Project Management-0107

Question Paper Project Management (MB271) : January 2007 Section A : Basic Concepts (30 Marks) • • • •

1.

Process Layout Product Layout Fixed Position Layout Service Facility Layout Group Technology Layout.

Which of the following models of demand forecasting estimates the demand for a particular product or < Answer > service on the basis of income and price elasticities of demand? (a) (b) (c) (d) (e)

3.

< Answer >

Which of the following types of layout is best suited for ship building? (a) (b) (c) (d) (e)

2.

This section consists of questions with serial number 1 - 30. Answer all questions. Each question carries one mark. Maximum time for answering Section A is 30 Minutes.

Chain ratio technique End use technique Econometric technique Consumption level technique Leading indicator technique.

Following is the network diagram of a small project. Expected time estimate (in weeks) of each of the < Answer > activities is indicated in the network diagram:

B

6

3 8

A

4

D

7 C

The free float of the activity (B-D) (in weeks) is (a) (b) (c) (d) (e) 4.

0 1 2 3 4.

Which of the following is false for the critical path method of network analysis? (a) (b) (c) (d) (e)

Activities on critical path have least amount of scheduling flexibility Any delay in a critical activity results in a delay in the entire project The series of critical activities is called the ‘critical path’ of the project The critical path of the project is the shortest path through the network A Project Manager should give more priority to critical activities while allocating resources.

< Answer >

(e) 5.

Income elasticity of demand for residents of a city was 1.45. Quantity demanded in year 1 was 700 units < Answer > while in year 2 it was 800 units. If the income in year 2 was Rs. 22,000, what was the income in year 1? (a) (b) (c) (d) (e)

6.

(a) (b) (c) (d) (e)

< Answer >

Sacred cow Scoring models Comparative benefit Q-sort technique Competitive necessity.

10. Which of the following methods is/are helpful in improving the individual creativity? I. II. III.

< Answer >

Initiation processes Core planning processes Facilitating planning processes Core implementation processes Facilitating implementation processes.

Which of the following models is a numeric model of selecting a project? (a) (b) (c) (d) (e)

< Answer >

The line of authority is confusing It is comprised of routine set of activities Project organization structure is limited to the life of the project Success of a project is judged on its ability to meet project goals It involves managing many risk variables.

Scope definition of a project falls under which of the following process groups of a project? (a) (b) (c) (d) (e)

9.

Project initiation Project planning Project organizing Project controlling Project closing.

Which of the following statements is not true for project management? (a) (b) (c) (d) (e)

8.

Rs. 10,066 Rs. 14,066 Rs. 16,066 Rs. 18,066 Rs. 20,066.

Organisations generally divide a project into various project phases to help management successfully < Answer > carry out the project activities. Assigning of work packages is conducted in which of the following phases of a project? (a) (b) (c) (d) (e)

7.

A Project Manager should give more priority to critical activities while allocating resources.

< Answer >

Checklist. Black box. Brainstorming. Only (I) above Only (II) above Only (III) above Both (I) and (II) above Both (II) and (III) above.

11. A firm’s capital base is Rs. 600 crore, of which Rs. 420 crore is the equity and Rs. 180 crore is debt. < Answer > Assume the cost of equity to be 12 percent and the post tax cost of debt to be 8 percent. Then the cost of capital of the firm is (a) (b) (c) (d) (e)

8.0% 9.8% 10.8% 11.8% 12.8%.

(e)

12.8%.

12. Which of the following is false with regard to data collection and analysis for conducting market and < Answer > demand analysis? (a) (b) (c) (d) (e)

Survey methods or experimental methods are ideal for collecting primary data Primary data is readily available and hence saves time of the research analyst Primary data can be obtained from sources both internal and external to the organisation Secondary data may be collected from the annual reports of the existing companies Secondary data can also be collected from the publications of government research organizations.

13. An aggregated project plan is a concise statement of all project activities. Firms prepare an aggregate < Answer > project plan to I. II. III. (a) (b) (c) (d) (e)

Assess the contribution of each project towards achieving organizational goals. Develop objective criteria to determine what projects are to be taken up. Develop the project schedules. Only (I) above Only (II) above Only (III) above Both (I) and (II) above All (I), (II) and (III) above.

14. Which of the following statements is not true regarding Work Breakdown Structure (WBS)? (a) (b) (c) (d) (e)

< Answer >

Activities should be carried on with dependence or linkages with other activities Every activity should produce a single tangible deliverable Every activity at any level of WBS is an aggregation of all its subordinate activities listed immediately below it There should be some flexibility in the WBS development process, as the WBS might be updated when the project scope changes The activities should be compatible with organizational and accounting procedures.

15. Conflicts are inevitable in project teams. A project manager uses various approaches to resolve conflicts. < Answer > Which of the following approaches to conflict management focuses on satisfying both parties to the greatest degree? (a) (b) (c) (d) (e)

Avoiding Accommodating Competing Collaborating Compromising.

16. Which of the following analyses helps a project manager to determine when the project will arrive at a < Answer > ‘no profit-no loss’ situation? (a) (b) (c) (d) (e)

Risk analysis Cost/benefit analysis Break-even analysis Regression analysis Technical analysis.

17. If Benefit Cost Ratio (BCR) of a project with initial outlay of Rs. 10 million is 1.00, then the NPV of the < Answer > project is (a) (b) (c) (d) (e)

Zero Rs. 1.0 million Rs. 1.1 million Rs. 1.5 million Rs. 2.1 million.

(e)

Rs. 2.1 million.

18. A dummy activity in a network diagram (a) (b) (c) (d) (e)

< Answer >

Is used to denote an incomplete activity Is used to denote the initial activity Is used to denote the terminal activity Is an activity which consumes zero time and zero resources Is used to denote the activity which consumes the maximum time.

