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engineering economy
Engineering Economy 17th Global Edition William G. Sullivan ,Elin M. Wicks ,C. Patrick Koelling - Solutions
39. A foreperson supervises A, B, and eight other employees. The foreperson states that he spends twice as much time supervising A and half as much time supervising B, compared with the average time spent supervising his other subordinates. All employees have the same production rate. On the basis
38. An automatic process controller will eliminate the current manual control operation. Annual cost of the current method is $4,000. If the controller has a service life of 13 years and an expected market value of 11% of the first cost, what is the maximum economical price for the controller?
37. A student is considering the purchase of two alternative cars. Car A initially costs $1,500 more than Car B, but uses 0.05 gallons per mile, versus 0.07 gallons per mile for Car B. Both cars will last for 10 years, and B’s market value is $800 less than A’s. Fuel costs$4.00 per gallon. If
36. Find the average time per unit required to produce the first 30 units, if the slope parameter of the learning rate is 92% and the first unit takes 460 hours.(a) 330.693 (b) 305.5404 (c) 245(d) 347.3211
35. Given the following information, how many units must be sold to achieve a profit of $25,000? [Note that the units sold must account for total production costs (direct and overhead) plus desired profit.] (3.4, 3.5)Direct labor hours: 0.2 hour/unit Direct labor costs: $21.00/hour Direct materials
34. You have been asked to estimate the per unit selling price of a new line of clothing. Pertinent data are as follows:Direct labor rate: $15.00 per hour Production material: $375 per 100 items Factory overhead: 125% of direct labor Packing costs: 75% of direct labor Desired profit: 20% of total
33. What is the projected impact on the per unit demanufacturing cost of a 50% increase in training costs coupled with a 90% increase in transportation costs?What is the revised cost reduction percentage? (3.5)Use the cost template presented in Section 3.5 to solve Problems (3-34) and (3-35).
32. What cost factor is the per unit demanufacturing cost most sensitive to and why? (3.5)
31. What other cost factors might you include in such an economic analysis? (3.5)
30. Refer to Example 3- 8. While cleaning out an old file, someone uncovers the first spacecraft manufactured by your company—30 years ago! It weighed 100 pounds and cost $600 million. Extend the spreadsheet to include this data point. How does adding this observation affect R and the standard
29. The Betterbilt Construction Company designs and builds residential mobile homes. The company is ready to construct, in sequence, 16 new homes of 2,400 square feet each. The successful bid for the construction materials in the first home is $64,800, or $27 per square foot.The purchasing manager
28. Refer to Example 3- 7. Construct a graph to show how the time to complete the 10th car changes as the learning curve slope parameter is varied from 75%to 95%. (3.4)
27. Extended Learning Exercise. You have been asked to prepare a quick estimate of the construction cost for a coal-fired electricity generating plant and facilities. A work breakdown structure (levels one through three) is shown is Table P3-27. You have the following information available:• A
26. A small plant has been constructed and the costs are known. A new plant is to be estimated with the use of the exponential (power sizing) costing model. Major equipment, costs, and factors are as shown in Table P3-26.(Note MW = 106 Watts.)If ancillary equipment will cost an additional$200,000,
25. Your FICO score is a commonly used measure of credit risk (see www.myfico.com). A score of 850 is the best (highest) score possible. Thirty-five percent of the FICO score is based on payment history for credit cards, car loans, home mortgages, and so on. Suppose your current FICO score is 720
24. A math camp instructor estimates that students will take 3 hours to complete the first assignment of math puzzles, but will be able to improve at a rate of 0.95 for the second assignment (they will take 5% less time). If they are able to sustain this rate of improvement, how long will students
23. A 250 square foot shell and tube heat exchanger was purchased for $15,250 in 2004 when the index value was 830. Estimate the cost of 150 square foot shell and tube heat exchanger in 2014 when the index value is 1,059 and the appropriate cost-capacity factor is 0.6. (3.4)
