MODEL TEST PAPER BBA VI

PROJECT MANAGEMENT (BBA 302)

Q1. Discuss the factors which determine “plant location”, “plant capacity” and” product
mix”.

Answer : Factors Determining Plant Location:

1. Proximity to Market: The location of a plant should be close to the target market to
minimize transportation costs and ensure timely delivery of products.

2. Availability of Resources: Availability and access to raw materials, labor, energy, and
infrastructure are crucial factors in plant location decisions. A plant should be located
near sources of raw materials to reduce transportation costs and ensure a stable supply
chain.

3. Labor Availability and Skills: The availability of skilled and affordable labor is an
important consideration. The plant should be located in an area with an adequate supply
of skilled workers or have access to training and education facilities to develop a skilled
workforce.

4. Infrastructure: Availability of infrastructure such as transportation networks (roads,

ports, airports, railways), utilities (power, water, and telecommunications), and support
services (banks, hospitals, schools) is essential for smooth operations.

5. Government Policies and Incentives: Government policies, tax incentives, regulations,

and political stability can significantly influence plant location decisions. Businesses
often seek locations with favorable policies, tax breaks, or special economic zones to
reduce costs and enhance competitiveness.

6. Market Access and Distribution: Proximity to distribution channels, suppliers, and

customers is crucial for efficient supply chain management. A location that provides easy
access to transportation networks and a large customer base can improve market reach
and responsiveness.

7. Environmental Factors: Environmental regulations, climate conditions, and ecological

impact must be considered. Plants should be located in areas with minimal environmental
risks and comply with regulations to ensure sustainable operations.

Factors Determining Plant Capacity:

 1. Demand Forecasting: Accurate demand forecasting is essential to determine the plant
capacity. It involves analyzing market trends, customer preferences, and anticipated
growth to estimate future demand for the product.

2. Production Technology: The choice of production technology and equipment influences

plant capacity. Different technologies have varying levels of efficiency, throughput, and
production rates, which impact the capacity of the plant.

3. Resource Availability: The availability of resources such as raw materials, labor, and
capital affects plant capacity. Sufficient resources must be allocated to meet production
requirements and ensure smooth operations.

4. Economies of Scale: Plant capacity is often determined by economies of scale. Larger

plants can achieve lower production costs per unit due to higher production volumes,
spreading fixed costs, and leveraging efficiencies.

5. Flexibility and Scalability: The capacity should be flexible and scalable to adapt to
changing market conditions and demand fluctuations. It allows for adjustments in
production levels and product mix without significant disruptions.

6. Lead Time and Cycle Time: The desired lead time and cycle time for production also
impact plant capacity. Lead time is the time taken to fulfill an order, while cycle time is
the time taken to complete one production cycle. Plant capacity should be aligned with
the desired lead time and cycle time.

Factors Determining Product Mix:

1. Customer Demand and Preferences: Understanding customer demand, preferences, and

market trends is crucial in determining the product mix. It involves analyzing customer
needs, conducting market research, and identifying profitable product segments.

2. Market Segmentation: Market segmentation helps identify different customer groups

with distinct needs and preferences. The product mix can be tailored to target specific
segments and maximize market penetration.

3. Profitability and Margins: The profitability and margins associated with different
products influence the product mix. Products with higher profitability or better market
potential are given priority in the mix.
 4. Technological Capabilities: The technological capabilities of the plant and available
resources impact the product mix. The plant must have the necessary equipment,
expertise, and processes to produce different products efficiently.

5. Resource Allocation: The availability and allocation of resources, such as raw materials,
labor, and machinery, affect the product mix. Some products may require specialized
resources, limiting their inclusion in the mix.

6. Competitor Analysis: Analyzing the offerings of competitors helps determine gaps in

the market and identify opportunities for product differentiation. The product mix can be
adjusted to capitalize on these opportunities.

7. Strategic Objectives: The strategic objectives of the organization also influence the
product mix. For example, a company focused on innovation may allocate resources to
develop new products, while another company may emphasize cost optimization by
concentrating on a limited product range.

