ENX314 Typical Exam-Type Questons and Solutions B-2 (1)

8/19/2019 ENX314 Typical Exam-Type Questons and Solutions B-2 (1)

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UNIVERSITY OF SUNDERLAND

SCHOOL OF COMPUTING AND TECHNOLOGY

LEVEL 3 EXAMINATION

ENX314: PROJECT MANAGEMENT and APPRAISAL

Revision / Tutorial Questions and Answers


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Question 1.

The lifecycle of a project may be broken down into 4 stages, namely concept,design, implementation and commission. Figure Q1 below shows how the levelof effort typically changes through the lifecycle.

Figure Q1. The stages of the project lifecycle and the level of effortassociated with each

(a) Explain why the level of effort is likely to vary between lifecycle phases asshown in Figure 1.

(5 marks)

(b) What typical tasks are likely to feature in each of the generic lifecycle phaseslisted above?

(12 marks)

(c) Explain how the ability of the project manager to influence the project (i.e.add value) varies through each of the lifecycle phases. How does the cost to

change the project vary through these phases? (8 marks)


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Question 2.

(a) The Project Management Institute Body of Knowledge (PMI BOK) breaks the

field of Project Management into NINE (9) different areas. Choose THREE (3) ofthese and give a summary of the important features of each.

(3 x 5 marks)

(b) Before any project can go ahead, the interests of stakeholders must be

considered and managed. Who are these stakeholders and how would youmanage their interests?

(10 marks)

Question 3.

A potential 6-year project requires the purchase of a new piece of machinery.You are the project manager and you must choose between two potentialmachines (Machine A and Machine B), either of which would be suitable. Thecost of each machine is identical at £80,000. However, they differ inperformance such that the projected future cash flows are different for eachmachine. Projected cash flows over the 6 years of the project are as follows inTable Q3a:

Table Q3a. Six year cash flow figures for Machine A and Machine B.

(a)

(i) By simple inspection of the cash flow figures, state which machine you would

choose and justify your choice.

(ii) Your colleague disagrees with your choice. Suggest one valid reason whyyour colleague’s choice may be justified?

(3, 3 marks)

Year Cash Flow: Machine A Cash Flow: Machine B

0 -£80,000 -£80,000

1 £5,000 £35,000

2 £8,000 £25,000

3 £12,000 £18,000

4 £20,000 £10,000

5 £25,000 £7,000

6 £30,000 £5,000


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(b) Calculate the total NPV for each machine after 6 years assuming a discount(inflation) rate of 7% for each year of the project. Table Q3b provides a list of

discount factors for a range of discount/inflation rates.

(10 marks)

(c) Calculate the Internal Rate of Return (IRR) for Machine A over the 6 year

period. You may do the calculation graphically or by any valid method of yourown choice.

(9 marks)

Table Q3b. Discount Factors over 6 years for various inflation/discount rates.

Question 4.

Table Q4 gives information on the daily employee resource required for a 6-taskproject together with the early start dates, durations and associated float for eachtask.

Table Q4: Project Employee Resource Requirements

Discount Factors for given discount (inflation) rates over a 6-year project

Years 1% 2% 3% 4% 5% 6% 7% 8% 9% 10%

1 0.9901 0.9804 0.9709 0.9615 0.9524 0.9434 0.9346 0.9259 0.9174 0.9091

2 0.9803 0.9612 0.9426 0.9246 0.9070 0.8900 0.8734 0.8573 0.8417 0.8264

3 0.9706 0.9423 0.9151 0.8890 0.8638 0.8396 0.8163 0.7938 0.7722 0.7513

4 0.9610 0.9238 0.8885 0.8548 0.8227 0.7921 0.7629 0.7350 0.7084 0.6830

5 0.9515 0.9057 0.8626 0.8219 0.7835 0.7473 0.7130 0.6806 0.6499 0.6209

6 0.9420 0.8880 0.8375 0.7903 0.7462 0.7050 0.6663 0.6302 0.5963 0.5645

ActivityFloat

(Days)Early StartDate (Day)

Duration(Days)

Employees Required(per Day)

A1 0 1 2 2

A2 2 3 2 2

A3 0 3 2 6

A4 2 5 2 3

A5 0 5 4 1

A6 0 9 1 2


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(a) On the basis of the information presented in Table Q4, draw up a GanttChart showing activities and their relative timing. Indicate available float on the

diagram. Finally, superimpose the required resources on each day of each

activity. Use a format (such as that shown below in the Figure Q4 template(Activity A1 has been completed for you).

