THE UNIVERSITY OF NEW SOUTH WALES

SCHOOL OF ACCOUNTING
ACCT2522 Management Accounting 1
Session 1, 2017

Tutorial Week 12 Project Management

Overall Theme

This week we consider the importance of project planning and implementation, and discuss how
project cost, time and quality can be managed. In particular, we explore how Gantt Charts and
AOA network diagrams (using CPM/PERT methodologies) are used to model and manage
projects. We also consider how resource loading and levelling techniques can be used to manage
variability in projects resource requirements.

Desired Learning Outcomes and Essential Reading

TOPIC 11
PROJECT PLANNING AND ANALYSIS
After completing this topic, you should be able to: Text book Materials:

1. Understand the nature of projects, and the common steps, issues

and people involved in their analysis and management.
Stevenson, Chapter 17
2. Understand and apply GANTT charts for planning and
scheduling. BDMM Chapter 6
3. Utilise CPM/PERT techniques in developing AOA network (excerpt)
diagrams for project management, and be able to explain the
advantages and disadvantages of these techniques. Both readings
available on Moodle
4. Explain concepts of resource loading and levelling.

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 Self Study Questions (complete in your own time)

1. Stevenson Ch.17, Problems 1-5 on pp.765-771. Worked solutions are provided in the text.

Problem 1: Practice with AOA diagrams

Problem 2: Practice with early and late start and finishes, slack time.
Problem 3 & 4: Practice with PERT calculations
Problem 5 part (a) only: Practice with project crashing

2. Consider the following CPM/PERT diagram. Among other resources, each activity (A, B, C
and D) requires a certain number of skilled supervisors to oversee the work. The number of
weeks to complete each activity is shown, along with the number of skilled supervisors
needed, in brackets.

A 4 (5) D 6 (4)

AC24(3)
(3)

B 4 (7)

a. Show in Gantt chart format (weeks on the horizontal axis and number of supervisors on the
vertical axis), the resource loading week by week, assuming that each activity starts as soon as
possible.
b. Your task is to reduce variability in supervisory requirements without increasing project
duration. Show in Gantt chart format how one should use resource levelling to achieve this.

Tutorial Questions (must be prepared prior to the tutorial)

Question 1: Advantager University

This question can be found on the following pages.

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Question 1: Advantager University

Advantager University is a top ranked university that has experienced huge and growing demand
from potential students for several years. To cope with this increased demand, several managers
have been hired by the university to facilitate expansion projects. The School of Accounting is just
one of the successful schools at Advantager that urgently needs to expand. To better serve students
and staff, the University administration has provided the School with a choice of several under-
utilised buildings on campus that would meet the School's expansion needs.

After several committee meetings, eight major expansion project activities have been identified,
and the University has agreed to provide project managers to support these activities. People
involved in the expansion were interviewed to gather information for the following table:

Table 1:
Activity Immediately Number of Activity Description Time Estimates (weeks)
preceding Managers Optimistic Likely Pessimistic
activities required*
A - 4 Select building 1 2 3
B - 2 Interview staff applicants 1 2 9
C A 3 Develop remodelling plans 1 2 3
D B 2 Select staff applicants 2 4 6
E C 3 Remodel 1 3 11
F C 3 New staff training 1 3 5
G D, E 2 Install facilities 2 5 8
H F, G 3 Move in 1 2 3

* Managers are qualified to work on all activities relating to the Universitys expansion projects,
and can be interchanged between activities and projects.

Required:

1. Draw a detailed network diagram for the project (there is a skeleton diagram on the next page
to get you started if youre really stuck, but it would be better if you tried to work this out on
your own first). 1

2. What is the critical path? What does it tell you, and why is it important?

3. (a) Which activities have slack?

(b) Using your answer to (a), explain the concept of shared slack, and where it does/does not
exist for this project.

4. (a) Advantager University has hired several managers to facilitate its expansion plans. Using
the data in Table 1, show in Gantt chart format (weeks on the horizontal axis and number of
managers on the vertical axis), the resource loading for this project week by week, assuming
that each activity starts as soon as possible.

(b) Show in Gantt chart format how you would use resource levelling to achieve a reduction in
variability in management requirements without increasing project duration.

1
Please note, when you draw up the last activity in your network diagram, you should set your late finish time to equal
your early finish time. When drawing up these diagrams you should assume we dont want a project to take any longer
than it has to remember, on the critical path there is no slack! Activities examined in isolation may have slack, but
the critical path should not.
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 (c) Explain how your answer to (b) can help Advantager University, given that it is undergoing
several expansion projects simultaneously.

5. (a) Calculate the path variance of BDGH.

(b) What is the value in calculating path variances?

6. A world-renowned Nobel Prize winning accounting academic will be visiting the university in
12 weeks. If the project can be completed in 12 weeks, she will be able to give a speech at the
opening ceremony for the building, attracting valuable news coverage of the event.

(a) Using the additional information in Table 2 below, ascertain the smallest total additional cost
incurred for finishing the entire project in 12 weeks.
(b) What factors would you consider in deciding whether to crash the project?

Table 2:
Activity Normal time Normal cost Crash time Crash cost
(weeks) $ (weeks) $
A 2 100,000 2 -
B 3 30,000 2 40,000
C 2 250,000 1 310,000
D 4 30,000 3 35,000
E 4 1,200,000 2 1,800,000
F 3 60,000 3 -
G 5 800,000 3 1,100,000
H 2 350,000 1 600,000

Hint

This can help you get started on Question 1, if youre really stuck ..

2 4

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 Self Study Questions (complete in your own time)

1. Stevenson, Ch 17, Problems 1- 5 on pp. 765-771. Worked solutions are provided in the text.

Problem 1: Practice with AOA diagrams

Problem 2: Practice with early and late start and finishes, slack time.
Problem 3 & 4: Practice with PERT calculations
Problem 5 part (a) only: Practice with project crashing

2. Consider the following CPM/PERT diagram. Among other resources, each activity (A, B, C
and D) requires a certain number of skilled supervisors to oversee the work. The number of
weeks to complete each activity is shown, along with the number of skilled supervisors
needed, in brackets.

A 4 (5) D 6 (4)

AC24(3)
(3)

B 4 (7)

a. Show in Gantt chart format (weeks on the horizontal axis and number of supervisors on the
vertical axis), the resource loading week by week, assuming that each activity starts as soon as
possible.
b. Your task is to reduce variability in supervisory requirements without increasing project
duration. Show in Gantt chart format how one should use resource levelling to achieve this.

No. of
Supervisors
13
12
11
10 A
9
8
7
6
5
4 B
3
D
2 C
1
Weeks 1 2 3 4 5 6 7 8 9 10 11 12 13 14

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 2.
No. of
Supervisors
13
12
11
10
9
8
7
6 A
5
4 B
3
D
2 C
1
Weeks 1 2 3 4 5 6 7 8 9 10 11 12 13 14