Q2. A company is considering whether to purchase a new machine. Machines A and B are
available for$. 80,000 each. Earnings after taxation are as follows:

Year Machine A Machine B

1 24,000 8,000
2 32,000 24,000
3 40,000 32,000
4 24,000 48,000

5 16,000 32,000
Required: Evaluate the two alternatives using the following: (a) payback method, (b) rate
of return on investment method, and (c) net present value method. You should use a
discount rate of 10%.
Answer : a) Payback method

24,000 of 40,000 = 2 years and 7.2 months

Payback period:

Machine A: (24,000 + 32,000 + 1 3/5 of 40,000) = 2 3/5 years.

Machine B: (8,000 + 24,000 + 32,000 + 1/3 of 48,000) = 3 1/3 years.

According to the payback method, Machine A is preferred.

(b) Rate of return on investment method

(c) Net present value method

The idea of this method is to calculate the present value of cash flows.

Net Present Value of Machine A: $1,04,616 - $80,000 = $24,616

Net Present Value of Machine B: $1,03,784 - 80,000 = $23,784

According to the net present value (NPV) method, Machine A is preferred because its NPV
is greater than that of Machine B.

Q3. What are the Various means of financing the projects ? explain the procedure
involved in availing them by an entrepreneur. What are relative advantages and
limitations olf such funds?
Answer : Various Means of Financing Projects:
Equity Financing: Equity financing involves raising funds by selling shares or ownership
stakes in the company. This can be done through private investors, venture capital firms, or by
going public through an initial public offering (IPO). Entrepreneurs can avail equity financing
by identifying potential investors, preparing a compelling business plan, and negotiating the
terms of investment.

Advantages:
1. Does not create debt obligations.
2. Investors share the risks and rewards of the business.
3. Provides access to expertise and network of investors.
4. Potential for substantial capital infusion.

Limitations:
1. Dilution of ownership and control.
2. Investors may have different objectives and expectations.
3. Time-consuming process of finding suitable investors.
4. .Entrepreneurs may need to give up a portion of their equity.

Debt Financing: Debt financing involves borrowing money from lenders with the promise of
repayment, typically with interest, over a specified period. Entrepreneurs can avail debt
financing through various sources such as banks, financial institutions, or through government-
backed loan programs. The procedure involves preparing a loan application, providing necessary
documentation, and demonstrating the ability to repay the loan.

Advantages:
1. Entrepreneurs retain ownership and control.
2. Interest payments may be tax-deductible.
3. Repayment terms can be structured to match cash flow.
4. Debt obligations can help build a credit history.

Limitations:
1. Requires collateral or a strong credit history.
2. Interest payments increase the cost of financing.
3. Failure to repay can lead to legal consequences.
4. May impose restrictions on business operations.
Grants and Subsidies: Entrepreneurs can explore grants and subsidies offered by government
agencies, non-profit organizations, or research institutions. These funds are often provided to
support specific industries, research and development projects, or initiatives that benefit society.

Advantages:
1. Does not require repayment or equity dilution.
2. Provides financial support for specific projects or activities.
3. Enhances credibility and recognition of the business.
4. May include additional support such as mentorship or resources.

Limitations:
1. Competition for grants can be intense.
2. Eligibility criteria and application processes may be stringent.
3. Grants may come with restrictions or reporting requirements.
4. Funding amounts may be limited.

Crowdfunding: Crowdfunding involves raising funds from a large number of individuals

through online platforms. Entrepreneurs present their project or business idea, set a funding
goal, and offer rewards or equity in return for contributions. The procedure involves creating a
compelling crowdfunding campaign, marketing it to potential backers, and managing the
fundraising process.

Advantages:
1. Access to a large pool of potential investors.
2. Validation of the business idea or product.
3. Can generate pre-sales or market traction.
4. Limited or no dilution of equity.

Limitations:
1. Requires a well-executed marketing campaign to attract backers.
2. Time-consuming process to manage and maintain the crowdfunding campaign.
3. May not be suitable for all types of projects or businesses.
4. Regulatory and legal considerations may apply.

Self-Funding: Entrepreneurs can finance their projects using personal savings or assets. This
includes using personal funds, selling personal assets, or utilizing personal lines of credit.

