what is a decision tree
a mathematical model to help managers make decisions by estimating probabilities of likely outcomes
how is a decision tree constructed
-square with decision
-lines for each choice (cost
underneath)
-each choice’s outcome (probability underneath)
-result/ financial benefit of outcome
-look at image
what choice is always included in a decision tree
do nothing
what must probability of outcomes add up to on a decision tree
1
how is expected value calculated via decision trees
result/financial benefit of outcome x probability of outcome
how is total expected value calculated via decision trees
adding together the expected value of each outcome
how is net gain calculates via decision trees
total expected value - cost of choice
what are the advantages of using decision trees
-choices set in logical way
-potential options considered at same time
-probabilities allow risk to be addressed
-costs are considered
-easy to understand and tangible results
what are the disadvantages of using decision trees
-probabilities are just estimates
-quantitative data only
-probabilities/ expected value could be bias
-decision making technique doesnt reduce risk
which decision from a decision tree is most beneficial
highest net gain
what is critical path analysis/network diagrams
-a project analysis and planning method, allowing projects to be completed in the shortest possible time
what is needed for critical path analysis
activities
time duration
dependencies
what is the critical path
-the longest path of activities to end the project
-determines shortest possible time to complete the project
how is float calculated
LFT - duration - EST
bottom in front node, middle, top back node
what is float
the time an activity can be extended/delayed before the project is delayed
what are network diagrams made of
-node with EST earliest start time AND LFT latest finish time
-line with activity and duration
what is the process of making a network diagram
-first node with 0,0
-any activities that do not have dependencies come from first node
-activities with dependencies
-activities with the same dependencies come from the same node
-add up duration from right to left to calculate EST, always choose the LONGEST
-minus durations from left to right for LFT
-identify critical path and mark with dashes
-calculate floats
DO PRACTISE QUESTIONSSS
what are the uses of critical path analysis
-estimate + minimise project time
-support project costing and evaluation
-plan and organise resouces
-prioritise tasks
-help provide direction (motivation)
what are the pros of critical path analysis
-reduce risk and costs of a project
-encourages assessment of each activity requirements
-spot activities with float; can reallocate resources
-decision making + planning resource
-provide managers with useful overview
-links well with other planning eg cash flow forecast/ budgeting
what are the cons of critical path analysis
-often reliant on estimates/assumptions
-doesnt guarantee success of project
-resources may not be flexible when addressing float
-too many activities can become complicated and may need to be broken to mini projects
what are the disadvantages of finishing a project late
-affect reputation
-could lose further business if it was contracted out
-more money spent on staff/ renting resources
