Crashing of Networks

Cost Model Analysis

In whole of CPM Cost Model, we will be assuming that project duration is reduced by deploying more resources on critical activities.

Project Cost

Total Project cost is the sum of two separate cost:

the direct cost for accomplishing the work, and the indirect cost related to the control or direction of that work, financial overhead, lost production, and the hike.

The components of the total cost are depicted in figure

Components of project cost

Indirect Project Cost: Indirect costs on a project are those expenditures which cannot be apportioned or clearly allocated to the individual activities of a project, but are assessed as a whole.

Indirect cost rises with increased duration.

The total indirect cost curve will thus be curved.

Direct Project Cost: These include labour cost, material cost, equipment cost etc.

Normal time (t_n): Normal time is the standard time that an estimator would usually allow for an activity.

Crash time (t_c): Crash time is the minimum possible time in which an activity can be completed, by employing extra resources. Crash time is that time, beyond which the activity cannot be shortened by any amount of increase in resources.

Normal cost (C_n): This is direct cost required to complete the activity in normal time duration.

Crash cost (C_c): This is the direct cost corresponding to the completion of the activity within crash time.

The straight line or segmented approximation of the direct cost curve is helpful in carrying out the project cost analysis. In such analysis, the cost slope is used.

Cost Slope: The cost slope is the slope of the direct cost curve, approximated as straight line. It is defined as follows:

Total Project Cost and Optimum Duration: The total project cost is the sum of the direct cost and indirect costs.

We find that the minimum total cost is obtained at some duration known as the optimum duration. The corresponding cost is known as the minimum cost. If the project duration is increased, total cost will increase, while if project duration is decreased to the crash value, project cost will be the highest.