19. Performance measurement technique like earned value analysis helps the project manager to assess < Answer > whether (a) (b) (c) (d) (e)

Costs are within specified limits Time is within specified limit Variances in scope, cost and schedule are within specified limits Manpower is within specified limit Quality is within specified limit.

20. Traditional project management techniques cannot be easily used to manage information technology (IT) < Answer > projects. Which among the following is not true for IT projects? (a) (b) (c) (d) (e)

IT projects are labour intensive; they require a number of experts to work on them Planning is the most crucial stage in the IT project, which determines if the project will be a success or failure In an IT project it is easy to identify a task to be completed Reviewing the initial schedule regularly helps to maintain an accurate schedule for a software project IT projects usually employ matrix organization structure.

21. Which of the following parameters of culture helps a project manager to understand the physical objects < Answer > and tools created by the people of a particular region? (a) (b) (c) (d) (e)

Material culture Language Customs and rituals Education Religion.

22. Project communication planning involves determining the information and communication requirements < Answer > of the various stakeholders of a project. Which among the following is/are true about project communication planning? I.

The activity manager requires a detailed report because he is directly responsible for getting the work done. II. The project manager requires status reports on all the tasks that are in progress during the reporting period. III. Senior management usually prefers to get information in great detail about scheduling of various project activities. (a) (b) (c) (d) (e)

Only (I) above Only (II) above Only (III) above Both (I) and (II) above Both (II) and (III) above.

23. Status reviews, design reviews and process reviews are usually carried out in which of the following < Answer > stages? (a) (b) (c) (d) (e)

In the concept development stage of the project life cycle In the planning stage of the project life cycle During the implementation of the project When the project is completed When auditing has to be conducted.

(e)

When auditing has to be conducted.

24. In which of the following criteria used to select a strategy for decision-making under uncertainty, does < Answer > the project manager identify the minimum payoff values for each strategy and adopts the strategy that has the highest payoff value from among those minimum payoff values? (a) (b) (c) (d) (e)

Maximax criterion Maximin criterion Minimax regret criterion Minimin criterion Criterion of realism.

25. Technical analysis of a project idea includes an in-depth study of all technical aspects related to basic < Answer > manufacturing operations, detailed design, assembling, modeling and prototype testing. Which among the following is/are true about technical analysis of a project idea? I. II.

The manufacturing processes do not depend on the availability and quality of the raw materials. Adoption of a particular technology requires an understanding of the need, readiness and cost of the technology. III. Plant capacity is determined on the basis of installed capacity, machinery and availability of infrastructure and labour. (a) (b) (c) (d) (e)

Only (I) above Only (II) above Both (I) and (II) above Both (II) and (III) above Both (I) and (III) above.

26. Which of the following statements is not true regarding Total Quality Management (TQM)? (a) (b) (c) (d) (e)

< Answer >

TQM is not a tool or a product, but is a philosophy According to the concept, there are two categories of customers, viz., external customers and internal customers Ensuring proper quality in the product is the responsibility of Quality Control department only Firms build teams and empower employees in order to improve the quality of the product Firms also adopt practices like benchmarking and bench trending to meet future market trends regarding quality of product. < Answer >

27. The following information relates to a project network: Activity A–B A–C A–D B–D C–D

Time (days) 14 7 12 8 5

Direct Cost (Rs.) 8,000 9,500 6,000 4,000 12,000

The indirect cost is Rs. 5,000 per day. Total cost of the project will be (a) (b) (c) (d) (e)

Rs. 1,10,000 Rs. 1,29,500 Rs. 1,39,500 Rs. 1,49,500 Rs. 2,59,000.

28. Suswasthya Ltd. is a company, well known in India as a healthcare service provider. Which of the < Answer > following factors may be considered to be the most critical one regarding the choice of location of the service delivery point? (a) (b) (c) (d) (e)

Location of the market Transportation Availability of labor Availability of infrastructure Intangible factors like government concessions, attitudes of people toward a particular industry etc.

etc. 29. Just as the project has a life cycle, a project audit too has a life cycle. In which of the following stages of < Answer > project audit life cycle, the objective is to set performance standards to enable the auditor to measure project performance and achievements against them? (a) (b) (c) (d) (e)

Audit initiation Defining the project baseline Setting up an audit database Preparing audit report Project audit termination.

30. Which of the following is not a correct step in resolving ethical dilemmas in project management? (a) (b) (c) (d) (e)

< Answer >

Identifying various stakeholders, especially those who have a special interest in the output of the project Identifying facts of the situation by collecting information which is biased in nature Developing alternative solutions with the help of basic ethical core values and the information available Evaluating alternative proposals by shortlisting only those solutions that are ethical Deriving additional support from ethical codes of other related disciplines, earlier cases and individual experience.

END OF SECTION A

Section B : Problems/Caselets (50 Marks) • • • • •

1.

This section consists of questions with serial number 1 – 6. Answer all questions. Marks are indicated against each question. Detailed workings/explanations should form part of your answer. Do not spend more than 110 - 120 minutes on Section B.

A small project is composed of various activities whose time estimates are given in the following table: Name A B C D E F G H I J K L M

Activity Tail Event 1 1 1 2 3 3 3 4 5 6 5 6 7

Head Event 2 3 4 5 5 6 7 7 6 7 8 8 8

Optimistic 6 7 6 10 12 9 6 3 12 5 12 15 18

Time required (days) Most likely 6 7 12 10 12 9 6 3 30 5 30 15 30

You are required to: a. Find the expected duration and the variance of duration for each activity. b. Find out the critical path and its duration. c. Calculate the standard deviation of duration of the critical path.

Pessimistic 24 7 18 10 30 9 6 3 48 5 42 15 54

< Answer >

c. d.

Calculate the standard deviation of duration of the critical path. Find out the probability that the project will be completed in 72 days. (6 + 3 + 1 + 2 = 12 marks)

2.