Advantages:
1. Full ownership and control of the business.
2. No interest payments or equity dilution.
3. Immediate access to funds.
Limitations:
1. Limited financial resources.
2. Personal financial risk.
3. Constraints on the scale and growth potential of the project.
4. May not be feasible for large-scale projects.

It is important for entrepreneurs to carefully assess their financing needs, evaluate the
advantages and limitations of each funding option, and choose the most appropriate means of
financing based on their business model, goals, and financial situation. Consulting with financial
advisors, industry experts, or mentors can provide valuable guidance in the decision-making
process.

Q4. : project planning is an essential part of project management . comment also , explain
the essential elements / steps involved in the project management?

Answer: Project planning is indeed a crucial part of project management. It sets the foundation
for the successful execution and completion of a project. Proper planning allows project
managers to define objectives, allocate resources, establish timelines, and identify potential risks
and challenges. It provides a roadmap for the project team, aligns stakeholders' expectations,
and increases the chances of achieving project goals within the allocated budget and schedule.

Essential Elements/Steps in Project Management:

1. Project Initiation: This is the initial phase where the project is conceptualized, and the need
for the project is identified. It involves defining the project scope, objectives, stakeholders,
and high-level requirements. Project initiation sets the direction and purpose of the project.

2. Project Planning: This step involves detailed planning, including defining project
deliverables, creating a work breakdown structure (WBS), establishing a project schedule,
identifying resources needed, and developing a budget. Project planning ensures that all
project aspects are considered and that a comprehensive plan is in place.

3. Project Execution: This phase involves the actual implementation of the project plan. Tasks
are performed, resources are allocated, and progress is monitored. Project managers
coordinate activities, manage team members, and ensure that work is completed according to
the plan.

4. Project Monitoring and Control: During this step, project performance is continuously
monitored, and any deviations from the plan are identified and addressed. Key performance
indicators (KPIs) are tracked, and adjustments are made to keep the project on track. Regular
reporting and communication take place to keep stakeholders informed.
5. Risk Management: Risk management is an ongoing process throughout the project
lifecycle. It involves identifying, assessing, and mitigating potential risks and uncertainties
that could impact project success. Risk management helps in proactive decision-making and
minimizing the negative impact of risks.

6. Quality Management: Quality management ensures that the project delivers the expected
level of quality. It involves defining quality standards, implementing quality control
measures, conducting inspections and tests, and ensuring that deliverables meet the specified
requirements.

7. Change Management: Change is inevitable during a project. Change management involves

assessing and managing changes to the project scope, schedule, resources, or objectives. It
includes evaluating change requests, identifying impacts, and implementing changes
effectively.

8. Project Closure: The final step is project closure, where the project is formally completed.
This includes conducting a project review, documenting lessons learned, archiving project
documents, and transitioning deliverables to the appropriate stakeholders. Project closure
ensures a smooth transition and captures valuable insights for future projects.

Each of these elements or steps is essential for effective project management. They work
together to ensure that projects are well-planned, executed efficiently, and achieve the desired
outcomes. Adhering to these steps increases the chances of project success and helps minimize
risks and uncertainties.

Q5. What are the techniques used for risk analysis of any project ? explain briefly with
suitable examples.
Answer : Techniques Used for Risk Analysis in Project Management:

1. Risk Identification: The first step in risk analysis is identifying potential risks that may
impact the project. This can be done through various techniques such as brainstorming,
checklists, SWOT analysis (Strengths, Weaknesses, Opportunities, Threats), and reviewing
historical data from similar projects. For example, in a construction project, potential risks
could include delays due to weather conditions, labor shortages, or changes in regulatory
requirements.

2. Risk Assessment and Probability/Impact Analysis: Once risks are identified, they need to
be assessed to determine their probability of occurrence and potential impact on the project.
This can be done through qualitative or quantitative analysis. Qualitative analysis involves
assigning subjective values such as high, medium, or low to the likelihood and impact of
risks. Quantitative analysis involves assigning numerical values to assess probabilities and
impacts. For example, a software development project may use probability and impact scales
to evaluate the likelihood and consequences of software bugs.
3. Risk Prioritization: After assessing risks, they need to be prioritized based on their
significance to the project. Risks with higher probabilities and severe impacts are given
higher priority. Prioritization helps project managers allocate resources and develop
mitigation strategies for the most critical risks. For example, in a manufacturing project, a
risk of supply chain disruption due to a single-source supplier may be prioritized higher than
other risks.

