Question 2: You have just been assigned as Project Manager (PM) to the Kuraiz-Re
ID: 442618 • Letter: Q
Question
Question 2: You have just been assigned as Project Manager (PM) to the Kuraiz-Reconda Fiber Optic Cable (KRFOC) project. You are preparing your cost estimate for the project and your Project Engineer (PE) tells you it will take 300 hours to complete the design effort. Your Finance Manager (FM) tells you that engineering labor is $100 an hour. Fortunately for you, unfortunately for them, you are a graduate of UMUC, specializing in project management in general and advanced project management techniques in particular.
Answer the following three questions:
Upon questioning, your PE admits that the 300 hours is just a guess, that under the best circumstances, meaning you quit bugging him with inane questions, it may take only 270 hours. However, it could take as long as 400 hours (if you do not leave him alone to do his job). He stands by his estimate that it will normally take 300 hours. What is the expected cost for design?
Thinking back to your UMUC days, you wonder if all engineers cost $100 per hour. Upon questioning, your FM admits that this is an average cost, that some are higher, some are lower. You direct him to give you the distribution of all engineer labor rates. With a lot of help (your FM does not have the benefit of your UMUC education), he replies that the labor rate is normally distributed with a mean of $100 and a standard deviation (he is still not sure what that is) of $3. Using this information and a wonderful tool you mastered at UMUC, Crystal Ball (CB), what is the mean cost of your engineering effort? Be sure to provide the results of your CB simulation.
You are about to present your cost estimate to your sponsor when you remember that he was once a Professor at UMUC. You recall, too, that he wore both a belt and suspenders and you suspect that this meant he might be a bit conservative. You therefore decide to provide an engineering cost estimate such that you are confident that 90% of the time your actual costs would be less than that value and that no more than 10% of the time would you exceed that value. What is your new estimate of engineering costs? Be sure to provide the results of your CB simulation.
Explanation / Answer
Solution :
1) The expected number of hours required by project engineers = (400 + 270 )/2
expected number of hours = 335 hours
The expected cost for design = 335 hours X $ 100
The expected cost for design = $ 33,500
2 ) The normal labor rate is $ 100 with a standard deviation of $ 3
Labor rate is normally distributed in the range of $ 97 - $ 103
The mean cost of your engineering effort = 97+103/2
The mean cost of your engineering effort = $ 100
3) At 90% confidence level the value of Z = 1.68
1.68 = X - mean / SD
1.68 = X - 100 / 3
X = 105.04 is the labor rate
The new estimate of engineering costs = $ 105.04 X 335
The new estimate of engineering costs = $ 35,188.40
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