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Unformatted text preview: =.xIsE$151.:sectiowo24.ENGINEERINGECONOMY 3 '  é'siisnngi Semester 290nm. SJ.P. Levelleg; ' 3 5; ; 21:111; 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” BreakEven Analyses (comparing alternatives on Total Cost), 3 breakeven 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 semiannual 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 kickin $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 endofperiod. 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 5year
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
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 Spring '10
 Bernhard
 Material costs, Skippy Dog Inc., new machine operation, equipment cost estimate, Sunk Costs measure

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