EXERCISE SET NO.

S.N.:
Name
Date:
Professor :

rate of retun, determine the acceptability of a proposed engineering

01. Using an 8% is expected to generate a uniform
Benefit/Cost ratio analysis. The project
project using cost P4.8M and is estimated to have a
5%
income of P530 000.00 per year, will
salvage value after 15 years. ns (Ans. Project is not acceptable, 0.96)
P4lal2181. 714
(o.05)(PA.3M)(1-03)
P4.8M

Proj. is rejct
fully automate a production line is being
02. To save on labor costs a proposal to P750 000.00 and will have an
considered. Equipment for this proposal will cOstyears. Projected annual savings is
estimated salvage value of P50 000.00 after nine
000.00. For a 10% MARR, determine
P235 000.00 while annual expenses is P33
analysis.
project acceptability using BICD235k 33l 02 (Ans. Consider automation, 1,46)

net annual profit of

03. A food processing plant has an estimated initial cost P15.5M with a
P3M for the first four years of operations. In year 5 the plant is expected to expand to
meet growing demand. Cost of expansion is P6M with net annual profit increasing by
P1.5M.Determine the B/C ratio for a 12-year operating period using a 12.5% MARR.
(Ans. 1.21)
32 18383

Possts Pis,5M +PlMUns) PI3s24573.74

P22 132 I83.%3
BIC
Pro 179 513.14

7-14
 government of a town in region 5is
The local considering the construction of asmall
meet the needs of its
4 power plant to growing tourismindustry. Initial cost of plant
facilities arnd equipment is P700M and annual cost for operations and maintenance is
P5.8M. Annual benefits for jobs created, and savings from
power
and P72M, respectively. If project life is 40 years and equipment generation is P43M
is
every10 years at a cost of P50M, evaluate this refurbishing done
analysis. Use a 13% MARR.
undertaking by means of the BIC
40

epower plant shoud be corstrycteo -30

p

P7us 001 121.8

05. ME Board Exam March 2014

Aski resort installs two new ski lifts at a cost of P2.0M. The resort expects annual
gross revenue to increase P600 000.00 while it incurs an annual expense of P75
000.00 for lift operations and maintenance. What is the back-pay period?
(Ans. 3.8 years)
NA Plaok- Pisk
3ycars

payment of P400 000,00 and

06. A taxi operator purchased a new unit with a down
monthly payments of P12 500.00for the next three years. The unit is expected to be
Used for eight years and will be sold for P40 000.00 after that time. The estimated net
for the first fve
monthly income from the unit (depreciation included) is P25 000.00 period
years and P22 000.00 for the last three years. Detemine the payback
(Ans. 32 months)
P 40 k

7-15
 Determine the payback period for 10-year investment project that will cost
07. depreciabie assets. The project is expected to eam P2.5M P9.8M in
expenses for operations, maintenance, and taxes estimated annually, with
at PO.114M, yearty
salvage
valueforthe assets is estimated lat 30% after 10 years using the SLM depreciation.
PasM- (o3\(Pq3M (Ans. 5.76 years)

P
N
A Ps -PO.a4M-PGs DOD

3 The production manager of a manutfacturing plant figured that by instaling four 15

KVAR power condensers the power factor willincrease by 20%, resulting in amonthly
power savings of P7700.00 Each unit costs P75 000.00 with a 10% salvage value after
10 years. The overal cost of installation is P14 000.00, and the estimated annual cost
of maintenance and taxes is P11 800.00. If a 9% sinking fund formula is applied for
depreciation, determine the payback period for the condensers.

