The University of Faisalabad

Department of Electrical Engineering

Chapter 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 that the engine’s life is 8 years, what assumptions have been made to arrive at the
$2,500 per pound savings?
2. A municipal solid-waste site for a city must be located at Site A or SiteB. 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

If the power plant will pay $8.00 per cubic yard of sorted solid waste delivered to the plant,
where should the solid-waste site be located? Use the city’s viewpoint and assume that 200,000
cubic yards of refuse will be hauled to the plant for one year only. One site must be selected.
3. Suppose your company has just discovered $100,000 worth (this is the original manufacturing
cost) of obsolete inventory in an old warehouse. Your boss asks you to evaluate two options:
(1) remachine the obsolete parts at a cost of $30,000 and then hopefully resell them for $60,000
or (2) scrap them for $15,000 cash (which is certain) through a secondhand market. What
recommendation would you make to your boss? Explain your reasoning.
4. A large wood products company is negotiating a contract to sell plywood overseas. The fixed
cost that can be allocated to the production of plywood is $800,000 per month. The variable
 cost per thousand board feet is $155.50. The price charged will be determined by p = $600 −
(0.5)D per 1,000 board feet.
i. For this situation, determine the optimal monthly sales volume for this product and
calculate the profit (or loss) at the optimal volume.
ii. What is the domain of profitable demand during a month?
5. The annual fixed costs for a plant are $100,000, and the variable costs are $140,000 at 70%
utilization of available capacity, with net sales of $280,000. What is the breakeven point in
units of production if the selling price per unit is $40?
6. The fixed cost for a steam line per meter of pipe is $450X + $50 per year. The cost for loss of
heat from the pipe per meter is $4.8/X1/2 per year. Here, X represents the thickness of
insulation in meters, and X is a continuous design variable.
i. What is the optimum thickness of the insulation?
ii. How do you know that your answer in Part (i) minimizes total cost per year?
iii. What is the basic trade-off being made in this problem?
7. 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.”
i. Assume the company’s claim is correct. How much money will be saved by adding one
quart of Dynolube if gasoline costs $4.00 per gallon and your car averages 20 miles per
gallon without the Dynolube?
ii. If a quart of Dynolube sells for $19.95, would you use this product in your automobile?
8. 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 present cost accounting procedure.
Option B: Manufacture 10,000 items per year, using available capacity in the factory. Cost
estimates are direct materials = $5.00 per item and direct labor = $1.50 per item. Manufacturing
overhead is allocated at 200% of direct labor (= $3.00 per item). Based on these data, should
the item be purchased or manufactured?
9. 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. The Motor Pool charges $0.36 per mile,
has no daily fee, and pays for the gas. The local car dealer charges $30 per day and $0.20 per
mile, but the group must pay for the gas. The car’s fuel rating is 20 miles per gallon, and the
price of gas is estimated to be $2.00 per gallon.
10. 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.
i. How many pounds of coal delivered to your electric utility does this leak equate to if
one pound of coal contains 12,000 Btu and the boiler combustion process and water
distribution system have an overall efficiency of 30%?
ii. If a pound of coal produces 1.83 pounds of CO2 during the combustion process, how
much extra carbon dioxide does the leaky faucet produce in a year?