Figure Q4: Template for Gantt Chart (10 marks)

(b) Draw up Resource Histograms for (i) Early Starts and (ii) Late Starts.Comment on the results in terms of employee resource requirements over theduration of the project given that you are limited to a maximum of 6employees per day.

(15 marks)

Question 5.

(a) Table Q5 shows the logic table for a particular project.

Task Predecessors Duration (Days)

A - 3

B A 7

C A 5

D C 3

E B 2

F B, C 4

G D, E, F 6

Table Q5. Logic table for project activities A through G.

(i) Construct a Network Diagram showing the various logical activityrelationships from this information.

(5 marks)

Activity Day

Number 1 2 3 4 5 6 7 8 9

A1 2 2

A2

A3

A4

A5

A6

TotalResources 2 2


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(ii) Perform a forward and backward pass to complete activity boxes. Arrangedata within activity boxes as outlined in Figure Q5 below.

Figure Q5. Layout of Activity Box information. (5 marks)

(iii) Highlight the critical path on your diagram. (3 marks)

(b) It is suggested that the duration of the whole project could be shortened by 4days by completing Activity B in 3 days rather than 7 days. Rework the NetworkDiagram and comment on whether this strategy would succeed. State thereasons for your answer.

(12 marks)


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Question 6.

(a) Consider the two graphs depicted in Figures Q6a and Q6b. Explain thenature of the information provided by each graph and comment on the differingviews they present on project performance to “timenow”.

Figure Q6a

Figure Q6b

(10 marks)

Planned

Actual

Planned

Actual


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(b) What do you understand by the term “Earned Value”? (5 marks)

Draw a fully-labelled Earned Value Curve, ensuring you include the followinginformation on your graph.

· BCWS, BCWP and ACWP

· Schedule Variance (SV) and Cost Variance (CV)

· Estimate at completion (EAC) and Budget at Completion (BAC)

· Overrun and Slippage

· Timenow.

(10 marks)

Question 7.

(a) Sales estimates for a project are given in Table Q7a. With the aid of thisinformation prepare a cash flow statement for the months June to November.

Sales Estimates:

JUN JULY AUG SEPT OCT NOV DEC JAN

Salesestimates (units)

1900 2400 1300 2000 2100 3800 2500 1800

Table Q7a

Additional relevant information is given below:

· Sales prices per unit are £40. Customers are given two months’ credit (i.e.

they pay you 2 months later ).

· Material price per unit is £10. Suppliers allow you one month credit (i.e.

you pay them 1 month later ).

· Labour costs per unit are £15. Labour is paid for in the month of use.

· Overheads are £3,200 per month.

· There is a scheduled loan repayment of £24,000 per month for theduration of this project.


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Use a template like that shown in Table Q7b to construct your answer.

Income & Expenditure Details (£) for months of:

August September October November December January

BroughtForward

6,000

Income

Total Available

Expenditure

Overheads

Materials

Labour

Loan TotalExpenditure

Closing Balance

Table Q7b

(15 marks)

(b) As a project manager involved in planning and control, rigorous projectmonitoring is vital to success. Efficient project control relies on the projectmanager being given relevant and timely data on project performance. This

involves “data capture”.

List, and briefly discuss, 5 aspects of feedback/data capture which you considerimportant in ensuring efficient project management.

(10 marks)


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Solutions


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Question 1.

The lifecycle of a project may be broken down into 4 stages, namely concept,

design, implementation and commission. Figure Q1 below shows how the levelof effort typically changes through the lifecycle.