4. Risk Mitigation Planning: Once risks are identified and prioritized, mitigation strategies
are developed to reduce the probability and/or impact of risks. Mitigation strategies may
include risk avoidance, risk transfer (such as insurance), risk acceptance, or risk reduction
through preventive measures. For example, in a product development project, a risk of
patent infringement may be mitigated by conducting a thorough patent search and making
necessary design modifications.

5. Contingency Planning: In addition to mitigation strategies, contingency plans are

developed to address risks that cannot be fully eliminated or mitigated. Contingency plans
outline alternative actions or measures to be taken if a risk occurs. They help minimize the
impact of risks on the project. For example, in a construction project, a contingency plan
may include alternative suppliers in case the primary supplier fails to deliver materials on
time.

6. Risk Monitoring and Control: Risk analysis is an ongoing process throughout the project
lifecycle. Project managers continuously monitor identified risks, assess their effectiveness,
and identify new risks that may arise. Regular reviews, tracking of risk indicators, and
periodic risk assessments help ensure that risks are effectively managed. For example, in an
IT project, regular vulnerability scans and penetration testing may be conducted to identify
new security risks.

7. Lessons Learned: After the project is completed, it is important to document and analyze
the risks faced during the project. Lessons learned from risk analysis provide valuable
insights for future projects. This includes documenting successful risk mitigation strategies,
areas for improvement, and best practices. For example, a project review may identify the
effectiveness of risk response strategies in managing the project's schedule and budget.

By employing these risk analysis techniques, project managers can identify, assess, prioritize,
and mitigate risks, leading to more effective risk management and increased project success
rates. It allows project teams to proactively address potential challenges, minimize negative
impacts, and improve overall project outcomes.

Q6. What is project ideas? How project ideas are generated? How will you decide whether
an idea is worth pursuing or it is a raw idea only ? give examples?
Answer : Project ideas refer to potential concepts, initiatives, or proposals for undertaking a
specific project. They represent the starting point for developing and implementing projects to
achieve defined objectives. Project ideas can come from various sources, including individuals,
teams, stakeholders, market research, emerging trends, or problem identification. The generation
and evaluation of project ideas play a critical role in determining whether an idea is worth
pursuing or remains in its raw form.

Process of Generating Project Ideas:

1. Brainstorming: Brainstorming is a popular technique for generating project ideas. It

involves gathering a group of individuals to generate a large number of ideas without
criticism or judgment. The aim is to encourage free-flowing creativity and capture a wide
range of potential project ideas.

2. Market Research and Needs Analysis: Conducting market research and analyzing
customer needs can provide insights into potential project opportunities. This involves
studying market trends, customer demands, and identifying gaps or problems that need to be
addressed.

3. SWOT Analysis: SWOT analysis (Strengths, Weaknesses, Opportunities, Threats) can help
generate project ideas by identifying internal strengths and weaknesses, as well as external
opportunities and threats. By understanding the organization's capabilities and the external
environment, project ideas can be formulated to capitalize on strengths and opportunities or
address weaknesses and threats.

4. Feedback and Collaboration: Seeking feedback from stakeholders, customers, or subject

matter experts can generate project ideas. Collaboration with individuals or teams from
different backgrounds can spark innovative ideas and provide diverse perspectives.

5. Evaluating the Worthiness of a Project Idea:

Determining whether an idea is worth pursuing or remains a raw idea requires a systematic
evaluation process. Some factors to consider include:

6. Alignment with Organizational Goals: Evaluate whether the project idea aligns with the
overall strategic goals and objectives of the organization. It should contribute to the
organization's mission, vision, and values.

7. Feasibility and Resources: Assess the feasibility of implementing the project idea.
Consider the availability of resources, such as financial, human, and technological, required
to execute the project successfully.
8. Market Demand and Viability: Analyze the market demand and potential viability of the
project idea. Identify the target audience, assess market size, competition, potential
customers' willingness to pay, and overall market potential.

