N.

2 PROBLEMS

1. A group from Bacolod is planning a six-day trip to Dumaguete. For transportation, the group will rent a car from
either the school motor pool or a local car dealer. The school charges P26 per kilometer, has no daily fee, and the
motor pool pays for the gas. The car dealer charges P2500 per day and P14 per km, but the group must pay for the
gas. The car’s fuel rating is 10 km per liter, and the price of the gas is estimated to be P28 per liter.
(a) At what point, km is the cost of both options equal? (nearest value)
a. 717 km b. 1200 km c. 1448 km d. 1,630 km e. 1,913 km
(b) The car dealer has offered a special student discount and will give the students 100 free km per day.
What is the new break-even point?
a. 717 km b. 1200 km c. 1448 km d. 1,630 km e.1,913 km
2. 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 USD 23 per ton of material removed. A second method of development
will recover only 50% of the ore deposit, but it will cost only USD 15 per ton of material removed. Subsequent
processing of the removed ore recovers 300 pounds of metal from each ton and costs USD 40 per ton of ore
processed. The recovered metal can be sold for USD 0.80 per pound. What is maximum profit that could be
expected if method A is used to develop the mine?
a. USD10.974 M b. USD9.25 M c. USD7.50M d. USD6.75M e. USD2.68M
3. What is the increase in profit if instead of Method A, Method B is used? (Pls refer to the preceding problem)
a. $1.724 M b.(-) $1.724. M c. (-)$1.55M d. $1.55M e. USD2.68M
4. Two currently owned machines are being considered for the production of a part. The capital investment
associated with the machine is about the same and can be ignored. The important differences between the
machines are their production capacities (production rate x available production hours) and their rejects
(percentage of parts produced that cannot be sold) Consider the following table:
Machine A Machine B
Production Rate 100 parts/h 130parts/h
Hours Available for Production 7 h/day 6 h/day
Percent Parts Rejected 3% 10%
The material cost is P6 per part and all defect-free parts produced can be sold for P12 each (rejected parts have
negligible scrap value). For either machine, the operator is P25 per hour and the variable overhead rate for traceable
costs is cost P5 per hour. Assume that the daily demand for this part is large enough that all defect-free parts can be
sold. What is the maximum profit per day using machine A?
a. P3,738 b. P6,763 c. P5,670 d. P4,520 e. P2,350
5. What is the increase in profit if Machine B is used instead of Machine A?
a. P338 b. P174 c. (-P174) d. P420 e. (-P420)
6. A machine part to be machined may be made either from an alloy of aluminum or steel. There is an order for 8000
units. Steel costs P380/kg, while aluminum costs P870/kg. If steel is used, the steel per unit weighs 110 grams; for
aluminum, 30 grams. When steel is used, 50 units can be produced per hour; for aluminum, 80 units per hour with the
aid of a tool costing P64,000, which will be useless after 8,000 units are finished. The cost of the machine and the
operator is P1080 per hour. If all other costs are identical, determine which material will be more economical.
a. Steel cheaper by P15.80 unit b. Aluminum cheaper by P15.80 c. None of these
7. The ore of a gold mine contains an average of 14 grams of gold per ton. One method of processing costs P1,000 per
ton and recovers 93% of the gold, while another method costs only P900 per ton and recovers 81% of the gold. If gold
can be sold at P90/gram, which method is better and by how much?
a. 1st method is better by P51.20/ton ore b. 2nd method is better by P51.20/ton ore
 8. A certain masonry dam requires 200,000 m3 gravel for its construction. The contractor found two possible sources
for the gravel with following data: Determine which of the two sites will give lesser cost.
Data:
Source A Source B
Distance, gravel pit to dam 3.0 km 1.2 km
Gravel Cost @ pit, P/m3 None P100.00
Purchase price of pit P 8,000,000 None
Cost of Road construction P 4,500,000 None
Overburden costs P3,700,000
Hauling Costs, P/km/m3 P40.00 P40.00
a. A is cheaper by P3,200,000 b. Source B is cheaper by P3,200,000 c. None of these

9. A company manufactures 1 million units of a product annually. A new design of the product will reduce material
cost by 12%, but will increase processing cost by 2%. If materials cost is P 12//unit and processing will cost P4/unit,
how much can the company afford to pay for the preparation of the new design and making changes in equipment?
a. P 1.36 M b. P800,00 c. P600,000 d. P 505,000
10. In the design of an automobile radiator, an engineer has a choice of using either a brass-copper alloy casting (A) or
plastic molding (B). Either material provides the same service. However, the brass-copper alloy casting weighs 25
pounds, compared with 20 pounds for the plastic molding. Every pound of extra weight in the automobile has been
assigned a penalty of P600 to account for increased fuel consumption during the life cycle of the car. The brass-
copper alloy costs P335 per pound, whereas the plastic molding costs P740 per pound. Machining costs per casting
are P600 for the brass-copper alloy. Which material should the engineer select, and what is the savings in unit costs.
a. A, P2,825 b. B, P2,825 c. A, P2,225 d. B, P2,225

11. A machine used for cutting materials in a factory has the following outputs per hour at various speeds and requires
periodic tool regrinding at intervals cited.
Speed Output per hour Tool regrinding
A 200 pieces Every 8 h
B 250 pieces Every 7 h
C 280 pieces Every 5 h
A set of tools costs P4200 and can be ground 20 times. Each regrinding and change costs P180 and the
time needed to regrind and change tools is 1 h. The machine operator is paid P50/h, including the time the tool is
changed. The tool grinder who also sets the tools to the machine is paid P45/h. The hourly rate chargeable against
the machine is P150/h, regardless of speed.
Which speed should the engineer select for minimum costs?
a. A b. B c. C
12. Workers A and B can finish a work in 2 days. Workers A and C can finish the same job in 3 days. Workers B
and C can finish the same job in 4 days.
a. In how many days will the same job be finished if workers A, B and C work together?
a. 24/13 b. 4.5 c. 30/24 d. 13/24
b. How many days will it take for each of worker A, B and C to finish the job if they work individually?
A;B;C
a. 24/7; 24/5;24 b. 13/24; 24/5 c. 5/24; 24/24/5;24 d. 24/5; 24; 25/4