Selections in

the Present
Economy
SEA – General
Engineering Department
Present Economy
• Present economy involves the
analysis of problems for
manufacturing a product or rendering
a service based on present or
immediate costs.
• Present economy analysis is
employed when the alternatives to be
compared will provide the same
result and the length of time involved
in the study is relatively short.
Present Economy Studies
■ Selection of materials
■ Selection of method
■ Selection of design
■ Site selection
■ Comparison of proficiency of workers
■ Economy of tool and equipment
maintenance
■ Economy in the utilization of personnel
Present Economy Studies
■ Selection of materials
-which material will result in the most
economical product and will give the
best results considering the costs of
materials and their processing
■ Selection of method
-determining the most economical
among different methods performing
the same operation and satisfactory
results
Present Economy Studies
■ Selection of design
-selecting the design best suited for
the work to be done with particular
care with utmost economy
■ Site selection
-selecting the best site or location
which includes all pertinent factors
such as cost of land, construction
cost and availability of skilled labors
Present Economy Studies
■ Comparison of proficiency of workers
-observing workers having varying
proficiencies affecting costs, e.g.
efficient and diligent workers are paid
higher wages
■ Economy of tool and equipment
maintenance
-indicating the best time to perform
maintenance in optimum operating
conditions at highest level of efficiency
Present Economy Studies
■ Economy in the utilization of
personnel
-identifying the sufficient number of
workers to be assigned at a specific
work to minimize idleness
Selection of Material
A machine part to be machined may be made
either from an alloy of aluminum or steel. There is
an order for 8,000 units. Steel costs P3.80 per kg,
while aluminum costs P8.70 per 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 P640, which
will be useless after the 8,000 units are finished.
The cost of the machine and operator is P10.80
per hour. If all other costs are identical, determine
which material will be more economical.
Selection of Material
𝑆𝑡𝑒𝑒𝑙:
𝑃3.80 1𝑘𝑔 110𝑔
𝑀𝑎𝑡𝑒𝑟𝑖𝑎𝑙 𝐶𝑜𝑠𝑡 = ∙ ∙ ∙ 8,000𝑢𝑛𝑖𝑡𝑠 = 𝑃3,344
𝑘𝑔 1000𝑔 𝑢𝑛𝑖𝑡
𝑃10.80 ℎ𝑟
𝐿𝑎𝑏𝑜𝑟 𝑎𝑛𝑑 𝑀𝑎𝑐ℎ𝑖𝑛𝑒 𝐶𝑜𝑠𝑡𝑠 = ∙ ∙ 8,000𝑢𝑛𝑖𝑡𝑠 = 𝑃1,728
ℎ𝑟 50𝑢𝑛𝑖𝑡𝑠
𝑇𝑜𝑡𝑎𝑙 = 𝑃3,344 + 𝑃1,728 = 𝑷𝒉𝒑 𝟓, 𝟎𝟕𝟐

𝐴𝑙𝑢𝑚𝑖𝑛𝑢𝑚:
𝑃8.70 1𝑘𝑔 30𝑔
𝑀𝑎𝑡𝑒𝑟𝑖𝑎𝑙 𝐶𝑜𝑠𝑡 = ∙ ∙ ∙ 8,000𝑢𝑛𝑖𝑡𝑠 = 𝑃2,088
𝑘𝑔 1000𝑔 𝑢𝑛𝑖𝑡
𝑃10.80 ℎ𝑟
𝐿𝑎𝑏𝑜𝑟 𝑎𝑛𝑑 𝑀𝑎𝑐ℎ𝑖𝑛𝑒 𝐶𝑜𝑠𝑡𝑠 = ∙ ∙ 8,000𝑢𝑛𝑖𝑡𝑠 = 𝑃1,080
ℎ𝑟 80𝑢𝑛𝑖𝑡𝑠
𝑇𝑜𝑜𝑙 𝐶𝑜𝑠𝑡 = 𝑃640
𝑇𝑜𝑡𝑎𝑙 = 𝑃2,088 + 𝑃1,080 + 640 = 𝑷𝒉𝒑 𝟑, 𝟖𝟎𝟖