N: 4.83 5 yeais
Paz400 -PHk-P|5k PAA42 7u
D]100%
below:
09. Consider alternatives Aand Bwith the following cash flows presented
End of Year A
-P150 000.00 -P330 000.00
75 000.00 150 000.00
1
75 000.00 150 000.00
2
75 000.00 150 000.00
3
alternative.
a.)Using payback period, determine the better
detemine which alternative is better.
b.)Using an 11% MARR and AW analysis,
959.17,select B)
(Ans. NA=2yrs, Ng = 2.2 yrs, select A; ATA = P13 618.04, Ate = P14
A)

P330 oU PI3 I8:04

3elect opon A ArP3 551-21

Axn, P4454.69
sele opton B 7-16
 proposals with cash flows presented below:
Considerthreeinvestment
End ofYear 1 2
0 -P52 500.00 -P60 000.00 -P125 000.00
10 500.00 15 000.00
1-7
7 54 000.00 20 000.00 400000.00

a) Determine the best proposal using payback period.

b.) Using a 17%
MARR, determine the altemative ranking based on FW analysis.
5 yrs, N2 =4 yrs, N3 6.3
= yrs, select 2; Fr3= P24 844.74 > Fr =P20 040.92 >
(Áns. N
Fr2 =P16 505.66, select 3)
P52 500
PIO 500 2 P?0040.42

Pn5oot
PInsk.n)'
P24344A 14

requires an initial investment of P850 000.00 and

project revenue is P235
11. A proposed engineering 000.00for the next three years. Estimated acceptability
yearly expenses of P50 fifth to the fourteenth year. Determine project
000.00 annually from the
and an 11% MARR. 10.49%)
using the ERR method (Ans. Project is not acceptable,

10-year
and a 17% MARR, determine the acceptability of aadditional
lsing theERR method an initial investment of
P2.8M with
12.
manufacturing project that requires seventh year, respectively.
at the end of the third and sold
expenses of P1M and P3M project is P1.25M for ten years with all equipment to be
Annual income from this 14% reinvestment rate.
for P0.5M after that time. Apply a (Ans. Project is acceptable, 18.1%)

7-17
 Company is considering a proposal to supply power to asmall town. Initial
electric
An investmentis P18M plus
another P25M spread out evenly over a five year
13 capital generated is expected to be
will last for 15years and income Determine
project the feasibility of the
period. The startingatthe end of the fourth year.
P7.5M per year MARR and a 15% reinvestment rate.
usingthe ERR method with a 14% (Ans. Proposal is not feasible, 13%)
proposal

evaluating a new site for nickel mining. The

usinga 17% MARR is P485M. Net annual
Amining company equipment expenses are expected to cost will be
14.
site acquisition and the next 12 years after which the mine year
P95M for P18M per
receipts are estimated atbiodiversity restoration is anticipated to cost
method.
depleted. Clean up and years. Assess this venture using the ERRrecommended, 16.72%)
three
for the succeeding (Ans. Venture is not

CE Board Exam
November 1996
bridge whose cost is P200M and life is 20 years,
15. capitalized cost of a at the end of each 20 years.
At 6%. find the partially rebuilt at a cost ofP100M (Ans. P245.31M)
if the bridge must be

CCFC +
PCR
(Ibo M) 245.S1 M
-Pa00 MB -ou°41
capitalized
equipment is P15 000.00 per year and its
16. The maintenance cost of an the equipment has a salvage value of P30 000.00 and
cost at 6% interest is P1.8M. If years,find its original cost.
has to be renewed at cost after 10 (Ans. P701 240.00)
COM RC -SV
CC:FC +
FC-P30k
0-04 U40.0H 7-18

FCPI0) 239 .44 or P1ol 24)

 as problem number 16 except that the equipment has to be replaced every 12
Same oniginalcost.
17. vearsat 120%of (Ans. P722 768.00)
CC FC! (H)+
(P1.SM):Fct C.ou)
CP72 7ul.3) orf2148
construction cost
capitalized cost for an asphalt road that will reguire a
18. Determine the
year end for maintenance, plus an expenditure of P1M
of P10M, P50 000.00 each
repavement. Money is worth 5% effective.
every four years for
PCR (Ans. P15 640 236.65)
CC-FC+
PIM
PrOM +
((C PIS to 34.b5 small
a first cost
public market if the structure has operating
capitalized cost of a
Determine the P750 000.00. Annual
19
P20M, life of 20 years and a salvage value of annually. Use an interest rate of
of
to be paid is P70 000.00
cost is P150000.00. Taxes
7.5%. Re-SV (Ans. P28 860 329.19)
COM
P20M- P750000
.05 I.O15)°
CC:Pi8 G0324. 19
deserving students, a
For the purpose of providing yearly scholarships to poor but fund set up by a well
20. deposit in an endowment
wealthy engineer made a lump-sumprovide P200 000.00 after one year, increasing by
known university. The fund will payments become uniform
P10000.00 each year untilthe end of the 15th year where
interest per year, detemine the amount
and continue forever. If the fund will earn 9%
of the deposit. (Ans. P3087 350.04)

