MARCH 2010

PROJECT MANAGEMENT

Instructions to candidates:
a) Time allowed: Three hours (plus an extra ten minutes’ reading time at the start – do not write anything during this
time)
b) Answer FIVE questions with TWO from Section A and THREE from Section B
c) All questions carry equal marks. Marks for each question are shown in [ ]
d) Non-programmable calculators are permitted in this examination

SECTION A

1. a) Describe the different phases of the project life cycle. [10]

b) With the aid of a diagram, describe the life cycle of a project in terms of the degree of project completion and
required effort. [10]

2. a) Identify and describe the main criteria for project selection models. [12]
b) List FOUR numeric and also FOUR non-numeric types of project selection models. [8]

3. a) Identify the advantages of top-down budgeting AND also the advantages of bottom-up budgeting. [12]
b) Distinguish between direct and indirect costs, giving at least THREE examples of EACH. [8]

4. “Operations and projects differ primarily in that operations are ongoing and repetitive while projects are
temporary and unique.” Discuss this statement, making particular reference to the distinctive characteristics of a
project. [20]

SECTION B

5. A company wishes to install a new networked computer system into its head office. The following table shows the
main activities involved, along with the estimated activity durations:

Activity duration (days)

Activity Optimistic (O) Pessimistic (P) Most likely (L)
A 13 15 14
B 16 21 19
C 15 22 17
D 14 19 16
E 6 10 8
F 3 6 5
G 6 10 7
H 5 9 8
I 8 16 12
J 11 17 14
K 10 19 15
L 8 10 10

a) Calculate the expected durations for critical path activities A–E–I. [5]
b) Calculate the scheduled duration for the project. [5]
c) What is the probability of the project being completed in a desired time of 35 days? [5]
d) What is the probability of the project being completed in a desired time of 32 days? [5]

continued overleaf
6. A large manufacturing company is developing a new model of bicycle, and the following table shows some of the
information involved in this project:

Duration
Activity (weeks) Predecessors
A 4 ---
B 3 ---
C 6 ---
D 3 B
E 3 A, D
F 2 B
G 3 E
H 1 A, D
I 5 E
J 3 H, I
K 4 C, F, G

a) Calculate the scheduled completion time and identify the critical path. [4]
b) Calculate the slack (float time) for ALL activities. [6]
c) Construct a Gantt chart for the project. [10]

7. Using the network below and the additional information provided, find:
a) the crash cost per day per activity [8]
b) which activities should be crashed to meet a project deadline of 10 days at minimum cost [8]
c) the new cost [4]

A B

E
1 4 5

C
D

Activity Normal time Crash time Normal cost Crash cost

(days) (days) (£) (£)
A 7 3 300 700
B 3 1 250 600
C 6 5 500 900
D 3 2 200 500
E 2 1 300 400

continued overleaf
8. A house building company is considering three potential site locations, A, B and C, for its next development. The
sites at locations A and B will each require an investment of £8m, while the site at location C will require an
investment of £10m. The annual rate of return over the given period is expected to be 5%, and estimates of yearly
 sales income, in £m, from each of the three sites are as follows:

Year Site A Site B Site C

1 2.0 3.0 0.0
2 2.0 5.0 1.0
3 2.0 1.0 3.0
4 2.0 1.0 4.0
5 2.0 0.0 5.0

Calculate the net present value of EACH of the sites, and advise the company which of the three sites should be
the most profitable. [20]

Relevant Formulae:

Question 5:

Expected Activity Duration: O + 4L + P

6

Activity Std. Dev: P – O

6

Uncertainty of Project Completion Time:

Z = (D – U)
Var

D: desired project completion time

U: the critical time of the project; the sum of the TEs for activities on the Critical Path
Var: the variance of the critical path; the sum of the variances of activities on the Critical Path
Z: the number of standard deviations of a normal standard distribution.

Question 7:

Crash Cost/Slope = Crash Cost – Normal Cost

Normal Duration – Crash Duration

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