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CMA Final · Strategic Cost Management · Network Analysis - PERT, CPM

Two critical activities of a project, A and B, are in series, and no other path will become critical during crashing. Activity A can be crashed by at most 2 days at Rs 3,000 per day. Activity B can be crashed by at most 3 days at Rs 4,500 per day. Every day saved reduces indirect cost by Rs 3,800. Which crashing decision gives the maximum net saving?

Crash only activity A for 2 days, giving a net saving of Rs 1,600. A's Rs 3,000 daily cost is below the Rs 3,800 indirect saving, but B's Rs 4,500 exceeds it, so crashing B would reduce the net benefit to Rs 900.

  1. ACrash 2 days (A only), net saving Rs 1,600Correct
  2. BCrash 3 days (A 2 days and B 1 day), net saving Rs 900
  3. CCrash 1 day (A only), net saving Rs 800
  4. DDo not crash, net saving nil

Explanation

Crash the cheapest activity first. Crashing A for 2 days costs 6,000 and saves 7,600 in indirect cost, a net saving of 1,600. A third day via B costs 4,500, which is more than the 3,800 saved, so net saving falls to 900 (cost 10,500 against saving 11,400). One day gives only 800.

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