7-19
 submitted|the following cost estimatessfor a prop0sed 100-m bridge.
contractors
TWo Bridge B
23. Bridge A P27M
P20M
FirstCost 30 years
20 years P750 000.00
Life P500 000.00
SalvageValue P50 000.00
P160 000.00
Annual Upkeep P1.5MI4 years
P1M/6 years
Repairs capitalized cost for each
determine the
compounded annually,
If interest is 7.5% 653.66; CCB =P32 892
197.74)
bridge. (Ans. CCA =P32 608

May 2004 units per month. The fixed and

24. CE Board Exam production capacity of 9000
a
Ashoes factory has follows:
variable costs are as
monthly operating cost = P900 000.00
Fixed P200.00per unit
Material and labor cost =
P500.00
Selling price per unit = has an eficiency of 80%?
month if the factory (Ans. P1260 000.00)
What is the profit per Ce:Pyook
S Ps0o
Cyf00
1998
25. EE Board ExamOctober of a machine shop is P69 994.00. If the cost of
making
maintenance cost the
The annual
P56.00 per unit and the selling price is P135.00 per forged unit, find
a forging is
number of units to be forged to break-even (Ans. 886 units)
PU4904.00
S-Cy PRS- PS lF:PGrg94.00

7-21
 ME Board Exam April 1998
26. VYZ Corporation manufactures bookcases that it sells for P65.00 each t e , v
P35 000.00 per year to operate its plant. This sum includes rent, depreciatinn
charges on equipment, and salary payments. If the cost to produce one bookcase ie
PS0.00,how many cases must be sold each year for XYZ to avoid taking a loss?
-P25 (Ans. 2334 cases)

n2333.35 2234 cases/ye CyP5U

27. CE Board exam November 2000

The cost of producing a certain commodity consist of P45.00 per unit for labor and
materials cost, and P15.00 per unit for other variable cost. The fixed cost per month
amounts to P450 000.00. If the commodity is sold at P250.00 each, what is the break
even quantity?
(Ans. 2367 units)
P0-P0 -23u{unts
&P2tu

28. ME Board Exam April 1998

A company that manufactures electric motors has a production capacity of 200
motors amonth. The variable costs are P150.00 per motor. The average selling price
of the motors is P275.00. Fixed costs of the company
month and this includes taxes. The number of motors thatamount to P20 000.00 per
must be sold each mnonth
to break-even is

n
CE (Ans. 160 motors)
P1s-PISD
S-Cy SP7S
yrPIS6

29.
Eagle Concrete Industries produces
materials cost of P3.25 per piece withhollow blocks ata labor cost of P3.00 per
piece,
piece. The fixed charges are P54 an equipment depreciation charge of PO.25 per
O00.00
determine the number of blocks to be a month. f each block is sold for
produced and sold each month to P11.00,
n' break-even.
C,PAAns. 12 000 blocks)
bËock S=PIl
 1999
CE Board Exam May 1998, May
30. ntormine the break - even point in terms of number of units produced per month
per unit)
using the following data: (the costs are in pesos
P 600.00
Seling price per unit 428 000.00
Total monthiy overhead expenses 115.00
Labor cost 76.00
Cost of materials 2.32
Other variable costs
P193.32/unst (Ans. 1053 units)
Cy P(I15 7+2.32]/ yni