Figure Q1. The stages of the project lifecycle and the level of effortassociated with each

(a) The graph above depicts both (i) the instantaneous input to the project and

(ii) the accumulated input to the project over the 4 lifecycle phases. During theconcept/initiation phase, the level of effort is relatively low and may involve very

few people. Once the go-ahead is given to the design/development stage thelevel of input required is likely to be higher as more detailed planning is put

together. When moving to the full-blown implementation/execution phase thewhole project team will be involved and the level of input will rise to a maximum.Finally, once the execution is complete, only commissioning and handoverremains and the level of input will fall again.

(5 marks)


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(b) The main tasks associated with each of the generic project phases (concept,design, implementation and commission) are likely to include those in the

diagram below. The student’s answer need not be exhaustive with respect to the

diagram below, but a comprehensive treatment is required for full marks.Similarly, the answer may be presented in diagram, list or essay format, providedthe level of information presented is appropriate.

(12 marks)

(c) In essence the level of ability to influence the project decreases with timethrough each successive project phase. Similarly, the cost to make changes tothe project increases with time through each successive project phase. Thestudent may well choose to explain this with the aid of a sketch graph as below:


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(8 marks)

Question 2.

(a) The nine areas, plus associated important features are given below. Any 3

may be chosen and discussed for 5 marks per area:

PROJECT INTEGRATION MANAGEMENT

A subset of project management that includes the processes required to ensure

that the various elements of the project are properly coordinated. It consists of:

o Project plan development - integrating and coordinating all project plans tocreate a consistent, coherent document.

o Project plan execution - carrying out the project plan by performing theactivities included therein.

o Integrated change control - coordinating changes across the entire project.


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PROJECT SCOPE MANAGEMENT


that the project includes all the work required, and only the work required, tocomplete the project successfully. It consists of:

o Initiation - authorizing the project or phase.o Scope planning - developing a written scope statement as the basis for

future project decisions.o Scope definition - subdividing the major project deliverables into smaller,

more manageable components.o Scope verification - formalizing acceptance of the project scope.o Scope change control - controlling changes to project scope.

PROJECT TIME MANAGEMENT


timely completion of the project. It consists of:

o Activity definition - identifying the specific activities that must be performedto produce the various project deliverables.

o Activity sequencing - identifying and documenting interactivitydependencies.

o Activity duration estimating - estimating the number of work periods that willbe needed to complete individual activities.

o Schedule development - analysing activity sequences, activity durations,and resource requirements to create the project schedule.

o Schedule control - controlling changes to the project schedule.

PROJECT COST MANAGEMENT


that the project is completed within the approved budget. It consists of:

o Resource planning - determining what resources (people, equipment,materials) and what quantities of each should be used to perform project

activities.o Cost estimating - developing an approximation (estimate) of the costs of the

resources needed to complete project activities.o Cost budgeting - allocating the overall cost estimate to individual work

activities.o Cost control - controlling changes to the project budget.


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PROJECT QUALITY MANAGEMENT


that the project will satisfy the needs for which it was undertaken. It consists of:

o Quality planning - identifying which quality standards are relevant to the

project and determining how to satisfy them.o Quality assurance - evaluating overall project performance on a regular

basis to provide confidence that the project will satisfy the relevant qualitystandards.

o Quality control - monitoring specific project results to determine if theycomply with relevant quality standards and identifying ways to eliminatecauses of unsatisfactory performance.

PROJECT HUMAN RESOURCE MANAGEMENT

A subset of project management that includes the processes required to make

the most effective use of the people involved with the project. It consists of:

o Organizational planning - identifying, documenting, and assigning projectroles, responsibilities, and reporting relationships.

o Staff acquisition - getting the needed human resources assigned to andworking on the project.

o Team development - developing individual and group skills to enhanceproject performance.