𝑨𝒍𝒖𝒎𝒊𝒏𝒖𝒎 𝒊𝒔 𝒄𝒉𝒆𝒂𝒑𝒆𝒓.
Selection of Material
A Diesel engine uses Type A filter and high-
grade lubricating oil costing P5.50 per liter. With this
filter, the oil and the filter have to be changed every
500 hours of operation, and 5 liters of oil have to be
added every 100 hours. This filter costs P148 a
piece. Eighty liters of oil fill the engine.
Another type, filter B, costing P120 may be
used with a lower grade of oil costing P4.80 per liter.
However, if this filter is used, the oil and filter have
to be changed every 300 hours, and 10 liters are
added after each 150 hours the engine is used.
Which type of filter and oil would you recommend?
Selection of Material
𝑇𝑦𝑝𝑒 𝐴 𝐹𝑖𝑙𝑡𝑒𝑟 (500 ℎ𝑜𝑢𝑟𝑠)
𝐹𝑖𝑙𝑡𝑒𝑟 𝐶𝑜𝑠𝑡 = 𝑃148
𝑃5.50
𝐼𝑛𝑖𝑡𝑖𝑎𝑙 𝐶𝑜𝑠𝑡 𝑜𝑓 𝑂𝑖𝑙 = ∙ 80𝑙𝑖𝑡𝑒𝑟𝑠 = 𝑃440
𝑙𝑖𝑡𝑒𝑟
𝑃5.50 5𝑙𝑖𝑡𝑒𝑟𝑠
𝐶𝑜𝑠𝑡 𝑜𝑓 𝐴𝑑𝑑𝑖𝑡𝑖𝑜𝑛𝑎𝑙 𝑂𝑖𝑙 𝑒𝑣𝑒𝑟𝑦 100 ℎ𝑜𝑢𝑟𝑠 = ∙ ∙ 4𝑡𝑖𝑚𝑒𝑠 = 𝑃110
𝑙𝑖𝑡𝑒𝑟 𝑡𝑖𝑚𝑒
∗∗ 4 𝑡𝑖𝑚𝑒𝑠 𝑏𝑒𝑡𝑤𝑒𝑒𝑛 𝑓𝑖𝑙𝑡𝑒𝑟 𝑐ℎ𝑎𝑛𝑔𝑒𝑠
𝑇𝑜𝑡𝑎𝑙 𝐶𝑜𝑠𝑡 𝑓𝑜𝑟 500 ℎ𝑜𝑢𝑟𝑠 𝑜𝑝𝑒𝑟𝑎𝑡𝑖𝑜𝑛 = 𝑃148 + 𝑃440 + 𝑃110 = 𝑃698

𝑃698
𝐶𝑜𝑠𝑡 𝑝𝑒𝑟 100 ℎ𝑜𝑢𝑟𝑠 𝑜𝑝𝑒𝑟𝑎𝑡𝑖𝑜𝑛 = = 𝑷𝒉𝒑 𝟏𝟑𝟗. 𝟔𝟎
5
Selection of Material
𝑇𝑦𝑝𝑒 𝐵 𝐹𝑖𝑙𝑡𝑒𝑟 (300 ℎ𝑜𝑢𝑟𝑠)
𝐹𝑖𝑙𝑡𝑒𝑟 𝐶𝑜𝑠𝑡 = 𝑃120
𝑃4.80
𝐼𝑛𝑖𝑡𝑖𝑎𝑙 𝐶𝑜𝑠𝑡 𝑜𝑓 𝑂𝑖𝑙 = ∙ 80𝑙𝑖𝑡𝑒𝑟𝑠 = 𝑃384
𝑙𝑖𝑡𝑒𝑟
𝑃4.80 10𝑙𝑖𝑡𝑒𝑟𝑠
𝐶𝑜𝑠𝑡 𝑜𝑓 𝐴𝑑𝑑𝑖𝑡𝑖𝑜𝑛𝑎𝑙 𝑂𝑖𝑙 𝑒𝑣𝑒𝑟𝑦 150 ℎ𝑜𝑢𝑟𝑠 = ∙ ∙ 1𝑡𝑖𝑚𝑒 = 𝑃48
𝑙𝑖𝑡𝑒𝑟 𝑡𝑖𝑚𝑒
∗∗ 𝑜𝑛𝑐𝑒 𝑏𝑒𝑡𝑤𝑒𝑒𝑛 𝑓𝑖𝑙𝑡𝑒𝑟 𝑐ℎ𝑎𝑛𝑔𝑒𝑠
𝑇𝑜𝑡𝑎𝑙 𝐶𝑜𝑠𝑡 𝑓𝑜𝑟 300 ℎ𝑜𝑢𝑟𝑠 𝑜𝑝𝑒𝑟𝑎𝑡𝑖𝑜𝑛 = 𝑃120 + 𝑃384 + 𝑃48 = 𝑃552