Indusri is evaluating three projects, viz., Project A, Project B and Project C. The projects A, B and C require an initial investment of Rs. 4,20,000, Rs. 4,50,000 and Rs. 4,80,000 respectively. The expected cash inflows for the projects are given below. Year

< Answer >

Cash Inflow (in Rs.) Project A

Project B

Project C

1

45,000

1,10,000

75,000

2

1,20,000

1,10,000

1,10,000

3

1,40,000

1,60,000

1,50,000

4

2,20,000

2,30,000

2,50,000

5

1,20,000

1,00,000

1,40,000

6

90,000

80,000

70,000

The firm’s objective is to achieve a 10% return on capital. You are required to evaluate and suggest the management the suitable investment option on the basis of a. Net present value method. b. Internal rate of return. (6 + 9 = 15 marks)

Caselet 1 Read the caselet carefully and answer the following questions: 3.

According to you what are the different control functions that need to be taken care of in a project?

< Answer >

(6 marks) 4.

< Answer >

Discuss in brief the various types of control systems in a project. (8 marks)

Of late, many organizations are experiencing difficulties in managing their projects, especially with regard to project control. Traditional project management served the interests of the construction, utilities, manufacturing and defense companies well because of the nature of their industries. Typically, these organizations were large, bureaucratic and functioned in command-and-control forms. However, due to technological advancements and increasing pressure on the organizations to succeed, the competitive environment has undergone a change. As a result, the role of a project manager who acts as a captain of the ship has become more demanding. Many organizations have relied on the project manager’s abilities to monitor and control the project progress. The expansion of a project manager’s role is now creating problems for the organizations as project managers are increasingly finding it difficult to handle the responsibilities. According to a survey, “Project Control Functions: A Benchmark of Current Best Practices”, conducted by the Center for Business Practices, the research arm of project management consultancy firm PM Solutions, majority of organizations perform their project control functions poorly. The survey found that around 50% of the respondents reported their organizations as performing average to poor project control functions. Undoubtedly, project control is a sensitive issue for organizations and any lapse can result in a failure of the project altogether. “These findings confirm why many organizations have begun to accept that day-to-day project control functions suffer when they’re assimilating into other project management duties.” In order to overcome the control function constraints, few organizations have innovatively created a new position that can effectively take up the responsibility of project control. Evolution of Project Controller In order to succeed in today’s project environment, the project manager is expected to develop two different skill sets

In order to succeed in today’s project environment, the project manager is expected to develop two different skill sets dealing with the science and art of project management. “The primary segment of the project manager’s work deals with the art or leadership side of project management. It demands vision, communication, negotiation, motivation and interpersonal skills. On the other hand, the science side requires detailed knowledge of project management methodology and tools plus strong analytical and problem-solving skills.” Finding a project manager with these two complementary sets of skills is very difficult. The results of the above mentioned study, “Project Control Functions: A Benchmark of Current Best Practices,” also confirm this. Realizing the fact that these skill sets are provided by two different people, some organizations have started dividing the responsibilities of the project manager into two distinct positions: Project manager and project controller. While finding the project manager with the required skill sets is one part of the problem, the other part arises on account of attention and focus. As a result of too many issues to focus on, project managers seldom find enough time to regularly monitor and control the project performance. While some organizations define the responsibilities of the project controller with greater emphasis on administrative tasks of the project, others look at the project controller as some sort of a chief financial officer with emphasis on scope, schedule, cost and resources control functions. Irrespective of the extent of definition of responsibility, the project controller has to interact and assist the project manager with a wide range of activities. The role of a project controller is not easy to perform. It requires a different skill set on the part of the individual to succeed. According to Robert Worums, “The successful project controller must possess technical expertise in project management software, and related spreadsheet and/or database tools; as well as business process expertise in cost budgeting and estimating, risk analysis, critical path diagramming and analysis, resource forecasting and change control.” The ever-increasing demand on the organizations to deliver excellent results is likely to reshape the responsibilities that the project controller is going to handle in the coming future. With two specialists providing specialized services and handling complementary assignments of a project, the control functions of the project are likely to improve and ultimately ensure success of the project.

Caselet 2 Read the caselet carefully and answer the following questions: 5.

< Answer >

Discuss the areas and concepts that Software Process Technology is benefited from. (4 marks)

6.

The following caselet discusses the concept of Software Processes and the properties that characterize and distinguish these processes from the other process types. The special nature of the Software Process indicates its special characteristics. Discuss.

< Answer >

(5 marks) The definition of Software Processes (SP) supplements the concept of a life cycle in the sense that it defines the skeleton and philosophy of carrying out an SP. But it is not sufficient to guide and control a development and/or maintenance project. An SP is a “coherent collection of policies, organizational structures, technologies, procedures and artifacts that are necessary to conceive, develop, install and maintain a software product” (Fuggetta, 2000). The necessity for human participation in a creative way and the absence of repetitive actions makes, neither the software development nor the maintenance a production process. However, there are some similarities between both types of processes, which are useful for the understanding of the software processes in a wider perspective. Like in the production process, the software processes consist of two inter-related sub-processes; the production process and the management process (McLeod,1990). The production process strictly relates to the production and maintenance of the product, while the management process provides the necessary resources for the production process, and controls it. This control is possible when the production process feeds back information of its situation to the management process. The technology which automates and integrates the production processes is called Software Process Technology (SPT). Primarily, this is done in a new work environment, known as “Process-centered Software Engineering Environment”, (PSEE), that supports the management and production processes in an integrated way. The main objective of the SPT is to control the inherent complexity of the SP with a clear understanding of the process in itself, and by an automated support, by means of a PSEE. A fundamental aspect to achieve this objective is the computerized process support, which is the presence of a model of processes and the right means of defining, modifying, analyzing and enacting it (Derniame et. al., 1999). One of the biggest challenges faced while using this technology would be the measurement of software processes. It is one of the basic aspects of the management of these processes. Traditionally, the software process measurement has focused on the measurement of projects and products but as a result of the increasing interest shown by software companies in the institutionalizing, modeling and improvement of their processes, software process models have become an important entity to be taken into consideration.

