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Unit 4 PMF PERT CPM
Unit 4 PMF PERT CPM
• Total Float
• TF = (Lf – Ef) or (TF = Ls-Es)
• Free Float
• (FF = Total float – Head event slack)
• Independence Float
• (IF = Free float – Tail event slack)
Break Even Analysis
Break Even Analysis
• The Breakeven point is the point where gains
equal the losses.
• Fixed Costs
• Variable Costs
Break Even Analysis
• Variable Cost
• Fixed Cost
• Offer
Acceptance
Agreement
Contract
Contract Management
• Contract – Agreement between two or more
parties in writing, to do or not to do certain
things.
• Responsibility
• Reimbursement
• Risk
Contract Management
• Purchase Order
• Invoice
Purchase Cycle
The Need
Financial Authority
RFP
Invite Tenders
PQQ
Tenders
Qualifying
Evaluation
Negotiation
Contract Award
Manage Contract
Approval And Payment
Sign Off
Update Of Records
•
Make or Buy Decision
• It is the determination whether to produce a
component internally or to buy it from outside
the supplier
• 2. Economic Analysis
• 3. Breakeven Analysis
Problems
• There are three alternatives available to meet the demand
of a particular product. They are as follows:
• Manufacturing the product by using process A and B,
buying the product. The annual demand of the product is
8,000 units. Should the company make the product using
process A or Process B or buy it?
Manufacturing by Manufacturing by the
Cost Element Buy
the Process A Process B
Fixed Cost/year (Rs) 500,000 600,000
Variable /Unit (Rs) 175 150
Purchase price/Unit(Rs) 125
Solution
• Data Given:
• Fixed cost for Process A = Rs.5,00,000
• Fixed cost for Process B = Rs.6,00,000
• Variable cost for Process A = Rs.175/unit
• Variable cost for Process B = Rs.150/unit
• Purchase cost = Rs.125/unit
Annual Demand = 8000 units
Solution
• Total Cost for Process A
• = Fixed Cost + Variable Cost
• = 5,00,000 + 175* 8000
• = Rs.19,00,000
• Total Cost for Process B
• = Fixed Cost + Variable Cost
• = 6,00,000 + 150*8000
• = Rs.18,00,000
Solution
• Purchase Cost
• = 8000*125
• = Rs.10,00,000
• The Total cost is low for purchase compared to
process A and Process B.
• Payback Period
= Initial Investment ÷ Annual Cash Flow
= $105M ÷ $25M
= 4.2 years