𝑃552
𝐶𝑜𝑠𝑡 𝑝𝑒𝑟 100 ℎ𝑜𝑢𝑟𝑠 𝑜𝑝𝑒𝑟𝑎𝑡𝑖𝑜𝑛 = = 𝑷𝒉𝒑 𝟏𝟖𝟒
3

𝑻𝒚𝒑𝒆 𝑨 𝑭𝒊𝒍𝒕𝒆𝒓 𝒔𝒉𝒐𝒖𝒍𝒅 𝒃𝒆 𝒓𝒆𝒄𝒐𝒎𝒎𝒆𝒏𝒅𝒆𝒅.

Selection of Method
The making of rivets holes in structural
steel members can be done by two methods.
The first method consists of laying out the
position of the holes in the members and
using a drill press costing P30,000. The
machinist is paid P35 per hour and he can
drill 30 holes per hour. The second method
makes use of a multiple-punch machine
costing P27,500. the punch operator is paid
P30 an hour and he can punch out 4 holes
every minute. This method also requires an
expense of P1.75 per hole to set the
machine.
Selection of Method
A. If all other costs are assumed equal,
what is the total cost for each machine
for 6,000 holes, assuming the total cost
of each machine to be charged to
these holes?

B. For how many holes will the costs

be equal?
Selection of Method
𝐴. 𝐷𝑟𝑖𝑙𝑙 𝑃𝑟𝑒𝑠𝑠:
𝐶𝑜𝑠𝑡 𝑜𝑓 𝑚𝑎𝑐ℎ𝑖𝑛𝑒 = 𝑃30,000
𝑃35 ℎ𝑟
𝑊𝑎𝑔𝑒 = ∙ ∙ 6,000ℎ𝑜𝑙𝑒𝑠 = 𝑃7,000
ℎ𝑟 30ℎ𝑜𝑙𝑒𝑠
𝑻𝒐𝒕𝒂𝒍 = 𝑷𝒉𝒑 𝟑𝟕, 𝟎𝟎𝟎

𝑀𝑢𝑙𝑡𝑖𝑝𝑙𝑒 𝑃𝑢𝑛𝑐ℎ 𝑀𝑎𝑐ℎ𝑖𝑛𝑒:

𝐶𝑜𝑠𝑡 𝑜𝑓 𝑚𝑎𝑐ℎ𝑖𝑛𝑒 = 𝑃27,500
𝑃30 𝑚𝑖𝑛 ℎ𝑟
𝑊𝑎𝑔𝑒 = ∙ ∙ ∙ 6,000ℎ𝑜𝑙𝑒𝑠 = 𝑃750
ℎ𝑟 4ℎ𝑜𝑙𝑒𝑠 60𝑚𝑖𝑛𝑠
𝑃1.75
𝑆𝑒𝑡𝑢𝑝 𝐶𝑜𝑠𝑡 = ∙ 6,000ℎ𝑜𝑙𝑒𝑠 = 𝑃10,500
ℎ𝑜𝑙𝑒
𝑻𝒐𝒕𝒂𝒍 = 𝑷𝒉𝒑 𝟑𝟖, 𝟕𝟓𝟎
Selection of Method
𝐵. 𝐷𝑟𝑖𝑙𝑙 𝑃𝑟𝑒𝑠𝑠:
𝐶𝑜𝑠𝑡 𝑜𝑓 𝑚𝑎𝑐ℎ𝑖𝑛𝑒 = 𝑃30,000
𝑃35 ℎ𝑟 7
𝑊𝑎𝑔𝑒 = ∙ ∙ 𝑋 ℎ𝑜𝑙𝑒𝑠 = 𝑋
ℎ𝑟 30ℎ𝑜𝑙𝑒𝑠 6
𝟕
𝑻𝒐𝒕𝒂𝒍 = 𝟑𝟎, 𝟎𝟎𝟎 + 𝑿
𝟔

