Name: ____________________________________________________ Date: _________________

Section: _________________________________________

Draw the project network of the Realiable Cosntruction Co. Project.

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Bill Fredlund, president of Lincoln Log Construction, is considering placing a bid on a building project. Bill has
determined that five tasks would need to be performed to carry out the proj ect. Using the PERT three-estimate
approach, Bill has obtained the estimates in the table below for how long these tasks will take. Also shown are
the precedence relationships for these tasks
 Immediate Predecessor

There is a penalty of $500,000 if the project is not completed in 60 weeks. Therefore, Bill is very interested in
8how likely it is that his company could finish the project in time.

(a) Construct the project network for this project.

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(b) Find the estimate of the mean and variance of the duration of each activity.

(c) Find the average completion time of the project.

Critical Path: A-C-E-G-H

Total time in the critical path =52 weeks (average completion time)

(d) Find the approximate probability of completing the project within 60 weeks. (e) Bill has concluded that the
bid he would need to make to have a realistic chance of winning the contract would earn Lincoln Log
Construction a profit of about $250,000 if the project is completed within 60 weeks. However, because of the
penalty for missing this deadline, his company would lose about $250,000 if the project takes more than 60
weeks. Therefore, he wants to place the bid only if he has at least a 60% percent chance of meeting the
deadline. How would you advise him?
Z=(60-52)/3.79=2.11

Probability=0.5+0.4821=0.9821=98.21%

The advice is to bid on the project since the probability of completion within 60 weeks period is way above 60%.

SALES DEMAND Using Year 1 of this data, compare a 3 month moving

average and a trend line projection as to their forecast
accuracy using MAD to determine which is better model.
MONTH YEAR 1 YEAR 2

January 80 100

February 85 75

March 80 90

April 110 90

May 115 131

June 120 110

July 100 110

August 110 90

September 85 95

October 75 85

November 85 75

December 80 80
Trend is a better model for this data since it has a lower MAD.

Using the data above (Year 1 and 2), make a quarterly forecast using seasonality with trend. (Hint:
Convert the data into quarterly demand)

SEASONALITY
Time
SALES (Y) TREND WITH TREND
index (X)
(Y=A+BX) (Trend*SI)
1
Q1 245 288.33 260.73 B= -1.81
2
Q2 345 286.52 343.42 A= 290.14
3
Q3 295 284.71 297.84
4
Q4 240 282.90 240.77 SI
5
Q1 265 281.10 254.18 Q1 0.904
6
Q2 331 279.29 334.75 Q2 1.199
7
Q3 295 277.48 290.27 Q3 1.046
8
Q4 240 275.67 234.61 Q4 0.851
Overall
282
Ave:

Sales = SI=Quarterly
Total of 3-month
average/Overall
period
average
Example: SI
Sum of January to march for Q1
for
80+85+80=245
Q1: (245+265)/2
282
Trend: y=290.14 -1.81X =
0.904
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273.86 247.64
10
272.05 326.07
Year 3 Quarterly Forecast
11
270.24 282.70
12
268.43 228.45