22. In the packaging department of a large aircraft parts distributor, a fairly reliable estimate of packaging and processing costs can be determined by knowing the weight of an order. Thus, the weight is a cost driver that accounts for a sizable fraction of the packaging and processing costs at
21. The cost of building a supermarket is related to the total area of the building. Data for the last 10 supermarkets built for Galaxy, Inc., are shown in the accompanying table.Building Area (ft2) Cost ($)1 12,500 700,000 2 13,000 725,000 3 13,500 750,000 4 14,200 800,000 5 15,000 840,000 6
20. A company that manufactures shuttle cars and mines for the coal mining industry has determined that “coal production in the U.S.” is a fairly reliable three-quarter leading indicator of their sales. This quarter’s coal production in the United States can be obtained from the Department of
19. For the data below (3.4.3):a. Find the regression equation, y = b0 + b1x.b. If x = 170 orders, how many shipments are expected?Shipments, y No. of Liner Board Orders, x 573 157 603 161 658 175 725 194
18. A power company is planning to replace a 30- year-old thermal power generator with a capacity of 200 MW with a new generator with a capacity of 1000 MW. They ask an engineering consultant to answer the following questions: (a) If the cost was $300 million 30 years ago and is $1000 million
17. The time to assemble the first unit on a production line is 10 hours. The learning rate is 0.90.Approximately how long will it take for the sixth unit to be assembled? (3.4.2)
16. A firm has recently added a new product to their offerings. Manufacturing reports that production is going smoothly and factory workers are becoming familiar with the manufacture of this product. All expectations are that the current rate of learning will continue and the manufacture of future
15. The capacity of a switchgrass-fueled ethanol plant is 100,000 gallons per month. Its capital investment is $600,000. Another design is being considered with a capacity of 40,000 gallons per month, and its capital investment is $300,000. Based on capital investment only, what is the
14. The capital investment cost for a switchgrass-fueled ethanol plant with a capacity of 250,000 gallons per year is $6 million. The cost-capacity factor for this particular plant technology is 0.59 for capacities ranging from 200,000 gallons per year to 500,000 gallons per year. What is the
13. Six years ago, an 80- kW diesel electric set cost$160,000. The cost index for this class of equipment six years ago was 187 and is now 194. The cost-capacity factor is 0.6. (3.4)a. The plant engineering staff is considering a 120- kW unit of the same general design to power a small isolated
12. Today (year 0) a new 8- megaWatt (MW)solar panel farm is constructed at a cost of $16 million. Six years from today, a smaller 7- MW solar farm will be added to the existing farm. The inflation rate on solar panel construction projects averages 6% per year. If the cost-capacity factor is 0.80
11. The purchase price of a natural gas-fired commercial boiler (capacity X) was $160,000 eight years ago. Another boiler of the same basic design, except with capacity 1.24X, is currently being considered for purchase. If it is purchased, some optional features presently costing $34,000 would be
10. A 24,000-square-foot warehouse was just constructed for $1,200,000. If the cost-capacity factor is 0.88, what is the estimated cost to construct a 32,000-square-foot warehouse? (3.4.1)
9. Prepare a composite (weighted) index for housing construction costs in 2018, using the following data: (3.3)Reference Type of Year Housing Percent (l = 100) 2018 Single units 60 32 64 Duplex units 10 34⎫⎪⎬⎪⎭$/ft2 51⎫⎪⎬⎪⎭$/ft2 Multiple 30 40 65
8. A water filtration system in an industrial process was purchased in 2015 for $440,000. It will be replaced at the end of year 2019. What is the estimated cost of the replacement, based on the following equipment cost index? (3.3)Year Index Year Index 2014 220 2017 257 2015 238 2018 279 2016 247
7. Suppose that your sister has decided to open a store selling accessories for pet animals. She anticipates opening her store in 12 months. In estimating future cash flows of the company, which of the following items would be relatively easy versus relatively difficult to obtain? Also, suggest how
6. An electric power distributor charges residential customers $0.15 per kilowatt-hour(kWh). The company advertises that “green power” is available in 150 kWh blocks for an additional $5 per month. (Green power is generated from solar, wind power, and methane sources.) (3.3)a. If a certain
