Question

The reduction in project time normally results in
1. decreasing the direct cost and indirect cost
2. increasing the direct cost and decreasing the indirect cost
3. increasing the direct cost and indirect cost both
4. decreasing the direct cost and increasing indirect cost

Answer 1

Correct Answer - Option 2 : increasing the direct cost and decreasing the indirect cost

Explanation:

In the case of CPM analysis, the total project cost is the sum of indirect cost and direct cost. 

Indirect cost:

• The indirect cost of a project includes overhead cost, losses, penality, rentals, project accommodations.
• The indirect cost is directly proportional to project duration with a linear variation. So if time is reduced then cost is also reduced.

Direct cost:

• Direct cost is the cost that is directly dependent on the number of resources involved for the completion of activities. It includes labor, materials, plants, and machining.
• To get the same work done in less time, we have to increase the amount of labor, equipment, and time-saving material that too at extra charges which simply means an increased direct cost.