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CMA Intermediate · Operations Management and Strategic Management · Project Management, Monitoring and Control

In the time-cost trade-off curve for a project, as the project duration is progressively reduced by crashing, how do total direct costs and total indirect costs typically behave?

Direct costs rise and indirect costs fall as duration is shortened. Crashing needs extra resources, overtime and expediting, which add direct cost, while a shorter project incurs fewer periods of overheads. The optimum project duration is where total cost is minimum.

  1. ADirect costs fall and indirect costs rise
  2. BDirect costs rise and indirect costs fallCorrect
  3. CBoth direct and indirect costs rise
  4. DBoth direct and indirect costs remain unchanged

Explanation

Crashing needs extra resources such as overtime and additional labour, so direct costs increase as duration shortens. Overheads and other time-related indirect costs accrue per period, so a shorter project reduces them. The optimum duration lies where their sum, the total cost, is lowest.

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