END OF SECTION B

Section C : Applied Theory (20 Marks) • • • •

7.

This section consists of questions with serial number 7 - 8. Answer all questions. Marks are indicated against each question. Do not spend more than 25 -30 minutes on section C.

It is the duty of a project manager to choose the projects that generate returns in the near future. Proper project selection also determines the allocation of resources which is aimed at ensuring better returns. A rational decision-making process is essential to choose the right project. In the context of the above explain the criteria for project selection model.

< Answer >

(10 marks) 8.

Organizational structures and processes are custom made to produce a specific product or service. Sometimes, organizations have to take up new tasks that they are not equipped to handle. These tasks are new to the organization as they are not performed earlier or they may not be repeated in the future again. To perform such unique tasks, organizations adopt the project approach. Explain the various characteristics of a project.

< Answer >

(10 marks) END OF SECTION C END OF QUESTION PAPER

Suggested Answers Project Management (MB271) : January 2007 Section A : Basic Concepts 1.

Answer : (c) Reason : In ship building process, the product does not move around and remains at a fixed location all through the production process. This type of layout is called fixed position layout.

2.

Answer : (d) Reason : The consumption level technique estimates the demand for a particular product or service on the basis of income and price elasticities of demand. Answer : (c) Reason :

3.

eks we

B 3 5

3

A 0 0

6w

eek s

D 11 11

8 weeks 4w

eek s

C 4 4

s eek w 7

A 0 0 4w

eek s

C 4 4

4.

Answer : Reason :

5.

Answer : Reason :

D 11 11

8 weeks

s eek w 7

The free float of activity B-D = ED – EB – tBD = 11 – 3 – 6 = 2 weeks. (d) Critical path method is a network analysis technique used to predict the project duration by finding out which sequence of activities has the least amount of scheduling flexibility. Any delay in a critical activity results in a delay in the entire project. The series of critical activities is called the ‘critical path’ of the project. The critical path of the project is the longest path through the network. A Project Manager should give more priority to critical activities while allocating resources. (e) Let income in year 1 = I1. Income elasticity of demand = 1.45. Quantity demanded in year 1 = 700 units. Quantity demanded in year 2 = 800 units. Income in year 2, I2 = Rs. 22,000.

ei =

Q 2 − Q1 I1 + I 2 × I 2 − I1 Q1 + Q 2

or, 1.45 = or, I1

.

800 − 700 I1 + 22, 000 × 22, 000 − I1 700 + 800

= Rs. 20,066.

6.

Answer : (c)

7.

Reason : Assigning of work packages is conducted in project organizing stage. Answer : (b) Reason : Some of the features of project management are as follows:

8.

•

It is required to develop a unique product or process and manage change.

•

The line of authority is confusing.

•

It is comprised of novel set of activities, not routine set of activities.

•

Success of a project is judged on its ability to meet project goals.

•

Its activities relate to innovation. It does not relate to maintenance.

• It involves managing many risk variables. So the statement (b) is false. Answer : (b) Reason : Core planning processes include: scope planning, scope definition, activity definition, activity sequencing, activity duration estimation, schedule development, resource planning, cost estimation, cost budgeting and project plan development. So the answer is alternative (b). Initiation is the process of formally identifying the presence of a new project or the passing of the ongoing project to the next phase. So the alternative (a) is not the answer. Facilitating planning processes include: quality planning, organizational planning, staff acquisition, communication planning, risk identification, risk quantification, risk response development, procurement planning and solicitation planning. So the alternative (c) is not the answer. Core implementation processes are about implementing the project. So the alternative (d) is not the answer. Facilitating implementation processes contain scope verification, quality assurance, team development,

9.

Answer : Reason :

10.

Answer : Reason :

information distribution, solicitation, vendor selection and contract administration. So, the alternative (e) is not the answer. (b) The non-numeric models are Sacred cow, Extension of product line, Operating necessity, Competitive necessity, Comparative benefit, Q-sort technique. The numeric models of selecting a project are Profit/Profitability models and Scoring models. Therefore the answer is (b). (d) It is not possible to establish a technique to enable someone to think creatively, but the following methods have been found helpful in improving the creativity of an individual– •

Attribute listing

•

Checklist

• Black box. Therefore the correct answer is (d). Some of the popular group creativity techniques used by several organizations are:

11.

•

Brainstorming

•

Delphi Technique

•

Nominal group technique.

Answer : (c) Reason : Total cost of capital of the firm = (Proportion of equity x Cost of equity) + (Proportion of debt x Cost of debt) = (70/100) x 12% + (30/100) x 8% = 10.8 %. Therefore the correct answer is (c).

12.

Answer : (b) Reason : If the data required is collected from the field/market in raw form solely for a particular purpose by the user, then it is called primary data, and if the data required is collected from somebody and is used by some other individual or organization then it is called secondary data. Collection of primary data needs a lot of time and effort of the observer and hence it is costly. So, the alternative (b) is false. Survey methods or experimental methods are ideal for collecting primary data. Hence option (a) is correct. Primary data can be obtained from sources both internal and external to the organisation. Hence, option (c) is correct. Secondary data can be collected from external sources such as Market Research Organizations, Trade Associations, Annual Reports of the existing companies and Government Research Organizations. Hence, the options (d) and (e) are also correct.

13.

Answer : (e) Reason :

Firms prepare an aggregate project plan to I. Assess the contribution of each project towards achieving organizational goals. II. Develop objective criteria to determine what projects are to be taken up. III. Develop the project schedules.

14.

Hence, option (e) is the correct answer. Answer : (a) Reason : The Work Breakdown Structure (WBS) is a useful tool for the project manager in identifying the project activities. It illustrates how each activity of the project contributes to the whole project in terms of budget, schedule and performance. Activities should be amenable to be carried on without dependence or linkages with other activities. Hence, option (a) is not true regarding Work Breakdown Structure (WBS). Options (b), (c), (d) and (e) are all true regarding Work Breakdown Structure (WBS).

