A project has a total duration of 120 days. If the critical path is compressed by 10 days through crashing activities at an additional cost of $25,000, and the daily overhead cost is $800, what is the net cost impact?
Correct Answer
D) $17,000 cost
Crashing cost is $25,000, but overhead savings from 10 fewer days is 10 × $800 = $8,000. Net cost impact is $25,000 - $8,000 = $17,000 additional cost.
Why This Is the Correct Answer
When crashing a project, you must consider both the additional costs of crashing activities and the savings from reduced overhead costs. The crashing cost is $25,000, but compressing the schedule by 10 days saves $8,000 in daily overhead (10 days × $800/day). The net cost impact is the difference between these amounts: $25,000 - $8,000 = $17,000 additional cost.
Why the Other Options Are Wrong
Option A: $25,000 cost
This option incorrectly adds the crashing cost and overhead savings ($25,000 + $8,000 = $33,000), when the overhead savings should be subtracted from the crashing cost.
Option C: $33,000 cost
This option only considers the crashing cost of $25,000 but fails to account for the overhead savings of $8,000 from the 10-day schedule compression.
Memory Technique
Remember 'CRASH minus CASH' - Crashing costs minus overhead Cash savings equals net impact
Reference Hint
Project Management chapter covering Critical Path Method (CPM) and schedule compression techniques including crashing and fast-tracking
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