5. The proposed small office building in Example 3- 2 had 24,000 net square feet of area heated by a natural gas furnace. The owner of the building wants to know the approximate cost of heating the structure from October through March (6 months) because she will lease heated space to the
4. Natasha has been told that if she reduces the thermostat setting on the heating system at her home by 1 degree, she will be able to reduce her present annual energy consumption of 5,000 kWh by 20%. In doing so, she will be able to save as much as $250 per year. (3.3)a. What is the implicit cost
3. An architect-engineering firm is planning a parking lot to accommodate 1,000 vehicles. Each parking space will be 9 feet×16 feet. It has been estimated that the space required for aisles will be 80% of the space required for parking. A local paving company charges $12 per square foot for paving
2. You are planning to retire from the city and start farming. You want to buy a strawberry farm set on 5 acres of land. In addition, you are also planning to grow blackberries on an attached plot of 1 acre. Develop a cost and revenue structure for designing and constructing, operating the farm for
1. One solar panel can generate 100 kilowatts of energy from one hour of sunlight. How much energy will the panel produce in a year if it receives 1,450 sunlight hours and can convert 90% of incident light into electric power? (3.3)
58. A manufacturer makes 7,900,000 memory chips per year. Each chip takes 0.4 minutes of direct labor at the rate of $8 per hour. The overhead costs are estimated at $11 per direct labor hour. A new process will reduce the unit production time by 0.01 minutes. If the overhead cost will be reduced
57. The fixed costs incurred by a small genetics research lab are $200,000 per year. Variable costs are 60% of the annual revenue. If annual revenue is $300,000, the annual profit/loss is most nearly which answer below? (2.2)(a) $66,000 profit (b) $66,000 loss(c) $80,000 profit (d) $80,000 loss
56. If the selling price is lowered to $35 per unit, how many units must be sold each year for the company to earn a profit of $60,000 per year?(a) 12,000 (b) 10,000 (c) 16,000(d) 18,000 (e) 5,143
55. If 10,000 units per year are sold, what is the annual profit?(a) $280,000 (b) $50,000 (c) $150,000(d) −$50,000 (e) $30,000
54. How many units per year must be sold for the company to breakeven?(a) 4,800 (b) 3,000 (c) 8,000(d) 6,667 (e) 4,000
53. Which of the following values of D represents the breakeven point?(a) 10 units (b) 15 units (c) 20 units(d) 25 units A manufacturing company leases a building for $100,000 per year for its manufacturing facilities. In addition, the machinery in this building is being paid for in installments of
52. What is the optimal number of units that should be produced and sold each month?(a) 10 units (b) 15 units (c) 20 units(d) 25 units
51. Visit your local car dealer (either in person or online) to determine the cost of the daytime running lights option. Howmany accidents (per unit time) would have to be avoided for this option to be cost effective? (2.5)
50. What are the key factors in this analysis, and how would your decision change if the assumed value of these factors changes? For example, what impact does rising fuel costs have on this analysis? Or, what if studies have shown that drivers can expect to avoid at least one accident every 10
49. Refer to Example 2- 7. If the average inside temperature of this house in Virginia is increased from 65◦F to 72 ◦ F, what is the most economical insulation amount? Assume that 100,000,000 Btu are lost with no insulation when the thermostat is set at 65◦F. The cost of electricity is now
48. Refer to Example 2- 4. If your focus was on reducing expenses, would it be better to reduce the fixed cost (B1)or variable cost (B2) component?What is the effect of a ±10% change in both of these factors? (2.2)
47. Web Exercise Home heating accounts for approximately one-third of energy consumption in a typical U.S. household. Despite soaring prices of oil, coal, and natural gas, one can make his/her winter heating bill noninflationary by installing an ultraconvenient corn burning stove that costs in the
46. Extended Learning Exercise The student chapter of the American Society of Mechanical Engineers is planning a six-day trip to the national conference in Albany, NY. For transportation, the group will rent a car from either the State Tech Motor Pool or a local car dealer. TheMotor Pool charges
