Written assignment 4

Written Assignment 4 Kieth A. Coleman TESC#: 0553344 TESC – MAN-435 Project Management September 17, 2015

Review sections 8.1 and 8.2 of your textbook. Then do the following: 1. Calculate the direct cost of labor for a project team member using the following data:
Hourly rate: $35/hr.
Hours needed: 150
Overhead rate: 55%.
The hourly rate which for the team member which translates to about $72,800 per year gets multiplied by the hours needed to determine how much that employee costs for the project. The employee costs $35 times 150 hours for the course of the project for a total of $5,250. An overhead rate which allows for plant costs, employees pay benefits and any other costs incurred from the project is applied to the job at a rate 55% or a multiplier of 1.55 times the employee cost. Therefore, $5,250 gets multiplied by 1.55 to equal $8,137.50 for a total cost. Our book says, there are other ways people argue to break up the cost such as adding personal time which I believe is just that and a company should not be paying for that. (Pinto, 2013, p. 248) 2. Calculate the direct cost of labor for the project team using the following data. What are the costs for the individual project team members? What is the overall direct cost of labor?

Being that there are multiple people involved with this project, the company being charged probably wants to see a breakdown of each employees cost as well as a total. Sandy uses 60 hours with an overhead charge of 1.35, 1.12 personal time rate, at $18 per hour for a total of $1632.96 direct labor cost. Chuck uses 80 hours with an overhead charge of 1.75, 1.12 personal time rate, at $31 per hour for a total of $1860.80 direct labor cost. Bob uses 80 hours with an overhead charge of 1.35, no personal time rate, at $9 per hour for a total of $972.00 direct labor cost. Penny uses 40 hours with an overhead charge of 1.75, 1.12 personal time rate, at $30 per hour for a total of $2352.00 direct labor cost. Their overall total direct labor equals $1632.96 plus $1860.80 plus $972.00 plus $2352.00 for a total $5845.76 cost. 3. Assume that overhead is charged on a flat-rate basis. Each member of the project is assigned an overhead charge of $150/week. What would the direct cost of labor be for an employee, given that she is assigned to the project for 200 hours at $10.50/hour?
Given a typical employee works 40 hours a week, 200 hours divide by 40 equals 5 weeks. Therefore, $150 per week would be an overhead total to $750. The employees cost for their hours would be 200 hours times the pay rate of $10.50 for a $2,100 total. Add the $2,100 and $750 together gives them a $2,850 total direct cost of labor for the employee on this project.

The simplified formula for calculating learning rate time using the table coefficients is given as:
TN = T1C where TN = Time needed to produce the nth unit
T1 = Time needed to produce the first unit
C = Learning curve coefficient 4. It took MegaTech, Inc., 100,000 labor-hours to produce the first of several oil-drilling rigs for Antarctic exploration. Your company, Natural Resources, Inc., has agreed to purchase the fifth (steady state) oil-drilling rig from MegaTech’s manufacturing yard. Assume that MegaTech experiences a learning rate of 80%. At a labor rate of $35 per hour, what should you, as the purchasing agent, expect to pay for the fifth unit?
The unit time at 80 percent would be .596 multiplied by the 100,000 hours it too k for the first drilling rig to equal 59,600 hours required to build the fifth one. The hours of 59,600 times the labor rate of $35 equals $2,086,000 cost for the fifth rig the purchasing agent should expect to pay. 5. Problem 4 identified how long it should take to complete the fifth oil-drilling platform that Natural Resources plans to purchase. How long should all five oil-drilling rigs take to complete? At a labor rate of $35 per hour, what should you, as the purchasing agent, expect to pay for the fifth unit?
It would take 3.738 total time times the 100,000 hour for the first rig for a total of 373,800 hours for all five rigs. At a rate of $35 per hour, it would cost $13,083,000for all five rigs to be built. 6. Suppose that you are assigning costs to a major project to be undertaken this year by your firm, DynoSoft Applications. One particular coding process involves many labor-hours, but highly redundant work. You anticipate a total of 200,000 labor-hours to complete the first iteration of the coding and a learning curve rate of 70%. You are attempting to estimate the cost of the twentieth (steady state) iteration of this coding sequence. Based on this information and a $60 per hour labor rate, what would you expect to budget as the cost of the twentieth iteration? The fortieth iteration?
At 70 percent, the total time multiplier is 7.407 to be multiplied by the 200,000 projected hours for the first iteration which equals 1,481,400 for the total project hours. The 1,481,400 hours multiplied by the labor cost of $60 per hour equals $88,884,000 total cost for the 20 iterations of the project.
At 70 percent, the total time multiplier for 40 iterations is 10.902 to be multiplied by the 200,000 projected hours for the first iteration which equals 2,180,400 for the total project hours. The 2,180,400 hours multiplied by the labor cost of $60 per hour equals $130,824,000 total cost for the 40 iterations of the project.

Bibliography
Pinto, J. (2013). Project Management: Achieving Competitive Advantage (3rd. ed.). Upper Saddle River, NJ: Pearson Education, Inc., publishing as Prentice Hall.