𝑀𝑢𝑙𝑡𝑖𝑝𝑙𝑒 𝑃𝑢𝑛𝑐ℎ 𝑀𝑎𝑐ℎ𝑖𝑛𝑒:

𝐶𝑜𝑠𝑡 𝑜𝑓 𝑚𝑎𝑐ℎ𝑖𝑛𝑒 = 𝑃27,500
𝑃30 𝑚𝑖𝑛 ℎ𝑟 1
𝑊𝑎𝑔𝑒 = ∙ ∙ ∙ 𝑋 ℎ𝑜𝑙𝑒𝑠 = 𝑋
ℎ𝑟 4ℎ𝑜𝑙𝑒𝑠 60𝑚𝑖𝑛𝑠 8
𝑃1.75
𝑆𝑒𝑡𝑢𝑝 𝐶𝑜𝑠𝑡 = ∙ 𝑋 ℎ𝑜𝑙𝑒𝑠 = 1.75 𝑋
ℎ𝑜𝑙𝑒
𝟏𝟓
𝑻𝒐𝒕𝒂𝒍 = 𝟐𝟕, 𝟓𝟎𝟎 + 𝑿
𝟖
Selection of Method
7 15
30,000 + 𝑋 = 27,500 + 𝑋
6 8
15 7
𝑋 − 𝑋 = 30,000 − 27,500
8 6
17
𝑋 = 2,500
24
2,500
𝑥= = 𝟑, 𝟓𝟐𝟗. 𝟒𝟏~𝟑, 𝟓𝟑𝟎 𝒉𝒐𝒍𝒆𝒔
17/24
Selection of Method
A certain manufacturing company received an order
for producing 100,000 pieces of a certain machine part.
A jig is necessary for production and two designs are
presented whose properties are as follows:
Jig A Jig B
Estimated Life 100,000 pcs 100,000 pcs
First cost P 5,000 P 4,200
Hourly wage of operator P 30.00 P 25.00
Number of pieces 100 80
produced per hour

If the only consideration is economy of operation,

determine which jig should be used.
Selection of Method
𝐽𝑖𝑔 𝐴:
𝐶𝑜𝑠𝑡 𝑜𝑓 𝐽𝑖𝑔 = 𝑃5,000
𝑃30 ℎ𝑟
𝐿𝑎𝑏𝑜𝑟 𝐶𝑜𝑠𝑡 = ∙ ∙ 100,000𝑝𝑐𝑠 = 𝑃30,000
ℎ𝑟 100𝑝𝑐𝑠
𝑇𝑜𝑡𝑎𝑙 = 𝑃5,000 + 𝑃30,000 = 𝑷𝒉𝒑 𝟑𝟓, 𝟎𝟎𝟎

𝐽𝑖𝑔 𝐵:
𝐶𝑜𝑠𝑡 𝑜𝑓 𝐽𝑖𝑔 = 𝑃4,200
𝑃25 ℎ𝑟
𝐿𝑎𝑏𝑜𝑟 𝐶𝑜𝑠𝑡 = ∙ ∙ 100,000𝑝𝑐𝑠 = 𝑃31,250
ℎ𝑟 80𝑝𝑐𝑠
𝑇𝑜𝑡𝑎𝑙 = 𝑃4,200 + 𝑃31,250 = 𝑷𝒉𝒑 𝟑𝟓, 𝟒𝟓𝟎

𝑱𝒊𝒈 𝑨 𝒊𝒔 𝒄𝒉𝒆𝒂𝒑𝒆𝒓 𝒃𝒚 𝑷𝒉𝒑 𝟒𝟓𝟎 𝒂𝒏𝒅 𝒔𝒉𝒐𝒖𝒍𝒅 𝒃𝒆 𝒖𝒔𝒆𝒅.

