Exam_1 Soln

Exam_1 Soln - =.x-IsE$151.:sectiowo24-.ENGINEERINGECONOMY 3...

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Unformatted text preview: =.x-IsE$151.:sectiowo24-.ENGINEERINGECONOMY 3 ' - é'siisnngi Semester 290nm. SJ.P. Level-leg; ' 3 5; ; 21:11-1; EAMINTION aigfieo tens, _. INSTRUCTIONS: This is a closed hook and closed notes exam. For the problems, show your set—ups and steps as appiicable and underline all answ 5. Answer the problems on the .1: provided and put your pages in order and staple them together when __ " fiESl’ld. NAME (please print): SECTION I: True/False and Multi le Choice: Read each of the following and clearly circle T if you believe the statement is true, or F if you believe it is false. Or select the correct response for multiple choice. (2 points per problem * 24 points total). Mark your ansWers on this examination sheet for this section. 1. Because Sunk Costs measure the a it of money invested at some earlier time, we should always consider these in our analyses. T 0% 2. In engineering estimation the concept of TRIANG ULATION refers to our desire to always :_-__;-_ back to the same data source three times to make sure that you have the estimate right. T e. ‘. 3. (P/F,i%,n) == (F/P,l%,fl)/i .0 T 6 4. In engineering economics the concept of LIFE CYLE COSTS means that w uld focus on aii of the positive and negative cash flows of a project over its whole life cycl r F 5. In engineering economy, Opportunity Costs are not the same as same as Cash Costs®r F 6, In Profit—Loss Break—Even and a Ea_riabi__e_§_q_s_t Portion. T I._ _ the TOTAL REVENUE line is made up of a Fixed Cost Portion 7. In “Cost Only” Break-Even Analyses (comparing alternatives on Total Cost), 3 break-even point between two competing alternatives could hought of as a “point of indifference” between those two alternatives (with respect to the level of r F 8. r: u P*(A/P.i%.n)*(F/Asi%a“)@' F 9. If Accountants are like historians, then __ 'neering Economist are also like historians (both “account for” and “focus on” past decisions). T of 10. in the Chapter 2 of our text the authors discuss df the following difficulties in making engineering estimates EXCEPT which of the following: . (an) estimator expertise (c) time and effort available (b) one of a kind estimates (d) management pressures 11. Engineers are acting in an ethical way most when they protect C interests. (a) their own personal (c) the general public’s (b) their company’s (d) the government’s 12. in Chapter l7, in class we touched briefly on all of the topics below except: (a) balance sheet (e) income statement (1)) fundamental accounting equation (d) venture capital acquisition SECTION II : PROBLEMS: Show all of your work for partial credit (76 points total). Work on the separate sheets of blank paper provided. Please order your sheets and staple to the exam when finished. Problem #1 — 5 points Sigfred borrowed $3,000 from Roy and promised. to pay him $3,405 after 1.5 years. What simple interest rate did Sigfi‘ed pay on the $3,000 he borrowed ? Problem #2 ~-— 8 points You have $1,000 to invest today. A local bank offers to pay $3,000 on an investment of $1,000 after a 20 year period. (i.e. you deposit $1,000 and 20 years later receive $3,000 from the bank). A second bank offers to pay an interest rate of 3% per semi-annual period (2 periods per year). Which bank’s offer would you choose and why? $5,000 $500 Probiem #3 m»- 5 points Compute the value of P in the following Cash Flow Diagram given at the right. Please note the effective interest rate per period is i0%. Problem #4 — 10 points You want to purchase a car for your baby brother who is 3 years oid. Presently you have $4,000 in a savings account that earns 3% per year. Your parents have promised to kick-in $5,000 at the time of the purchase, and your grandma has promised to give you $1,000 5 years from today toward the purchase. In addition, you plan on adding $500 per year toward the purchase starting at the end of this year. Assuming aii monies go into your savings account, how much will you have accumuia’ted toward the purchase when your brother turns i6? Problem #5 — 14 points Skippy Dog Inc. produces two models of certified pet carriers for international travel; data is given beiow for each. Please answer the following: (a) Calculate the total (manufacturing) cost per unit for each model, and (b) Based on sales information