CMA Final · Strategic Cost Management · Network Analysis - PERT, CPM
The indirect cost of a project is Rs 3,000 per day. A critical activity can be crashed by up to 4 days at an extra direct cost of Rs 2,500 per day, and no other path becomes critical. What is the net saving in total cost if the activity is crashed by the full 4 days?
The net saving is Rs 2,000. Crashing four days saves 4 × Rs 3,000 = Rs 12,000 of indirect cost but adds 4 × Rs 2,500 = Rs 10,000 of direct cost. The difference of Rs 2,000 is the gain from crashing.
- ARs 2,000Correct
- BRs 8,000
- CRs 10,000
- DRs 12,000
Explanation
Indirect cost saved = 4 × 3,000 = 12,000. Extra direct cost = 4 × 2,500 = 10,000. Net saving = 12,000 - 10,000 = 2,000. Rs 10,000 or Rs 12,000 each considers only one side of the trade-off.
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