45. A hot water leak in one of the faucets of your apartment can be very wasteful. A continuous leak of one quart per hour (a “slow” leak) at 155◦F causes a loss of 1.75 million Btu per year. Suppose your water is heated with electricity. (2.3)a. How many pounds of coal delivered to your
44. Which of the following statements are true and which are false? (all sections)a. Labor wages are a variable cost.b. A book cost is just another word for a cost that generates a cash flow.c. Total overhead costs are independent of the capacity of an operation (e.g., the size of a manufacturing
43. Ocean water contains 0.9 ounces of gold per ton.Method A costs $550 per ton of water processed and will recover 90% of the metal. Method B costs $400 per ton of water processed and will recover 60% of the metal.The two methods require the same capital investment and are capable of producing the
42. One method for developing a mine containing an estimated 100,000 tons of ore will result in the recovery of 62% of the available ore deposit and will cost $23 per ton of material removed. A second method of development will recover only 50% of the ore deposit, but it will cost only $15 per ton
41. A study makes the following recommendation to a no-frills budget airline: the airline ought to offer heavily discounted flight tickets four hours before a flight in order to fill up all the seats that are not yet sold, because any additional revenue will help to offset the fixed costs of
40. A company is analyzing a make-versus-purchase situation for a component used in several products, and the engineering department has developed these data:Option A: Purchase 10,000 items per year at a fixed price of $8.50 per item. The cost of placing the order is negligible according to the
39. Mr. Lester wants to create a business Web site. He already has the server and all the hardware he needs.So, he just needs to figure out what software to use.He narrows his choices down to either Microsoft IIS or Apache’sWeb Server. Mr. Lester expects a high hit rate of 90 hits/minute because
38. For the production of part R-193, two operations are being considered. The capital investment associated with each operation is identical.Operation 1 produces 2,000 parts per hour. After each hour, the tooling must be adjusted by the machine operator. This adjustment takes 20 minutes. The
37. The speed of your automobile has a huge effect on fuel consumption. Traveling at 65 miles per hour (mph) instead of 55 mph can consume almost 20% more fuel. As a general rule, for every mile per hour over 55, you lose 2% in fuel economy. For example, if your automobile gets 30 miles per gallon
36. A bicycle component manufacturer produces hubs for bike wheels. Two processes are possible for manufacturing, and the parameters of each process are as follows:Process 1 Process 2 Production rate 35 parts/hour 15 parts/hour Daily production time 4 hours/day 7 hours/day Percent of parts 20%
35. Two alternative designs are under consideration for a tapered fastening pin. The fastening pins are sold for$0.70 each. Either design will serve equally well and will involve the same material and manufacturing cost except for the lathe and drill operations. Design A will require 12 hours of
34. You are asked to recommend whether a firm should make or purchase product A. The following are data concerning the two options. For the purchase option, the firm can buy product A at $20 per unit. For the make option, the firm can produce product A based on the following cost estimation data.
33. A rock drill can be operated at three different operating speeds, each with a unique drilling rate (i.e., rate of production). The faster the drill operates, the sooner the bit wears out and must be replaced. Replacement bits cost $10.00 each and cannot be re-sharpened. The drill operator costs
32. An automobile dealership offers to fill the four tires of your new car with 100% nitrogen for a cost of $20. The dealership claims that nitrogen-filled tires run cooler than those filled with compressed air, and they advertise that nitrogen extends tire mileage (life) by 25%.If new tires cost
31. A producer of synthetic motor oil for automobiles and light trucks has made the following statement: “One quart of Dynolube added to your next oil change will increase fuel mileage by one percent. This one-time additive will improve your fuel mileage over 50,000 miles of driving.” (2.4)a.
