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(a) List three strategies that can be
used to deal with poor estimates? [3]
Strategies for dealing with poor estimates
- understand the cause of the problem [1]
- understand the nature of the relationship of the project team to
customers [1]
- find if the project is being carried out under contract. If so,
which
type of contract [1]
(b) Soft Solution is a popular software
development house. The company has been offered the opportunity to
develop two software products for their clients. The company wishes
to decide which project will give them a greater profit and has decided
to use the top-down parametric approach to choose between the projects.
For Project A, the development time is estimated to be 2 years. The
start up
costs are estimated to be higher at $150,000, but salary costs are
estimated to be lower at $40,000 per year increasing at a rate of
12% a year over the lifetime of the project.
For Project B, the development time is estimated to be 3 years. The
initial costs are estimated to be higher at $180,000, but salary costs
are estimated to be $28,000 per year, increasing at a rate of 15%
a year over the lifetime of the
project.
Express these relationships between start-up and annual costs for
projects A and B in the form Y=ma x +b, where X is the time in years
after the start of
development, and Y is the cost per year of the project. Determine
the constants m, a and b for each project, and use them to calculate
the total cost of each project. Determine which of the projects the
company should undertake. [12]
m=$30,000 (for project A) $20,000 (for project
B) [1 mark each]
a=(1+r) where r is increasing rate = 1.12 (for Project A) [1], 1.15
for Project (B) [1]
b= initial costs
b= $150,000 (for 1st year project A) (year 2 will be zero)
[1]
b=$180,000 (for 1st year project B) (year 2 to 3 will be
zero) [1]
Project A
y (for year 1) = 40,000+150,000=190,000
y (for year 2) = 44,800+0 = 44,800 [1]
Total cost = $234,800 (project A) [1]
Project B
y (for year 1) = $28,000+$180,000 = $208,000 [1]
y (for year 2) = $32,200
y (for year 3) = $37,030 [1]
Total cost = $277,230 (project B) [1]
Total cost for Project A is less than that of Project B
The company should undertake Project A. [1]
[max 12 marks]
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