Your company (Innovative Project Resources) was just awarded a pipe installation

Question

Your company (Innovative Project Resources) was just awarded a pipe installation Lump Sum contract by Refined Gas Corp. Your estimate budgeted 2.3 man-hours per linear feet of pipe. Innovative Project Resources has contractually agreed to install 100,000 LF of pipe in 46 weeks. Due to site saturation levels and other work taking place, Innovative Project Resources will be limited to a maximum of 100 Direct Labor employees. The work week is scheduled at 5-10's (50 hours per week per person). Contractual Direct Labor bill rate is $52 per hour. One week 35 of the project your field engineers are reporting are reporting that you are 62 % complete o the job and have expended 175,000 Direct Labor man-hours. You will calculate the following:

1.) Performance Factor

2.) Estimate to Completion (in term of man hours)

3.) Estimate at Completion (in terms of man hours)

4.) Budget Variance at Completion (in terms of dollars $)

Explanation / Answer

Total project =100,000 liner feet (LF) of pipe work.

Man-hours per LF = 2.3

Total man hours budgetd = 230,000

Project completed =62%

Budgeted man hours for completed project = 62% of 230,000 = 142,600

Actual man hours expended = 175,000

1. Performancefactor = 142,600 / 175,000 = 81.50%

Budgeted man hours for completion = 38% of 230,000 = 87,400

2.Estimate to Completion = 87,400 man hours.

3. Estimate at completion = 62% of 230,000 = 142,600 man hours

4. Budgeted man hours for completed project = 142,600

Budgeted rate = $52 per man hour

Actual man hours expended =175,000

Budgeted cost for completed project = 142,600 x $52 = $7,415,200

Budgeted cost for actual hours expended = 175,000 x $52 = $9,100,000

4. Budgeted variance at completion = $9,100,000 - $7,415,200 = $1,684,800.

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