30. A company uses a variable speed honing machine to increase the smoothness of the inside walls of hydraulic jacks. The hone uses acid-dipped“brushes” to perform this operation. Increasing the speed of the machine results in faster operation, but reduces brush life. A single “brush” costs
29. One component of a system’s life-cycle cost is the cost of system failure. Failure costs can be reduced by designing a more reliable system. A simplified expression for system life-cycle cost, C, can be written as a function of the system’s failure rate:C = CIλ+ CR · λ · t.Here, CI =
7, we could eliminate our oil dependence on Saudi Arabia.If the cost of electricity increases to $0.15 per kWh and the cost of insulation quadruples, how much insulation should be chosen in Example 2- 7? (2.3)
28. According to the U.S. Department of the Interior, the amount of energy lost because of poorly insulated homes is equivalent to 2 million barrels of oil per day. In 2009, this is more oil than the United States imports from Saudi Arabia each day. If we were to insulate our homes as determined by
27. Suppose you are going on a long trip to your grandmother’s home in Seattle, 3,000 miles away. You have decided to drive your old Ford out there, which gets approximately 18 miles to the gallon when cruising at 70 mph. Because Grandma is an excellent cook and you can stay and eat at her place
26. The cost of operating a large ship (CO) varies as the square of its velocity (v); specifically, CO = knv2, where n is the trip length in miles and k is a constant of proportionality. It is known that at 12 miles/hour, the average cost of operation is $100 per mile. The owner of the ship wants
25. A local hairdresser incurs fixed costs of $10,000 per year. He faces variable costs that are equal to 50% of the annual revenue. If his annual profits are $15,000, his annual revenues are most nearly (2.2):(a) $40,000 (b) $50,000(c) $60,000 (d) $70,000
24. A production plant has the capacity to produce 2,000 tons per year. At full capacity, there are total variable costs of $2,000,000 and fixed costs of $700,000.(2.2)a. What is the annual profit for the plant when working at full capacity (2,000 tons) and the product sells for$0.80 per pound?b.
23. Ethanol blended with gasoline can be used to power a “flex-fueled” car. One particular blend that is gaining in popularity is E85, which is 85%ethanol and 15% gasoline. E85 is 80% cleaner burning than gasoline alone, and it reduces our dependency on foreign oil. But a flex-fueled car costs
22. Afua Adipa’s laptop has been giving her a lot of trouble. It is four years old and in the last six months, the hard drive has crashed frequently, causing her to lose data. She takes her laptop to a service center, where she is told that her hard drive has become unstable, leading to crashes
21. A regional airline company estimated four years ago that each pound of aircraft weight adds $60 per year to its fuel expense. Now the cost of jet fuel has doubled from what it was four years ago. A recent engineering graduate employed by the company has made a recommendation to reduce fuel
20. An ice cream producer has fixed costs of $70,000 per month, and it can produce up to 15,000 ice cream tubs per month. Each tub costs $10 in the market while the producer faces variable costs of $3 per tub.a. What is the economic breakeven level of production?b. Calculate the ice cream
19. An amusement park faces large fixed costs of$500,000 per month and low average variable costs of$10 per visitor. It charges all visitors a flat entry fee of $50 for unlimited rides.a. What is the breakeven point for this park?b. The park currently has 42,000 visitors a month and proposes to
18. The world price of zinc has increased to the point where “moth balled” zinc mines in east Tennessee have been reopened because of their potential profitability.(a) What is the estimated annual profit for a mine producing 20,000 tons per year (which is at 100%capacity) when zinc sells for
17. A tiremanufacturer produces tires at a variable cost of $25 per unit. The plant has annual sales of $480,000 at a price of $40 per unit. Find the breakeven point in units of production. The annual fixed costs for the plant are$150,000. (2.2)
16. An electric power plant uses solid waste for fuel in the production of electricity. The cost Y in dollars per hour to produce electricity is Y = 20 +0.8X + 0.25X2, where X is in megawatts.Revenue in dollars per hour from the sale of electricity is 20X − 0.5X2. Find the value of X that gives
15. An exporter of leather handbags has just entered a newmarket. This exporter faces the following relationship between the price of handbags and the demand for them:p = 5 + 4800/D − 3000/D2, for D > 0 where p is the price per unit in dollars and D is the demand per month. The exporter wants to
