If an activity whose normal duration is 31 days can be shortened to 11 days for an added cost of $2,400, the crash cost per period is
A) $400.
B) $200.
C) $10,000.
D) $20,000.
E) $30,000.

Question

Quizplus · Accepted Answer

Crash cost per period can be calculated using the following formula:

Crash cost per period = (Normal cost - Crash cost) / (Normal duration - Crash duration)

Let C be the crash cost per period and N be the normal duration of the activity.

Given, N = 31 days and Crash duration = 11 days

Also, the added cost of crashing = $2,400

We know that normal cost is proportional to normal duration.

Let Normal cost = kN

Hence, Crash cost = Normal cost + added cost of crashing = k(11) + 2400 
= 11k + 2400

Substitute the values in the formula,

C = (kN - (11k + 2400)) / (N - 11)

Simplify,

C = k + (2400/20)

We need to find the value of k.

To find k, we can use the given information that normal duration is 31 days and the normal cost is $93,000.

Hence,

k(31) = 93,000

k = $3,000

Substitute the value of k in the equation we get C = $200.

Therefore, the best choice is B because it gives the crash cost per period as $200 which is the answer to the question.

If an Activity Whose Normal Duration Is 31 Days Can