CMA Final · Strategic Cost Management · Network Analysis - PERT, CPM
A critical activity at Sundaram Constructions has a normal duration of 10 days at a cost of ₹50,000 and a crash duration of 7 days at a cost of ₹62,000, with a linear cost-time relationship. What is the extra direct cost of shortening this activity by 2 days?
The extra direct cost is ₹8,000. The cost slope is the extra crash cost of ₹12,000 divided by the 3 days saved, which is ₹4,000 per day. Shortening by two days therefore costs 2 × ₹4,000. The ₹12,000 figure applies only to a full 3-day crash.
- A₹4,000
- B₹6,000
- C₹12,000
- D₹8,000Correct
Explanation
Cost slope = (62,000 − 50,000) / (10 − 7) = ₹4,000 per day. Shortening by 2 days costs 2 × 4,000 = ₹8,000. The ₹4,000 figure is only the slope for one day, and ₹12,000 is the cost of the full 3-day crash.
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