14. A tennis racquet manufacturer is negotiating a lease on land to build a manufacturing plant. The price charged will be determined by p = $450 − (0.1)D per tennis racquet. The manufacturer faces variable costs of$25 per tennis racquet. Fixed costs of manufacturing are currently $25,000, in
13. A lawn mower manufacturer encounters the following relationship between price and demand for small garden lawn mowers in the market: Price = 500−0.2 × Demand. The total fixed cost of manufacturing small lawn mowers is $100,000, while the company faces variable costs of $150 per unit. What is
12. A lash adjuster keeps pressure constant on engine valves, thereby increasing fuel efficiency in automobile engines. The relationship between price (p)and monthly demand (D) for lash adjusters made by the Wicks Company is given by this equation: D = (3,200 −p) /0.10. What is the demand (ˆD)
11. A company has established that the relationship between the sales price for one of its products and the quantity sold per month is approximately p = 75 – 0.1D units (D is the demand or quantity sold per month and p is the price in dollars). The fixed cost is $1,000 per month and the variable
10. A mail carrier at the U.S. Postal Service works on Sunday delivering high-priority letters and packages. She can deliver 15 items per hour. The fixed hourly costs(vehicle depreciation, insurance, etc.) equal $42 and the hourly variable costs (time and a half wages, etc.)total $0.50 per item
9. At the peak of the financial crisis, you had lost 40% on your stock holdings, leaving you with stocks worth $10,000. You asked your family for advice on what to do with your money. Your mother recommended that you buy property at prices that were at record lows, earning a potential return of 25%
8. Your friend works as a software analyst and earns$80,000 a year. She also has a part-time job of baking cookies for school and party events. She earns up to $500 per event and caters as many as five events a month.She is wondering if she should switch to baking cookies full-time when she might
7. Suppose you own an apartment that you want to let out. You have found a prospective tenant who will pay you $500 per month for the apartment as it is. However, you think that if you invest $2,400 in furnishing the apartment, you might be able to rent it out for $800 per month. Should you offer
6. You have been taking a course on game theory at university. After attending 10 of 15 hours of classes, you realize that you don’t enjoy the subject and are likely to do poorly in the final exam. At this point, you could stop attending these classes and give up on the course.However, you decide
5. Your company presently uses a crew of its own employees for all major maintenance. On average, 44 major repairs are performed each year at 20 lost production hours per repair. Keeping the crew costs$1,300,000 per year plus any lost production cost. Lost production costs are estimated at $2,500
4. A municipal solid-waste site for a city must be located at Site A or Site B. After sorting, some of the solid refuse will be transported to an electric power plant where it will be used as fuel. Data for the hauling of refuse from each site to the power plant are shown in Table P2-4.TABLE P2-4
3. A group of enterprising engineering students has developed a process for extracting combustible methane gas from cow manure (don’t worry, the exhaust is odorless).With a specially adapted internal combustion engine, the students claim that an automobile can be propelled 15 miles per day from
2. Given below is a numbered list of cost terms. For each of the definition statements that follow, place the number of the cost term in the blank that makes the statement a correct definition. Each cost term is used only once. (2.1)Numbered List of Cost Terms:1. Recurring 5. Opportunity 2.
1. An experimental composite engine block for an automobile will trim 20 pounds of weight compared with a traditional cast iron engine block. It is estimated that at least $2,500 in life-cycle costs will be saved for every pound of weight reduction over the engine’s 8- year expected life. Given
21. Energy can be conserved when your washing machine washes clothes at a lower temperature, which reduces the energy required to heat water. A study suggests that reducing the washing cycle temperature from 60 degrees Celsius to 40 degrees Celsius reduces energy consumption by up to 30%. What
20. A deep-water oil rig has just collapsed into the Gulf of Mexico. Its blowout-preventer system has failed, so thousands of barrels of crude oil each day are gushing into the ocean. List some alternatives for stopping the unchecked flow of oil into the Gulf. (1.3)
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