UEME4253 Project Management

Tutorial 1
Problems
1. Your firm designs PowerPoint slides for computer training classes, and you have just
received a request to bid on a contract to produce the slides for an 8-session class. From
previous experience, you know that your firm follows an 85 percent learning rate. For
this contract it appears the effort will be substantial, running 50 hours for the first
session. Your firm bills at the rate of RM100/hour and the overhead is expected to run a
fixed RM600 per session. The customer will pay you a flat fixed rate per session. If your
nominal profit margin is 20 percent, what will be the total bid price, the per session
price, and at what session will you break even?

2. Find the best alternative given the cost outcomes below. The probability of rain is 0.3,
clouds are 0.2, and sun is 0.5.
Alternative
a
b
c
d

Rainy
6
2
5
5

State
Cloudy
3
4
4
4

Sunny
4
5
3
3

3. In Problem 3, base your decision instead on the worst possible outcome for each
alternative.

4. A light manufacturing firm has set up a project for developing a new machine for one of
its production lines. The most likely estimated cost of the project itself is RM1,000,000,
but the most optimistic estimate is RM900,000 while the pessimists predict a project
cost of RM1,200,000. The real problem is that even if the project costs are within those
limits, if the project itself plus its implementation costs exceed RM1,425,000, the project
will not meet the firms NPV hurdle. There are four cost categories involved in adding
the prospective new machine to the production line:
a. Engineering labor cost,
b. Non-engineering labor cost,
c. Assorted material cost, and
d. Production line down-time cost.
The engineering labor requirement has been estimated to be 600 hours, plus or minus
15 percent at a cost of RM80 per hour. The non-engineering labor requirement is
estimated to be 1500 hours, but could be as low as 1200 hours or as high as 2200 hours
at a cost of RM35 per hour. Assorted material may run as high as RM155,000 or as low
Project Budget

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UEME4253 Project Management

as RM100,000, but is most likely to be about RM135,000. The best guess of time lost on
the production line is 110 hours, possibly as low as 105 hours and as high as 120 hours.
The line contributes about RM500 per hour to the firms profit and overhead. What is
the probability that the new and overhead. What is the probability that the new
machine project will meet the firms NPV hurdle?

Project Budget

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