15.

Answer : Reason :

16.

Answer : Reason :

17.

Answer :

Reason :

18. 19.

Answer : Reason : Answer : Reason :

20.

Answer : Reason :

21.

Answer : Reason :

22.

Options (b), (c), (d) and (e) are all regarding Work Breakdown Structure (WBS). (d) Collaborating approach focuses on satisfying both parties to the greatest degree. Hence, option (d) is the correct answer. Avoiding approach focuses away from the conflict altogether. Accommodating approach focuses on neglecting one’s own concerns in order to satisfy the concerns of others. Competing approach is adopted by the project manager who is committed to his own position or perspective and considers relationships as secondary issues. Compromising approach focuses on partially satisfying both the parties. (c) Break-even analysis helps a project manager to determine when the project will arrive at a ‘no profit-no loss’ situation. Hence, option (c) is the correct answer. (a)

Benefit Cost Ratio (BCR) =

PV of future cash flows Initial outlay

or, Initial outlay = PV of future cash flows (Since, BCR = 1.00). or, PV of future cash flows – Initial outlay = 0 or, NPV = 0. So, alternative (a) is the correct answer. (d) Dummy activity in a network diagram consumes zero time and zero resources. (c) Earned value analysis is a useful technique which assesses any change in scope, cost and schedule of the project. This technique helps the project manager to assess whether the variances in scope, cost and schedule are within specified limits. So, the answer is alternative (c). It is very evident that alternatives (a) and (b) are part of this technique but not the whole of it, so they are not perfect answers of this question. The alternatives (d) and (e) do not fall directly under this method; so they also do not form part of the answer. (c) In a non-IT project, it is usually easy to identify a task as complete, but in an IT project, even tasks that were declared completed need to be updated with the changing needs of the client, or to rectify latent defects, or to combine them with other modules. So option (c) is not true for IT projects. All other alternatives are true for IT projects. (a) The parameter of culture that helps a project manager to understand the physical objects and tools created by the people of a particular region is Material culture.

So, alternative (a) is the correct answer. Answer : (d) Reason : Senior management usually prefers to get information in the form of graphs and pictorial representations. As senior managers have very limited time for reviewing a project report, a report submitted to them is best limited to a single page with the milestones of the project highlighted.

23.

Answer : Reason :

24.

Answer : Reason :

Other statements are true for project communication planning. Therefore the correct answer is (d). (c) Status reviews, design reviews and process reviews are usually carried out during the implementation stage of the project. (b) In Maximin criterion of selecting a strategy for decision-making under uncertainty, the project manager identifies the minimum payoff values for each strategy and adopts the strategy that has the highest payoff value from among those minimum payoff values. Therefore the correct answer is (b).

25.

Answer : (d) Reason : The manufacturing process is also determined by the availability and quality of raw materials. For example, the quality of limestone decides whether wet or dry process is to be used in a cement plant. Other statements are true for the technical analysis of the project idea. Therefore the correct answer is (d).

26.

Answer : (c) Reason : TQM is not a tool or a product. It is a philosophy that seeks organisation-wide improvement by involving every individual in the organisation to improve the quality at every stage of the production process. It differs from the traditional quality control methods in the fact that in TQM, maintaining quality standards is the responsibility of everyone in the organisation. Hence, option (c) is not true regarding Total Quality Management (TQM). Options (a), (b), (d) and (e) are all true regarding Total Quality Management (TQM).

27.

Answer : (d) Reason : The network diagram for the given project can be drawn as follows:

B

14

s day

8d

ays

12 days

A

7d

D

ays

ays

5d C

Duration of the critical path =14 +8 = 22 days. The total cost = (8,000 + 9,500 + 6,000 + 4,000 + 12,000) + 5,000 x 22 = 39,500 + 1,10,000 = Rs. 1,49,500. 28.

Answer : (a) Reason : In this case, the place where the facilities are to be built is the most important factor. The place should be very near to the consumers, i.e., patients, so that they can avail the required services at any time, especially during an emergency situation. Availability of transportation and labor is not an issue here as they are neither required to transport any heavy item nor any major brawn work is performed for its operations. If the hospital is located near to the market place, all the necessary infrastructure facilities will be automatically available while intangible factors like government concessions, attitudes of people toward a particular industry etc. are not relevant in this case.

29.

Answer : (b) Reason : The stage of project audit life cycle in which the objective is to set performance standards to enable the auditor to measure project performance and achievements against them, is ‘Defining the project baseline’. Hence, option (b) is the correct answer.

30.

Answer : (b) Reason : While identifying facts of a situation in order to resolve ethical dilemmas in a project, a project manager should collect as much un-biased information as possible. Hence, option (b) is not a correct step in resolving ethical dilemmas in project management. Options (a), (c), (d) and (e) are all correct steps in resolving ethical dilemmas in project management.

Section B : Problems/Caselets 1.

a. Duration (days) Activity

A

to

tm

tp

6

6

24

Standard (σ) deviation tp − to

Expected duration t o + 4t m + t p (te ) = 6 (days)

6 + ( 4 × 6 ) + 24

6 (days) 24 − 6

=9

6 B

7

7

7 + ( 4 × 7) + 7

7

6

12

7−7

=7

10

10

12

12

9

9

9 + ( 4 × 9) + 9

9

6

6

9−9

=9

6−6

=6

6 H

3

3

3−3

=3

6 I

12

30

5

5

5 + ( 4 × 5) + 5

5

12

30

5−5

=5

0

=0

0

=0

0

=6

36

=0

0

6

12 + ( 4 × 30 ) + 42

42

=0

6

6 K

9

48 − 12

= 30

6 J

=3

6

12 + ( 4 × 30 ) + 48

48

0

6

3 + ( 4 × 3) + 3

3

=0

6

6 + ( 4 × 6) + 6

6

4

6

6 G

=2

30 − 12

= 15

6 F

0

6

12 + ( 4 × 12 ) + 30

30

=0

10 − 10

= 10

6 E

9

6

10 + ( 4 × 10 ) + 10

10

=3

18 − 6

= 12

6 D

( days )2

6

6 + ( 4 × 12 ) + 18

18

( )

6

6 C

Variance 2 σ

= 29

25

6 L M

15 18

15

15 + ( 4 × 15 ) + 15

15

30

6

54 − 18

= 32

6 b.

