Once this activity is shortened, it allows the multiple
activities to begin.
Long duration:- An activity that has a long duration offers
more potential time gain from crashing it.
Contd
Lower cost per period gained:- Activities that cost less to crash are
preferred. These include those requiring lower paid, lower skilled
workers or other resources that are otherwise sitting idle.
Early in the project (the Sunshine Rule):- If you fail in crashing
the activity and it takes longer than planned, it is still early in the
project. Thus you still have recovery time. Also, typically demand
on resources early in the project is lower than other times, and they
should be readily available.
Labor-intensive:- When an activity is low skill labor intensive, it is
easy to add people to help complete the project early. When an
activity requires high skills to complete, it may be hard to find
qualified individuals who are capable of completing the task.
Contd
Subject to common problems:- Try to pick activities that are
subject to higher probability of common problems. Shortening
the duration lowers the exposure time and lessens the chances
of having a problem.
Time/Cost Tradeoff Analysis
The objective of time-cost tradeoff analysis is to reduce the original project
duration determined from the critical path analysis, to meet a specific
deadline with the least cost.
Reducing project duration can be done by adjusting overlaps between
activities or by reducing activities duration. The activity duration can be
reduced through one of the following actions:
Applying multiple-shift works
Working extended hours
Offering incentive payments to increase the productivity
Using additional resources
Using alternate construction methods