PROJECT COMMUNICATIONS MANAGEMENT

A subset of project management that includes the processes required to ensuretimely and appropriate generation, collection, dissemination, storage, and

ultimate disposition of project information. It consists of:

o Communications planning - determining the information andcommunications needs of the stakeholders: who needs what information,

when they will need it, and how it will be given to them.o Information distribution - making needed information available to project

stakeholders in a timely manner.o Performance reporting - collecting and disseminating performance

information. This includes status reporting, progress measurement, andforecasting.

o Administrative closure - generating, gathering, and disseminatinginformation to formalize phase or project completion.


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PROJECT RISK MANAGEMENT

Risk management is the systematic process of identifying, analysing, and

responding to project risk. It includes maximizing the probability andconsequences of positive events and minimizing the probability andconsequences of adverse events to project objectives. It includes:

o Risk management planning - deciding how to approach and plan the risk

management activities for a project.o Risk identification - determining which risks might affect the project and

documenting their characteristics.o Qualitative risk analysis - performing a qualitative analysis of risks and

conditions to prioritise their effects on project objectives.o Quantitative risk analysis - measuring the probability and consequences of

risks and estimating their implications for project objectives.o Risk response planning - developing procedures and techniques to enhance

opportunities and reduce threats from risk to the project’s objectives.

Risk monitoring and control - monitoring residual risks, identifying new risks,

executing risk reduction plans, and evaluating their effectiveness throughout theproject life cycle.

(3 x 5 marks)

(b) In brief, stakeholders are people or organisations who are either actively

involved in the project, or whose interests may be affected by the project beingimplemented. Stakeholders may be affected either positively or negatively by theproject. Hence some will support the project and some will oppose it. Hencethere is a need to identify and prioritise stakeholders’ needs and make this thebasis for action. This may be achieved via an amalgamation of relevantinformation collected, e.g. by a proforma such as shown below:

(10 marks)


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Question 3.

(a) (i) Both machines produce an income of £100,000 over the six years of the

project. Hence return on investment over the six years is the same for bothmachines. However, Machine B has the shortest payback period since the levelof income is higher in the earlier years. Hence machine B would be favoured on

a payback period argument. (3 marks)

(a) (ii) The main point in favour of Machine A is that the level of income is high atthe end of the project and hence income beyond the original project tenure couldbe significantly higher than that for Machine B.

(3 marks)

(b) The cash flows should be discounted each year by the relevant discount

factor and the total NPV calculated. The relevant calculations are shown in thefollowing tables:

(10 marks)

Discount Rate = 7%

Year

Cash Flow:

Machine A

Discount Rate for

Year Discount Factor Present Value

0 -£80,000 - - -£80,000

1 £5,000 7% 0.9346 £4,672.90

2 £8,000 7% 0.8734 £6,987.51 3 £12,000 7% 0.8163 £9,795.57

4 £20,000 7% 0.7629 £15,257.90

5 £25,000 7% 0.7130 £17,824.65

6 £30,000 7% 0.6663 £19,990.27

Total NPV -£5,471.19

Year

Cash Flow:

Machine B

Discount Rate for

Year Discount Factor Present Value

0 -£80,000 - - -£80,000

1 £35,000 7% 0.9346 £32,710.28 2 £25,000 7% 0.8734 £21,835.97

3 £18,000 7% 0.8163 £14,693.36

4 £10,000 7% 0.7629 £7,628.95

5 £7,000 7% 0.7130 £4,990.90

6 £5,000 7% 0.6663 £3,331.71

Total NPV £5,191.18


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(c) The IRR is the inflation (discount) rate at the point at which the total NPVequals zero. Hence this may be found by plotting the total NPV against discount

rate as shown in the graph below:

(9 marks)

IRR plot for Machine A

-6000

-4000

-2000

0

2000

4000

6000

3 4 5 6 7 8

Rate (%)

T o

t a l N P V

IRR = 5.25%


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Question 4.

(a) The completed Gantt Chart should appear as shown:

(10 marks)

(b) Activities 200 and 400 have a degree of float, so can be scheduled flexiblywithin this float. The Early Start scenario leads to daily resource requirements asshown in the resource histogram below:

(5 marks)

The Late Start scenario leads to different daily resource requirements as shown

in the resource histogram (together with revised Gantt Chart) below:

Activity Day

Number 1 2 3 4 5 6 7 8 9

A1 2 2

A2 2 2

A3 6 6

A4 3 3

A5 1 1 1 1

A6 2

Total Resources 2 2 8 8 4 4 1 1 2


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(5 marks)

The discussion should centre on the “resource smoothing” effect which can beachieved by moving activities within their float. If this mechanism is not sufficient,other remedies must be sought to balance available and required resources.

