Business, Management - Other
I am trying to answer a question, given the different types of project planning, but I can't seem to understand them enough to apply the concepts. I need help in answering the following question.
Question: Is John Jr.'s WBS projection reasonable? What aspects of the decision will John Sr. consider?
Table A. Pool Installation WBS
Works Tasks Labor-Hours (estimated)
Prepare ground surface 2.67
Sand bottom .33
Lay out pool frame 2.50
Bottom ring 1
Side panels .50
Top ring 1
Add plastic liner 0.50
Assemble pool 1.66
Build wooden support 3.00
Fill and test 2.0
Ringold's Pool and Patio Supply
John Ringold, Jr., just graduated from a local university with a degree industrial management and joined his father's company as executive vice-president of operations. Dad wants to break John in slowly and has decided to see how he can do on a project that John Sr. has never had time to investigate. Twenty percent of the company's sales are derived from the sale of above-ground swimming pool kits. Ringold's does not install the pools. John Sr. has asked John Jr. To determine whether or not they should get into that business. John Jr. has decided that the easiest way to impress Dad and get the project done is personally to estimate the cost to the company of setting up a pool and then call some competitors and see how much they charge. That will show whether or not it is profitable.
John Jr. remembered a method called the work break-down structure (WBS) that he thought might serve as a useful tool to estimate costs. Also, the use of such a tool could be passed along to the site supervisor to help evaluate the performance of work crews. John Jr.'s WBS is shown in Table A. The total cost John Jr. calculated was $185.00, based on 12.33 labor-hours at $15.00/labor-hour. John Jr. found that, on average, Ringold's competitors charged $229.00 to install a similar pool. John Jr. thought he ad a winner. He called his father and made an appointment to present his findings the next morning. Since he had never assembled a pool himself, he decided to increase the budget by 10 percent, "just in case."
John Jr's projection is not reasonable. He considered only the labour cost and not the other cost elements. He did not consider cost of materials, Cost of machineries/equipments, Manufacturing Over head cost, Administrative Overhead cost, Sales cost etc. John Sr. due to his experience will certainly consider all these aspects ...