9. Potential Benefits and Impact: Consider the potential benefits and impact of the project
idea. Evaluate how it can bring value to stakeholders, solve a problem, address a need, or
create positive outcomes.

10.Risks and Challenges: Identify potential risks and challenges associated with the project
idea. Evaluate whether mitigation strategies can be implemented effectively and if the benefits
outweigh the potential risks.

Example:

Let's consider an example of a project idea for a software development company:

Idea: Develop a mobile app for personal finance management.

Evaluation:

Alignment with Organizational Goals: The project idea aligns with the company's goal of
providing innovative software solutions and addressing customer needs.
Feasibility and Resources: The company has the necessary technical expertise and resources to
develop the mobile app.
Market Demand and Viability: Market research indicates a growing demand for personal
finance management apps, and potential customers are willing to pay for such solutions.
Potential Benefits and Impact: The app can help individuals track their expenses, set budgets,
and improve financial management, leading to better financial well-being.
Risks and Challenges: Competition in the mobile app market and potential challenges in user
acquisition and retention should be considered.

Based on the evaluation, if the project idea demonstrates strong alignment with organizational
goals, feasibility, market demand, potential benefits, and effective risk management strategies, it
can be deemed worth pursuing. However, if there are significant barriers, limited market
potential, or high risks without feasible mitigation strategies, it may be considered a raw idea
that requires further refinement or reconsideration

Q7. Following information is available in respect of the project:

Activity To Tm Tp

A-B 3 6 15
 A-F 2 5 14

B-C 6 12 30

B-D 2 5 8

C-E 5 11 17

D-E 3 6 15

E-H 1 4 7

F-G 3 9 27

G-H 19 25 43

On the basis of above information :

a) Draw network diagram
b) Find critical path and critical activites
c) Find out variance and standard deviation of critical path
d) Find the probability of that the project will be completed in 35 days.

Answer : calculation of expected time and variance of each activity :

Activity To Tm Tp Te Variance

A-B 3 6 15 7 4

A-F 2 5 14 6 4

B-C 6 12 30 14 16

B-D 2 5 8 5 1

C-E 5 11 17 11 4

D-E 3 6 15 7 4

E-H 1 4 7 4 1

F-G 3 9 27 11 16

G-H 19 25 43 27 16
Q8. Write a short note on :
a) Phases of project life cycle.
b) Role of IT in project management
c) Post project evaluation
d) Social cost and social benefit.

Answer : a) Phases of Project Life Cycle:

The project life cycle represents the stages that a project goes through from initiation to
completion. The phases of the project life cycle can vary depending on the methodology or
approach used, but the following are commonly recognized:

1. Project Initiation: This is the first phase of the project life cycle. It involves identifying the
need for the project, defining its objectives, and conducting a feasibility study. Key activities
in this phase include project proposal development, stakeholder identification, and initial
resource allocation. The project is formally authorized, and a project manager is assigned.

2. Project Planning: In this phase, the project plan is developed in detail. It includes defining
project scope, objectives, deliverables, and stakeholders' requirements. The project schedule
is created, tasks are identified, and resources are allocated. Risk assessment and mitigation
strategies are also developed. The project plan serves as a roadmap for the project team and
stakeholders.
3. Project Execution: The execution phase involves the actual implementation of the project
plan. Tasks are performed, resources are utilized, and progress is monitored. The project
manager coordinates the activities, manages the project team, and ensures that work is
completed according to the plan. Communication and collaboration among team members
and stakeholders play a crucial role in this phase.

4. 5. Project Monitoring and Control: This phase involves monitoring and controlling
project activities to ensure they are on track. Key performance indicators (KPIs) are
monitored, and deviations from the plan are identified and addressed. Regular progress
reports, status meetings, and change management processes are used to track project
performance, manage risks, and make adjustments as necessary.

Project Closure: The closure phase marks the completion of the project. It includes finalizing
deliverables, conducting a project review or evaluation, documenting lessons learned, and
transitioning project outputs to the appropriate stakeholders. The project is formally closed, and
resources are released. This phase ensures a smooth handover and captures valuable insights for
future projects.

