Using the data contained in the above exhibit, compute the benefit-cost ratios associated with adopting System A and System B.
Budget Cost Analysis
Item System A System B
Purchase price 2,300,0001,600,000
5-year savings compared to using current system 4,100,0002,700,000
Cost of conversion from old to new system 325,000 300,000
Annual maintenance cost 275,000 200,000
Questions:
a)Using the data contained in the above exhibit, compute the benefit-cost ratios associated with adopting System A and System B.
b)Given the data contained in the exhibit, does it make sense from a financial perspective to abandon the current MIS and to adopt a new one? Explain your reasoning.
c)Using the data contained in the exhibit, which solution System A or System B is more attractive from a purely financial point of view? Write up your views in a one-page, single-spaced report that will be submitted to the Executive Management Committee.
d)What are the limitations of taking a purely financial approach to selecting a product that will enable Park Crest Hospital to meet its business needs? What other factors should be taken into account?
Schedule Cost Resource
Item; predecessor; Duration; # resources; Level effort; labor; Material;
A; 4 weeks 2Per@$1600 wK; $1000 material
B; A; 2 weeks; 2Per@$1200 wk; $2000 material
C; A; 4 weeks; 1Per@$1200 wk; $2000 material
D; B; 6 weeks; 1Per@$1000 wk; $5000 material
E; B,C; 3 weeks; 2Per@$1000 wk; $2000 material
F; D,E; 3 weeks 2Per@$1800 wk; $1000 material
Total; $13000
#of resources = 2 person @ $0000 per week per person
Questions:
a.Create a network diagram for the tasks listed in the table above.
b.Calculate earliest start, latest start, and float for each task.
Task; Earliest start (ES);Latest start (LS);Float
A
B
C
D
E
F
c.Given the information captured in the network diagram, create a Gantt chart for the project. In the Gantt chart, picture weekends. (Assume the project begins on a Tuesday and that a week of effort is five working days long.)
d.Calculate level of effort, labor costs, and total costs per task and put the values in the appropriate cells in the first table above.
e. Assume the company being examined here has only two testers. How will this show up on a resource histogram? How should the work for Tasks D and E be leveled? What, if any, impact will the resource leveling have on the project duration?
Reference: Project Management 2nd ed; J. Davidson Frame