6

Network diagram:

9) A(

1

B(7)

2 3

C(1

D(10) 5) E(1 F(9)

G (6

2)

)

4

H(3)

5

K(

2 I(30) 9) L(15)

6

J(5)

7

=0

0

=6

36

6

18 + ( 4 × 30 ) + 54

54

15 − 15

= 15

32) ( M

8

2

9) A(

B(7)

1

3

C(1

5 6

J(5)

G (6

2)

)

4

K(

2 I(30) 9) L(15)

5) E(1 F(9)

7

H(3)

32 M(

8 )

The various paths and their durations are: 1–2–5–8 : 9 + 10 + 29 = 48 days 1–2–5–6–8 : 9 + 10 + 30 + 15 = 64 days 1–2–5–6–7–8 : 9 + 10 + 30 + 5 + 32 = 86 days 1–3–5–8 : 7 + 15 + 29 = 51 days 1–3–5–6–8 : 7 + 15 + 30 + 15 = 67 days 1–3–5–6–7–8 : 7 + 15 + 30 + 5 + 32 = 89 days 1–3–6–8 : 7 + 9 + 15 = 31 days 1–3–6–7–8 : 7 + 9 + 5 + 32 = 53 days 1–3–7–8 : 7 + 6 + 32 = 45 days 1–4–7–8 : 12 + 3 + 32 = 47 days Critical path is the path with the longest duration. From above, it can be seen that the path with the longest duration (89 days) is 1 – 3 – 5 – 6 – 7 – 8. Therefore, the critical path is 1 – 3 – 5 – 6 – 7 – 8 and the critical path duration is 89 days.

( σ ) = Sum of variances of activity durations on the critical path. Variance of critical path, 2

c.

c

Activity on critical path

Variance

1 – 3 (B)

0

3 – 5 (E)

9

5 – 6 (I)

36

6 – 7 (J)

0

7 – 8 (M)

36

Total

81

2 σc ) ( Hence, variance of critical path, = 81.

d.

(σ ) Standard deviation of critical path, c = 81 = 9 days. Assuming that the duration of critical path is normally distributed: Probability that the project will be completed within 72 days = 0.5 – Probability that the project will be completed at a time greater than 72 days and less than or equal to 89 days. This is shown by the shaded region on the diagram. The critical path duration is 89 days. So, expected date of project completion, E = 89 days. Due date of the project, D = 72 days. Standard deviation of the project, Z=

D−E

( σc )

=

72 − 89

σc

= 9 days.

= −1.89.

9

Probability (–1.89 < Z ≤ 0) = 0.4706. ∴ probability that the project will be completed within 72 days = 0.5 – 0.4706 = 0.0294, i.e. 2.94%.

89 days Z=0

72 days Z=-1.89 2.

a.

Evaluation of Project A, Project B and Project C on the basis of Net Present Value:

NPV = ∑ where,

At

(1 + k )t

,

t = Time period K = Required rate of return A = Cash inflows.

Project A

45, 000

NPVA =

1

1, 20, 000

+

(1 + 0.1)

(1 + 0.1)

2

+

1, 40, 000

(1 + 0.1)

3

+

2, 20, 000

(1 + 0.1)

4

+

1, 20, 000

(1 + 0.1)

5

+

90, 000

(1 + 0.1)6

− 4, 20, 000

= 45,000×0.9091 + 1,20,000 × 0.8264 + 1,40,000 × 0.7513 + 2,20,000 × 0.6830 + 1,20,000 × 0.6209 + 90,000 × 0.5645 – 4,20,000 = 40,909.5 + 99,168 + 1,05,182 + 1,50,260 + 74,508 + 50,805 – 4,20,000 = Rs. 1,00,832.50. Project B

NPVB =

1,10, 000 1

+

(1 + 0.1)

1,10, 000

(1 + 0.1)

2

+

1, 60, 000

(1 + 0.1)

3

+

2, 30, 000

(1 + 0.1)

4

+

1, 00, 000

(1 + 0.1)

5

+

80, 000

(1 + 0.1)6

− 4, 50, 000

= 1,10,000 × 0.9091 + 1,10,000 × 0.8264 + 1,60,000 × 0.7513 + 2,30,000 × 0.6830 + 1,00,000 × 0.6209 + 80,000 × 0.5645 – 4,50,000 = 1,00,001 + 90,904 + 1,20,208 + 1,57,090 + 62,090 + 45,160 – 4,50,000 = Rs. 1,25,453. Project C

NPVC =

75, 000 1

(1 + 0.1)

+

1,10, 000

(1 + 0.1)

2

+

1, 50, 000

(1 + 0.1)

3

+

2, 50, 000

(1 + 0.1)

4

+

1, 40, 000

(1 + 0.1)

5

+

70, 000

(1 + 0.1)6

− 4, 80, 000

= 75,000 × 0.9091 + 1,10,000 × 0.8264 + 1,50,000 × 0.7513 + 2,50,000 × 0.6830 + 1,40,000 × 0.6209 + 70,000 × 0.5645 – 4,80,000 = 68,182.50 + 90,904 + 1,12,695 + 1,70,750 + 86,926 + 39,515 – 4,80,000 = Rs. 88,972.50. Since Project B has highest Net Present Value among the three projects, it is advisable to go for Project B. b.