Selection of Design
A company manufactures 1,000,000
units of a product yearly. A new design of
the product will reduce materials cost by
12%, but will increase processing cost by
2%. If materials cost is P1.20 per unit
and processing will cost P0.40 per unit,
how much can the company afford to pay
for the preparation of the new design and
making changes in equipment?
Selection of Design
𝑇ℎ𝑒 𝑚𝑎𝑥𝑖𝑚𝑢𝑚 𝑎𝑚𝑜𝑢𝑛𝑡 𝑡ℎ𝑒 𝑐𝑜𝑚𝑝𝑎𝑛𝑦 𝑠ℎ𝑜𝑢𝑙𝑑 𝑠𝑝𝑒𝑛𝑑 𝑠ℎ𝑜𝑢𝑙𝑑 𝑛𝑜𝑡 𝑒𝑥𝑐𝑒𝑒𝑑
𝑡ℎ𝑒 𝑠𝑎𝑣𝑖𝑛𝑔𝑠 𝑡ℎ𝑒𝑦 𝑤𝑖𝑙𝑙 𝑚𝑎𝑘𝑒 𝑜𝑛 𝑡ℎ𝑒 𝑛𝑒𝑤 𝑑𝑒𝑠𝑖𝑔𝑛.

𝑃1.20
𝑀𝑎𝑡𝑒𝑟𝑖𝑎𝑙𝑠 𝑐𝑜𝑠𝑡 = ∙ 1,000,000𝑢𝑛𝑖𝑡𝑠 = 𝑃1,200,000
𝑢𝑛𝑖𝑡
𝑃0.40
𝑃𝑟𝑜𝑐𝑒𝑠𝑠𝑖𝑛𝑔 𝑐𝑜𝑠𝑡 = ∙ 1,000,000𝑢𝑛𝑖𝑡𝑠 = 𝑃400,000
𝑢𝑛𝑖𝑡
𝑁𝑒𝑡 𝑠𝑎𝑣𝑖𝑛𝑔𝑠 = 𝑑𝑒𝑐𝑟𝑒𝑎𝑠𝑒 𝑖𝑛 𝑚𝑎𝑡𝑒𝑟𝑖𝑎𝑙𝑠 𝑐𝑜𝑠𝑡 − 𝑖𝑛𝑐𝑟𝑒𝑎𝑠𝑒 𝑖𝑛 𝑝𝑟𝑜𝑐𝑒𝑠𝑠𝑖𝑛𝑔 𝑐𝑜𝑠𝑡
𝑁𝑒𝑡 𝑠𝑎𝑣𝑖𝑛𝑔𝑠 = 12% 𝑚𝑎𝑡𝑒𝑟𝑖𝑎𝑙𝑠 𝑐𝑜𝑠𝑡 − 2% 𝑝𝑟𝑜𝑐𝑒𝑠𝑠𝑖𝑛𝑔 𝑐𝑜𝑠𝑡
𝑁𝑒𝑡 𝑠𝑎𝑣𝑖𝑛𝑔𝑠 = 0.12 𝑃1,200,000 − 0.02 𝑃400,000
𝑵𝒆𝒕 𝒔𝒂𝒗𝒊𝒏𝒈𝒔 = 𝑷𝒉𝒑 𝟏𝟑𝟔, 𝟎𝟎𝟎
Site Selection
A certain masonry dam requires
200,000 cu.m. of gravel for its
construction. The contractor found two
possible sources for the gravel with the
following data:
Site Selection
Which of the two sites will give
lesser cost?
Source A Source B
Average distance, gravel pit to 3.0 km 1.2 km
dam site
Gravel cost/cu.m. at pit --------- P10.00
Purchase price of pit P800,000 ---------
Road construction necessary P450,000 None
Overburden be removed at --------- 90,000
P4.20/cu.m. cu.m.
Hauling cost per cu.m. per km P4.00 P4.00
Site Selection
𝑆𝑜𝑢𝑟𝑐𝑒 𝐴:
𝑃𝑢𝑟𝑐ℎ𝑎𝑠𝑒 𝑝𝑟𝑖𝑐𝑒 𝑜𝑓 𝑝𝑖𝑡 = 𝑃800,000
𝑅𝑜𝑎𝑑 𝑐𝑜𝑛𝑠𝑡𝑟𝑢𝑐𝑡𝑖𝑜𝑛 = 𝑃450,000
𝑃4/𝑚3
𝐻𝑎𝑢𝑙𝑖𝑛𝑔 𝐶𝑜𝑠𝑡 = ∙ 3𝑘𝑚 ∙ 200,000𝑚3 = 𝑃2,400,000
𝑘𝑚
𝑇𝑜𝑡𝑎𝑙 = 𝑃800,000 + 𝑃450,000 + 𝑃2,400,000 = 𝑷𝒉𝒑 𝟑, 𝟔𝟓𝟎, 𝟎𝟎𝟎