S-CV
Unitmo cost of P85.00/unit,
materials cost
manufactures AVR's at a labor charges on the
Elektra Industries costs at P20.00/unit. The fixedP850.00/unit, how
31. P350.00/unit, with other variable AVR's are sold to retailers for
of 000.00/mo. If the
business are P125 break-even?
(Ans. 317 units)
must be produced each year to P)250o
many units Prso PASS
C- P12S o0
3ly.s 317 vnitr
n
The
air-conditioners a month.labor
to produce 1200 P1500.00/unit and
has the capacity month, materials cost is 000.00,
32. JFrost Corporation
production is P4.5M per
each air-conditioner is P10 break
fixed cost of price for capacity; b) the
P1000.00/unit. If the selling a production of 70% and the labor cost is
cost is or loss made for by 10%
determine a) the profit the fixed cost is reduced
month if units)
even point each (Ans. P1.8M; 526
b)Cyi(50D+ 0-8(loo))- P?sD0
reduced by 20%.
)/unit : P2500 ntt
fIs0D 0.9(P4SM
CV:P1500 + Pjok-P2300
a) GRin(S Co-ce P250)- p4, 50.200| n'>525.q152unitr
capacity of
SP-PI(M compact disk has aproductioncapacity. The
the manufacture of present operating at 55% P2.00/pc.
engaged in investors, it is at P6.9M. and variable cost is
33. Afactory Due to lack of cost
disks/yr.
1.5M P8.25M. annual fixed the break-even point. disks/yr)
annual sales is or loss; b) 000lyr; 862 500
Determine a) the current
profit (Ans. -P300
b) n <-Cu
a) GPn(sc,-CF
i5M)(06))-9M
=(0.55)-SM)(2M Po.q
P8.2M
(PSM)(0s)
:P300 O00

7-23
 produces circuit boards for automated manufacturing equipment. The
R.O. Botix Inc. month are P135 000.00 for rent and utilities, and P170 000
34. company's fixed costs per for labor, P335.00 for
utilities and wages. The variable costs per unit are: P405.00
for
and P90.00 for production utilities. If each board sells for P1530.00,
materials, volume for the company; b) the new break-even
determine a) the break-even sales
two units are found defective for every 15 units produced. (Assume ful
point if
material recovery) (Ans. 436 boards; 564 boards)
b)n:E
S-ly 13
P305 00D
PIS3O-P630 P3oso00
3
n4357) 43 boacls
n 564.I SS boar

40 000 pocket books per

capacity topublish
35. Sweetluv Publishing Company has the and all books published
operates at 75% capacity
the company
month. At present, each. The company's fixed cost is P520 000 per month and
materials, and P9.50 for
are sold at P60.00 P8.00 for labor, P10.50 for P55.00,
publishingcosts are as follows: shows that if the selling price is reduced tobased on
distribution. A marketing study of capacity. If authors are paid 10% royalty the monthly
book sales will increase to 95%
break-even point and profit made; b)
present
Sales, determine a) the to P55.00 per book. 000/mo; P297 000/mo)
if the price is reduced books, P260
protit (Ans.20 000
P9.s0 H5.50
.) Cy-P4PIo.5t Pq.c0 t+a) b) Cy(Pe Plo.5b+
n': Ce P(60 -34) lbcok
GP >n(s-w)Cp
30 000
hookr 000) 38000bets
nD.(40 0.45(40 P35.50)-g20D
n 3K00o(P56-
GP:
Plo-34)- P 20 000 GP: P297000

7-24
36. Cruiser Automotive Corporation (CAC) manufacturers and assembles smallcompact
cars. Fixed cost per month is P3M. The variatble cost per unit is P375 000.00 and
each unit sells for P575 000.00. Using the break-even chart determine the break-even
point and the company's profit at its current production rate of 30 units per month.
(Ans. 15 units, P3M/rno.)

106 25

x
P
Disbursement,
20

and
15
Revenue

10

10 20 30 40 50

Units Manufactured and Sold

37. With the increasing prices of oil in the world market CAC is expecting the demand for
its cars to increase by 50%. If the company tries to meet this demand it must expand
its facites, and this wil cost the cormpany an additional P1M per month. Show the
new break-even point and profit generated in the B-E chart at (Ans.
this level of production.
20 units; P5M/mo.)

7-25
 compressin
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pyinder ofNo Ne
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in
Ches 1normetr
ofsef Crank
dead Boito BDC
crotec?roke
center dead Top 7PC-