Evaluation of Project A, Project B and Project C on the basis of Internal Rate of Return (IRR): IRR is mathematically expressed as:

IRR is mathematically expressed as: n

At

∑

(1 + r )

t=0

t

= 0 ,

where, r = Internal Rate of Return A = Cash flows t = Time Period. Project A

NPVA = −4, 20, 000 +

45, 000 1

+

(1 + r )

1, 20, 000

(1 + r )

2

+

1, 40, 000

(1 + r )

3

+

2, 20, 000

(1 + r )

4

+

1, 20, 000

(1 + r )

5

+

90, 000

(1 + r )6

.

Assume r = 14%. NPVA

= – 4,20,000 + 45,000 × 0.8772 + 1,20,000 × 0.7695 + 1,40,000 × 0.6750 + 2,20,000 × 0.5921 + 1,20,000 × 0.5194 + 90,000 × 0.4556 = – 4,20,000 + 39,474 + 92,340 + 94,500 + 1,30,262 + 62,328 + 41,004 = 39,908.

Assume r = 18%. NPVA

= – 4,20,000 + 45,000 × 0.8475 + 1,20,000 × 0.7182 + 1,40,000 × 0.6086 + 2,20,000 × 0.5158 1,20,000 × 0.4371 + 90,000 × 0.3704

+

= – 4,20,000 + 38,137.5 + 86,184 + 85,204 + 1,13,476 + 52,452 + 33,336 = –11,210.5. Assume r = 17%. NPVA

= – 4,20,000 + 45,000 × 0.8547 + 1,20,000 × 0.7305 + 1,40,000 × 0.6244 + 2,20,000 × 0.5336 1,20,000 × 0.4561 + 90,000 × 0.3898 = – 4,20,000 + 38,461.5 + 87,660 + 87,416 + 1,17,392 + 54,732 + 35,082 = 743.5.

By interpolation, value of IRR for Project A = 17.06 %. Project B

Assume r = 20%. −4, 50, 000 + NPVB

1,10, 000 1.2

=

+

1,10, 000

(1.2 )

2

+

1, 60, 000 (1.2)

3

+

2, 30, 000

(1.2 )

4

+

1, 00, 000 (1.2)

5

+

80, 000 (1.2)

= – 4,50,000 + 1,10,000 × 0.8333 + 1,10,000 × 0.6944 + 1,60,000 × 0.5787 + 2,30,000 × 0.4823 + 1,00,000 × 0.4019 + 80,000 × 0.3349 = – 4,50,000 + 91,663 + 76,384 + 92,592 + 1,10,929 + 40,190 + 26,792 = –11,450. Assume r = 19%. NPVB

= – 4,50,000 + 1,10,000 × 0.8403 + 1,10,000 × 0.7062 + 1,60,000 × 0.5934 + 2,30,000 × 0.4987 + 1,00,000 × 0.4190 + 80,000 × 0.3521 = – 4,50,000 + 92,433 + 77,682 + 94,944 + 1,14,701 + 41,900 + 28,168

6

+

= –172. As above value is near to zero, so IRR can be taken as 19% for Project B. Project C

Assume r = 15%. −4, 80, 000 + NPVC

=

75, 000 1.15

+

1,10, 000

(1.15 )2

+

1, 50, 000 (1.15)

3

+

2, 50, 000

(1.15)

4

+

1, 40, 000 (1.15)

5

+

70, 000 (1.15)

6

= – 4,80,000 + 65,217 + 83,176 + 98,627 + 1,42,938 + 69,605 + 30,263 = 9,826. Assume r = 16%. NPVC

= – 4,80,000 + 75,000 × 0.8621 + 1,10,000 × 0.7432 + 1,50,000 × 0.6407 + 2,50,000 × 0.5523 + 1,40,000 × 0.4761 + 70,000 × 0.4104 = – 4,80,000 + 64,657.5 + 81,752 + 96,105 + 1,38,075 + 66,654 + 28,728 = – 4,028.5.

By interpolation, value of IRR for Project C = 15.71%. As IRR for Project B is highest, the management should invest in Project B. 3.

Different control functions that need to be taken care of in a project should include: • Education of the project team on proper project management processes. • Facilitating project planning/control processes. • Developing the project schedule and WBS (Work Breakdown Structure). • Managing the critical path in order to meet the schedules. • Estimation of project costs. • Tracking and analyzing project costs. • Managing the process of issue, risk and change control. • Documenting and delivering project status information.

4.

Types of Control System: Cybernetic Control Cybernetic Controls, also known as Steering Controls, are very common control systems. Automatic operation is its chief characteristic. A Cybernetic Control is like a steering in an automobile that enables the controller to keep the project on track. Cybernetic Controls are generally used to monitor and control tasks that are carried out more or less continuously, for example, software projects. The designing of Cybernetic Controls requires identifying mechanical tasks, based on the Work Breakdown Structure (WBS). The operation begins with an input that gets processed into an output. The sensing unit that monitors the output of the process (that we wish to control) sends the input to the comparison unit which then compares it with the standards that are already set. The comparison unit after measuring the variation between the input and the standard set, sends the output to the decision maker to decide on the requirement of a corrective action depending on the size of variation. If the variation is large enough to implement a corrective measure, the decision maker acts on the processing unit or the input to get it in close congruence with the set standards. Go/No-go Control As cost and time overruns may require the organisation to pay penalties to the customer, Go/No-go Controls are instituted to check whether the output meets the preset cost and time standards. These control systems are flexible and apply to all the aspects of project management. The project plan, budget and schedule are the control documents that contain preset milestones that act as verification points. Controls are usually done at the level of detail as mentioned in the project plan, budget and schedule. The periodicities with which Go/No-go Controls are operated are regular and preset. Preset intervals are decided upon with the help of calendars or the operating cycles. As project milestones do not happen as planned in the calendar, it is advantageous to link these controls to the actual plans and the happening of real events. But a judicious use of these controls is advisable. While some parameters of output have to meet a particular standard range, others may not meet the standards precisely.