what advice would you give the executives at Skippy Dog Inc. regarding this product line and explain why? PRODUCTS Data items “Shad Castle” Direct labor cost per unit Direct material cost er unit OTHER DATA: 5 You wiii use “direct labor hours” as your burden vehicle for indirect cost allocation 0 The total indirect (overhead) dollars per year are $2,000,000 Problem #5 ~— 14 points (a) In a Profit~Loss Break~Even Analysis, if Fixed Costs are $24,000 and Variable Costs are $7 .00 per unit, and we know that the Break—Even Point is 3,000 Units — What is the per unit Selling Price ? (b) Show the solution to the problem described above graphically. Remember to iahei your axes and show the slopes (or equations) of the lines that you. draw, break—even points and profit/loss regions. Problem #7 m 20 points Veronica Marie, engineering Vice President of Five Sisters Inc, has asked you to develop an ANNGAL estimate (Annuity) of the cost of a new machine operation to be added to one of Five Sisters Inc. '3 production lines. The annual estimate (which is in the form of an Annuity, as discussed in class) is to be for a five year period with costs starting at. the end of year one and extending through the end of year five. These are to be equivalent, consecutive and end-of-period. The new machine operation to be added will require a capital investment (for purchase of new equipment) and O& M costs of the equipment, and annual labor and material costs. Thus, the total estimate of annual costs (A) over the five—year period will include an equipment estimate (annual cost of equipment and operation & maintenance costs), a labor estimate (annual cost of iahor) and an estimate of material costs (annual material costs). Using the engineering estimating know—how you learned in £813 31 1 you are able to dig out the following data: Overall Data: Five Sisters Inc. will operate this machine for 2,000 hours per year (one shift with operator and machine at full time operation). w; You are not asked to account for scrap or lost work time in your estimate, assume the 2,000 hours is “productive working time” per year. Equipment Data: The machinery that is needed is a new machine which operates at 20 Horsepower (HP). Five Sister's Inc. currently has a 5 HP machine of the same type that cost $25,000 when it was oz‘iginaliy purchased 12 years ago. The Machine Cost index (MCI) for machines of this type was 200 when the 5 HP machine was purchased l2 years ago and is 410 today. This type of machine has a power sizing exponent of x=0.35. You will spread the initiai equipment cost estimate over the analysis period using an interest rate of i:20%. Operating and Maintenance Costs: Operating & Maintenance costs (exciuding labor) for the 20 HP machine will be $5.00 per hour. Labor Data: The labor cost for wages and benefits is $15.00 per hour. This will be constant over the 5-year period. Material Costs: The manual labor needed for this operation has a 93.068% Learning Curve associated with it. You know that the time required to produce the first unit is 0.75 hours. It also has been established that the 50"“ unit is to he used as the standard for determining how many units are produced per year. This production volume will be constant over the Snyear period. The cost of materials is $12.50 per unit produced. QUESTION: Calculate the estimate of total annual cost per year (cost Annuity over the five—year period) that you will present to Veronica Marie for the new operation to be added to Four Sisters Inc. is new production line? nm-memmwwwgmxex "'9 ‘ {.5- memmwmwmwwmgm‘wwm gamma w gfiavfifi m a W. www- ngwr/Mmmuimx“ fig W w W “yaw-«Wm mt: ‘ mfimlww‘mfhflmefldmfiwwabfiflwmwmh5mm ,amukfl M g m g V rflfifimmumfiwe arng ww¢nmwmrowv W13. 54m $24 W}‘ or if” 1 ' ‘ ~29 V qur- ‘ 2“ Mmmmmwwmmmmommmmmm {5 x .. ,, 3 f i wwwfimfiswmmx$mmmmamm§mmm- -'-::.' wmmv , .= '..,-~ . a E m§mfia§é ‘zm‘amcrazezm-EWW.mmmwm, 3 mg § MW” 2 m k WWW-b * ~ - m» . 7M W fig MW “WW ,gwmmc;mgqmmomamgzwmymfi‘Mvfiwmwmmmgw, £21m flm M? £2??? cfi a}; fl. MM :1 f @119 9mW ...
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This note was uploaded on 12/08/2010 for the course ISE 311 taught by Professor Bernhard during the Spring '10 term at N.C. State.

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Exam_1 Soln - =.x-IsE$151.:sectiowo24-.ENGINEERINGECONOMY 3...

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