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Assignment5 1st Mechanical

1) Handheld fiber-optic meters are useful for measuring temperature, pressure, and strain in noisy environments. The fixed costs are $800,000 annually. The units sell for $2950 each with variable costs of $2075. (a) The breakeven point is 1,000 units annually. (b) The profit for 3,000 units is $405,000. 2) The monthly fixed cost per vending site is $900. Water costs $0.18/gallon to purify and sells for $0.30/gallon. (a) The breakeven point is 3,000 gallons monthly. (b) The profit for 7,000 gallons is $

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73 views3 pages

Assignment5 1st Mechanical

1) Handheld fiber-optic meters are useful for measuring temperature, pressure, and strain in noisy environments. The fixed costs are $800,000 annually. The units sell for $2950 each with variable costs of $2075. (a) The breakeven point is 1,000 units annually. (b) The profit for 3,000 units is $405,000. 2) The monthly fixed cost per vending site is $900. Water costs $0.18/gallon to purify and sells for $0.30/gallon. (a) The breakeven point is 3,000 gallons monthly. (b) The profit for 7,000 gallons is $

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lapepeng2067
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Helwan University, Faculty of Engineering at Helwan, 2013-2014 (Second Term)

1st year Mechanical Department

Engineering Economy – Assignment # 3

Dr. Araby Ibrahim

1) Handheld fiber-optic meters with white light polarization interferometry are useful for
measuring temperature, pressure, and strain in electrically noisy environments. The fixed
costs associated with manufacturing are $800,000 per year. If a base unit sells for $2950
and its variable cost is $2075, (a) how many units must be sold each year for breakeven (
analytically and graphically) (b) what will the profit be for sales of 3000 units per year?

2) Nicholea Water LLC dispenses its product Nature’s Pure Water via vending machines
with most current locations at food markets and pharmacy or chemist stores. The average
monthly fixed cost per site is $900, while each gallon costs $0.18 to purify and sells for
$0.30. (a) Determine the monthly sales volume needed to break even (analytically and
graphically). (b) What will the profit be for sales of 7000 gallons per month?

3) Consider the accompanying breakeven graph for an investment, and answer the following
questions as they pertain to the graph.

Total Revenue

a) Give the equation to describe total revenue for X units per year.
b) Give the equation to describe total costs for X units per year.
c) What is the "breakeven" level of X in terms of costs and revenues?
d) If you sell 1600 units this year, will you have a profit or loss? How much?
4) Quatro Hermanas, Inc. is investigating implementing some new production machinery as
part of its operations. Three alternatives have been identified, and they have the following
fixed and variable costs:

Alternative Annual Fixed Cost ($) Variable Cost per unit ($)
A $120,000 $17
B 220,000 4
C 150,000 5.5

Determine the ranges of production (units produced per year) over which each alternative
would be recommended for implementation by Quatro Hermanas

5) Three alternative designs have been created by Snakisco engineers for a new machine that
spreads cheese between the crackers in a Snakisco snack. Each machine design has unique total
costs (fixed and variable) based on the annual production rate of boxes of these crackers. The
costs for the three designs are given (where Q is the annual production rate of boxes of cheese
crackers).

Design Fixed Cost ($) Annual Variable Cost ($)


A 100,000 20.5 Q
B 350,000 10.5 Q
C 600,000 8Q

Graphically, determine which of the machine designs would be recommended for


different levels of annual production of boxes of snack crackers. Management is
interested in the production interval of 0-150,000 boxes of crackers per year. Over what
production volume would each design (A or B or C) be chosen?
6) Samsung Electronics is trying to reduce supply chain risk by making more responsible
make-buy decisions through improved cost estimation. A high-use component (expected
usage is 5000 units per year) can be purchased for $25 per unit with delivery promised
within a week. Alternatively, Samsung can make the component in-house and have it
readily available at a cost of $5 per unit, if equipment costing $150,000 is purchased.
Labor and other operating costs are estimated to be $35,000 per year over the study
period of 5 years. Salvage is estimated at 10% of first cost and i =12% per year. Neglect
the element of availability (a) to determine the breakeven quantity and (b) to recommend
making or buying at the expected usage level.
7) An irrigation canal contractor wants to determine whether he should purchase a used
Caterpillar mini excavator or a Toro powered rotary tiller for servicing irrigation ditches
in an agricultural area of California. The initial cost of the excavator is $26,500 with a
$9000 salvage value after 10 years. Fixed costs for insurance, license, etc. are expected to
be $18,000 per year. The excavator will require one operator at $15 per hour and
maintenance at $1 per hour. In 1 hour, 0.15 mile of ditch can be prepared. Alternatively,
the contractor can purchase a tiller and hire 2 workers at $11 per hour each. The tiller
costs $1200 and has a useful life of 5 years with no salvage value. Its operating cost is
expected to be $1.20 per hour, and with the tiller, the two workers can prepare 0.04 mile
of ditch in 1 hour. The contractor’s MARR is 10% per year. Determine the number of
miles of ditch per year the contractor would have to service for the two options to break
even.

8) An effective method to recover water used for regeneration of ion exchange resins is to
use a reverse osmosis system in a batch treatment mode. Such a system involves
recirculation of the partially treated water back into the feed tank, causing the water to
heat up. The water can be cooled using one of two systems: a single-pass heat exchanger
or a closed-loop heat exchange system. The single-pass system, good for 3 years, requires
a small chiller costing $920 plus stainless steel tubing, connectors, valves, etc. costing
$360. The cost of water, treatment charges, electricity, etc. will be $3.10 per hour. The
closed-loop system will cost $3850 to buy, will have a useful life of 5 years, and will cost
$1.28 per hour to operate. What is the minimum number of hours per year that the
cooling system must be used in order to justify purchase of the closed-loop system? The
MARR is 10% per year, and the salvage values are negligible.

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