The major difference between the Cybernetic System and the Go/No-go Control System is that a Cybernetic System functions automatically and continuously, while a Go/No-go Control System functions only when it is put into application by the controller. Post Control Post Controls are applied after the completion of the project. These are also called Post Project Controls or Reviews. While Cybernetic and Go/No-go Control Systems help a firm to accomplish the goals of current projects, post control tries to enhance the firm’s chances of meeting future project goals, on the basis of lessons learnt in the past projects. 5.

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Software Process Technology benefits from a wide range of areas and concepts: i.

Technologies of software development and maintenance which provide the necessary tools and infrastructures to make it possible and economically feasible, to create and maintain complex software products that satisfy present and future needs.

ii.

Methods and Techniques in the software development and maintenance which entail the essential methodological support to benefit wisely from the technologies and carry out with success the development and maintenance activities.

iii.

Organizational Behavior, this is to say, the science of the organizations and people is useful because, in general, the software projects are carried out in groups that have to be coordinated and directed inside an effective organizational structure.

iv.

Marketing and Economy, since the efforts of the projects of software development and maintenance are not autonomous, like any other product, the software must be directed to satisfy the needs of real clients and users.

In consequence, in the development and maintenance of software, it is necessary to pay attention to the complex relationships that arise between the various organizational, cultural, technological and economic factors. 6.

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The special nature of the Software Processes is determined by the following characteristics: a. They are complex. b. They are not typical processes of production; since they are directed by exceptions, they are very much affected by unpredictable circumstances, and each has peculiarities that distinguish it from the others. c. They are not processes of “pure” engineering either, since the appropriated abstractions are not known. There isn’t an experimental science to back them up; they depend a lot on too many people; the design and production are not clearly defined, and the budgets, schedules and quality cannot be programmed in a sufficiently reliable way. d. They are not (completely) creative processes because some parts can be described in detail, and some procedures are established previously. e. They are based on discoveries which depend on communication, coordination and cooperation within a predefined framework; deliverables generate new requirements; the costs of changing the software are not normally known; furthermore, its success depends on the participation of the user and the coordination of many roles (sales, technical development, client, etc.).

Section C: Applied Theory 7.

The various criteria for project selection model are as follows: Realism • • Capability • Costs • Flexibility • Ease of Use • Easy computerization Realism The model considered for selection of a project should consider all the relevant factors that influence the decision of a project manager. The model should explicitly state the objectives of the

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influence the decision of a project manager. The model should explicitly state the objectives of the project manager and the firm in selecting a particular project. It should also consider the risks (technical, cost, time and performance risks) that a project may encounter. For example, consider a firm that has three projects in hand; Project ‘A’, Project ‘B’, and Project ‘C’. Project ‘A’ is an innovative project that improves the image of the firm, but requires lot of capital investment. Project ‘B’ can gain competitive edge for the firm by strengthening the capabilities of its scientists and skilled labor. Project ‘C’ can increase the sales of the firm by adding new features to the existing product. The project selection model should be a common measurement system that is capable of comparing different projects. Then the best project can be selected based on firm’s ability to execute the project successfully. Capability The selection model that the project manager considers should be capable of providing the optimum decision taking into consideration all the risks and constraints involved in the project. The selection model should have the capability to evaluate future project proposals based on the expected returns of each project without subjectivity. Costs The various costs incurred in obtaining the right selection model should be kept at minimum. The costs associated with designing a selection model include data generation costs, data processing and storage costs. The objective here is to identify the best selection model and optimize the costs incurred to select the decision model based on the size of the project. Firms should also ensure that the project costs do not exceed the benefits of the project. Flexibility The selection model should provide the desired results within the given conditions and taking into account the firm’s interests. The model should be easy to modify or should be capable of adjusting on its own to the changes in the firm’s environment. Ease of Use The selection model should be convenient to implement and easy to communicate. The model should be tested as to how best it can be used by existing employees without further interpretation to take a decision. Easy Computerization The data should be computerized for easy storage and retrieval. Software packages like MS Excel, Lotus 1-2-3, Quatro Pro work like Decision Support Systems, and assist the project manager in data analysis and decision-making. 8.

The various characteristics of a project are: •

Unique activities

•

Attainment of specific goal

•

Sequence of activities

•

Specified time

• Interrelated activities Unique Activities Every project has a set of activities that are unique, which means it is the first time that an organization handles that type of activity. These activities do not repeat in the project under similar circumstances, i.e., there will be something different in every activity or even if the activity is repeated, the variables influencing it change every time. For example, consider a ship building yard that builds ships for international clients. Even though the organization builds many ships, each time there will be a difference in some variable such as, the vessel’s design, time allowed for construction etc. Attainment of Specific Goal Organizations take up projects to perform a particular task or attain a specific goal. These tasks differ from project to project. The projects in an organization could be constructing a new facility, computerizing the accounts department or studying the demand for a new product that the organization plans to launch in the market. All these projects have a specific goal or result to attain and hence we can say that every project is goal-oriented. Sequence of Activities A project consists of various activities that are to be performed in a particular sequence jto deliver

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A project consists of various activities that are to be performed in a particular sequence jto deliver the end-product. This sequence depends on the technical requirements and interdependency of each of the activities. Specified Time Every project has a specified start date and completion date. This time limit is either self-imposed or it is specified by the client. The life span of a project can run forma few hours to a few years. A project comes to a close when it delivers the product or service as per the clients’ requirements or when it is confirmed that it is no longer possible for the project to deliver the final product or services as required by the client. Interrelated Activities Projects consist of various technically interrelated activities. These activities are considered interrelated as the deliverable (output) of one activity becomes the input for another activity of the project. Consider the project of building a multistoried luxury hotel. This project consists of various activities such as making a building plan, landscaping, constructing the building, designing the interiors, furnishing the rooms etc. All these activities are interrelated and are equally important for the completion of the project. < TOP OF THE DOCUMENT >