It is important to note that the project life cycle is not always linear and may involve iterations
or overlapping phases depending on the project's complexity and nature. Different project
management methodologies, such as Waterfall, Agile, or Hybrid approaches, may have
variations in the phases or terminology used, but the fundamental purpose remains the same: to
guide the project from initiation to closure.

b) Role of IT in Project Management:

Information Technology (IT) plays a crucial role in project management by enabling efficient
communication, collaboration, and data management. Some key roles of IT in project
management include:

1. Communication and Collaboration: IT facilitates real-time communication and

collaboration among project team members, regardless of their physical locations. Tools
such as project management software, video conferencing, and collaboration platforms
enable seamless information sharing, document management, and team coordination.

2. Project Planning and Tracking: IT tools support project planning by providing features
like Gantt charts, task scheduling, and resource allocation. These tools enable project
managers to create project timelines, allocate resources, track progress, and monitor
milestones. IT helps in visualizing project status and identifying potential bottlenecks or
delays.
3. Data Management and Analysis: IT enables efficient data management, storage, and
analysis throughout the project lifecycle. Project managers can gather and analyze project-
related data, such as budgeting, resource utilization, and risk assessments, to make informed
decisions. Data-driven insights help in optimizing project performance and identifying areas
for improvement.

c) Post-Project Evaluation:

Post-project evaluation is a critical process conducted after the completion of a project. Its
purpose is to assess the project's overall performance, achievements, and lessons learned. Some
key aspects of post-project evaluation include:

1. Project Objectives: Evaluate whether the project achieved its intended objectives and
delivered the desired outcomes. Assess the extent to which the project met its goals and
whether any deviations occurred.

2. Budget and Schedule: Evaluate the project's financial performance, including adherence to
the allocated budget and timeline. Identify any cost overruns or schedule delays and analyze
their causes.

3. Stakeholder Satisfaction: Assess stakeholder satisfaction by gathering feedback from

project team members, customers, and other relevant stakeholders. Evaluate whether
expectations were met, and if there were any areas for improvement or concerns.

4. Lessons Learned: Document and analyze lessons learned from the project. Identify
successes, challenges, and best practices to be applied to future projects. Capture insights on
what worked well and areas that could have been improved.

d) Social and Social Benefits:

Social cost and social benefit are important concepts used to evaluate the overall impact of a
project on society. They consider the positive and negative effects that a project can have
beyond its direct stakeholders. Here's a brief explanation of each:

Social Cost: Social cost refers to the negative or undesirable consequences that a project may
impose on society or the community. These costs are often externalized and not accounted for in
the project's financial calculations. Social costs can include environmental damage, health risks,
displacement of communities, or the depletion of natural resources. For example, a
manufacturing project may result in increased air pollution, affecting the health and well-being
of nearby residents.
It is important to conduct a thorough assessment of social costs during the project planning and
evaluation stages. Mitigation measures can be implemented to minimize or offset these costs,
ensuring that the project's impact on society is taken into account.
Social Benefit: Social benefit refers to the positive outcomes and advantages that a project
brings to society or the community. These benefits go beyond the direct economic gains and
include improvements in quality of life, environmental sustainability, social well-being, or
cultural preservation. Social benefits can include job creation, infrastructure development,
enhanced public services, or the promotion of renewable energy sources.
Identifying and maximizing social benefits is an important aspect of responsible project
management. Projects should be designed and implemented with the intention of generating
positive social impacts and creating value for the community in which they operate.

It is worth noting that the assessment of social costs and benefits requires a comprehensive
analysis, including stakeholder engagement, impact assessments, and evaluation methods.
Techniques such as social impact assessments, cost-benefit analysis, and sustainability
frameworks can be utilized to ensure a balanced consideration of social factors in project
decision-making.

Overall, understanding and managing the social costs and benefits of a project are essential for
responsible and sustainable project management. By considering the broader social implications,
projects can aim to minimize negative effects and maximize positive outcomes, contributing to
the well-being and development of society as a whole.