Question

The reduction in project time normally results in
1. Decrease in the direct cost and increase in the indirect cost
2. Increase in the direct cost and decrease in the indirect cost
3. Increase in both direct and indirect costs
4. Decrease in both direct and indirect costs

Answer 1

Correct Answer - Option 2 : Increase in the direct cost and decrease in the indirect cost

Explanation:

(i) In case of CPM analysis the total project cost is sum of indirect cost and direct cost.

(ii) Indirect cost of a project includes overhead cost , losses, penality, rentals, project accommdations. The indirect cost is directly proportional to project duration with linear variation. so if time is reduced then cost is also reduce.

(iii) Direct cost is the cost which is directly dependent on the amount of resources involved for completion of activities. It includes labour, materials, plants and machining.

(iv) To get the same work done in less time, we have to increase amount of labour, equipment and time saving material that too at extra charges which simply means increase in direct cost.