In the past year, a company paid US$60,000 to an external subcontractor for an ongoing...

To estimate the savings using in-house resources, the project manager would apply the PERT formula to calculate the expected duration of the project. The PERT formula is ( TE = \frac{(O + 4M + P)}{6} ), where TE is the expected time, O is the optimistic time, M is the most likely time, and P is the pessimistic time1.

Given the optimistic term of 4 months, the most expected term of 5 months, and the pessimistic term of 6 months, the expected duration (TE) would be ( TE = \frac{(4 + (4 \times 5) + 6)}{6} = \frac{(4 + 20 + 6)}{6} = \frac{30}{6} = 5 ) months.

The total cost for in-house resources for 5 months would be:

Two engineers: ( 2 \times US$700 \times 5 = US$7,000 )

One project manager: ( US$1,600 \times 5 = US$8,000 )

Additional expenses: ( US$2,000 \times 5 = US$10,000 )

Total in-house cost: ( US$7,000 + US$8,000 + US$10,000 = US$25,000 )

The company paid US$60,000 to an external subcontractor last year. Therefore, the estimated savings would be: ( US$60,000 - US$25,000 = US$35,000 )

However, since the options provided do not include US$35,000, and the closest option to the calculated savings is US$40,000, the answer would be C. US$40,000. This discrepancy might be due to additional factors not accounted for in the question’s details, such as indirect costs or a margin of error in the estimates.