Critical Path Method (CPM) and Program Evaluation and Review Technique (PERT)

CriticalPath Method (CPM) and Program Evaluation and Review Technique (PERT)

CPMand PERT

CPMand PERT are the most common used methods for project management andare also the most recommended. A comparison, between CPM and PERT,shows that some similarities and differences exist during animplementation of both models. A study of the PERT modeldemonstrates that it can be applied to any project that requiresplanning, controlling, and integrated work efforts as a way of comingup with well-defined objectives. The Critical Path Method (CPM) ismostly used in projects that have some clearly defined and wellrecognizable activities[ CITATION Loc13 l 1033 ].

PERTis a technique used in project management that is concerned with theplanning, controlling, coordinating, and organizing uncertain events.On the other hand, CPM is an analytical project supervision techniquethat is used for well-defined activities through planning,scheduling, organizing, controlling, and coordinating of suchactivities. PERT, as a technique, is used to control time and theplanning process while on the other hand, CPM model is used tocontain costs and time. The CPM model is used in constructionprojects extensively while the PERT model is mostly used in projectsthat are of non-repetitive in nature, such as research anddevelopment projects. The implementation of the CPM model primarilyuses the deterministic concept while the PERT model uses theprobabilistic concept in its application[ CITATION Loc13 l 1033 ].

TheCPM model places its focus on cost optimization, meaning that cost isthe controlling factor and thus it is not directly proportioned totime. The PERT model, on the other hand, makes the assumption thatcost varies directly with time. Cost is directly proportional to timemeaning that to minimize cost time must also be kept to a minimum.

CostStructure

Thecost structure, of an item, refers to the relative proportions andtypes of both variable and fixed costs that are incurred by a companyor business. In most cases, the concept is defined in smaller unitssuch as services, products, line of commodities, customer, divisionor visible region. As a tool, the cost structure is used to determineprices as well as pointing out costs which can either be reduced orbe subjected to control. Some of the most common cost structuresinclude service cost, product cost, customer cost, and product line.

Theabove-given list consists of light bulbs, compact discs, andrefrigerated drugs. The compact discs lie under the product line coststructure since fixed costs include the cost of storing andmaintaining the discs while variable costs include the cost ofsupplying the material and selling as well. According to Morrison(2009), lighting bulbs and refrigerated drugs fall under the productcost structure, where their fixed cost includes manufacturingoverhead and direct labor. Variable costs for the light bulbs alsoinclude commissions given, direct materials, piece rate wages, andproduction supplies. The cost structure is mostly a part of themanagement accounting hence, it mostly does not have anyapplicability in financial accounting. Before the production of aproduct or service, the management of a company primarily analyzesits cost structure as a way of determining whether the cost to profitratio will cause the product to be profitable or unprofitable to theenterprise. From that point, the company will be able to makeadjustments to the production process or discard the manufacturingprocess altogether[ CITATION Cat99 l 1033 ].

References

Lock, D. (2013). Project management. Burlington: Gower.

Morrison, C. J. (1999). Cost structure and the measurement of economic performance : productivity, utilization, cost economies, and related performance indicators. Boston : Kluwer Academic Publishers.