(5 marks)


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Question 5.

(a) The completed Network Diagram should appear as below:

Logical structure: (5 marks)

Activity Box Data: (5 marks)

Critical path ABFG (highlighted red): (3 marks)


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(b) After crashing Activity B, the redrawn Network Diagram would appear:

(8 marks)

Project would NOT be shortened overall by 4 days - only by 2 days (20 days to 18 days duration): (2 marks)

This is because the change to the duration of activity B has changed the critical path (ABFG to ACFG): (2 marks)


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Question 6.

(a) Two project performance graphs are presented separately:

In the first diagram, the project spending performance (planned and actual) isplotted as a function of time up to timenow. On the basis of this graph, theproject appears to be performing well because expenditure is below that planned

(45% of budget compared to an expected 55% of budget). The project appearsto be coming in under budget.

In the second diagram, the project progress performance (planned and actual) is

plotted as a function of time up to timenow. Here it can be seen that the progressachieved up to timenow is below that expected (40% complete compared to an

expected 55% complete).

Hence the first suggests good performance while the second suggests poorperformance. In fact, 45% of the project budget has been spent, while the project

has only been 40% completed. This highlights the fact that expenditure andprogress data should be presented in an integrated form, such that a true picture

of performance against plan is presented. (10 marks)


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(b) “Earned Value” is a method of providing the integrated progress & costinformation that part (a) of this question identified.

Earned value is also often termed the “Budgeted Cost for Work Performed”(BCWP ). It is a measure of the value of the work that has been performed todate (i.e. up to timenow). It may be calculated as a proportion of the total project“Budget at Completion” (BAC), depending on how much of the project hasactually been completed at that time. Very simply, if a project is 50% complete,the Earned Value is 50% of the total project BAC.

Earned Value (BCWP) = Percentage Complete (PC or earned progress) xBAC

(5 marks)

The graph should appear much like that shown below.

For a complete diagram: (10 marks)

E x p e n d i t u r e

, £


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Question 7.

(a) The cash flow table should be completed as shown below:

Income & Expenditure Details (£) for months of:

August September October November December January

BroughtForward

6,000 11,300 37,100 10,400 - 14,800 - 33,500

Income 76,000 96,000 52,000 80,000 84,000 152,000

Total Available 82,000 107,300 89,100 90,400 69,200 118,500

Expenditure

Overheads 3,200 3,200 3,200 3,200 3,200 3,200

Materials 24,000 13,000 20,000 21,000 38,000 25,000Labour 19,500 30,000 31,500 57,000 37,500 27,000

Loan 24,000 24,000 24,000 24,000 24,000 24,000

Total

Expenditure

70,700 70,200 78,700 105,200 102,700 79,200

Closing Balance 11,300 37,100 10,400 - 14,800 - 33,500 39,300

(15 marks)

(b) This is a somewhat more open-ended question, but something along thefollowing lines is expected (though marks will be available for any valid/relevant

points made:

· The frequency of data capture should be sufficient to allow for adequateresponse. Daily, weekly or monthly may be appropriate depending on theproject.

· Data should be received before important decision points.

· Accuracy of data is paramount as it affects control decisions, e.g. ±20%data accuracy is not good enough if control decisions are triggered on a±10% deviation from plan. In any event, accuracy of data should be better

than the profit margin.

· A higher level of accuracy is usually needed for critical activities, since anydelays in these will extend project duration.

· It often helps to use lots of milestones to report against. These help avoid“optimistic” reporting. Accuracy of data can be improved by reportingprogress (% complete) against mini-milestones

(10 marks)

ENX314 Typical Exam-Type Questons and Solutions B-2 (1)

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