𝑆𝑜𝑢𝑟𝑐𝑒 𝐵:
𝑃10
𝐺𝑟𝑎𝑣𝑒𝑙 𝐶𝑜𝑠𝑡 𝑎𝑡 𝑝𝑖𝑡 = 3 ∙ 200,000𝑚3 = 𝑃2,000,000
𝑚
𝑃4.2
𝑂𝑣𝑒𝑟𝑏𝑢𝑟𝑑𝑒𝑛 𝑅𝑒𝑚𝑜𝑣𝑎𝑙 𝐶𝑜𝑠𝑡 = 3 ∙ 90,000𝑚3 = 𝑃378,000
𝑚
𝑃4/𝑚 3
𝐻𝑎𝑢𝑙𝑖𝑛𝑔 𝐶𝑜𝑠𝑡 = ∙ 1.2𝑘𝑚 ∙ 200,000𝑚3 = 𝑃960,000
𝑘𝑚
𝑇𝑜𝑡𝑎𝑙 = 𝑃2,000,000 + 𝑃378,000 + 𝑃960,000 = 𝑷𝒉𝒑 𝟑, 𝟑𝟑𝟖, 𝟎𝟎𝟎

𝑺𝒐𝒖𝒓𝒄𝒆 𝑩 𝒊𝒔 𝒄𝒉𝒆𝒂𝒑𝒆𝒓 𝒃𝒚 𝑷𝒉𝒑 𝟑𝟏𝟐, 𝟎𝟎𝟎.

Comparison of Proficiency of Workers

Two workers, A and B, produce the

same product on identical machines. A
receives P25.00 per hour and he produces
100 units per hour. B is able to produce
120 units per hour. The machine rate or
cost of operation of the machines used by
them is P100.00 per hour.
A. Determine the cost per piece for
worker A.
B. Determine the hourly wage of worker
B in order that his cost per piece will
equal that of A.
Comparison of Proficiency of Workers

𝐴. 𝑊𝑜𝑟𝑘𝑒𝑟 𝐴:
𝑃25
𝑊𝑎𝑔𝑒 =
ℎ𝑟
𝑃100
𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑜𝑛 𝐶𝑜𝑠𝑡 =
ℎ𝑟
𝑃25 𝑃100 ℎ𝑟
𝐶𝑜𝑠𝑡 𝑝𝑒𝑟 𝑝𝑖𝑒𝑐𝑒 𝑜𝑓 𝑊𝑜𝑟𝑘𝑒𝑟 𝐴 = + = 𝑷𝟏. 𝟐𝟓/𝒑𝒄
ℎ𝑟 ℎ𝑟 100𝑝𝑐𝑠

𝐵. 𝑊𝑜𝑟𝑘𝑒𝑟 𝐵:
𝑋
𝑊𝑎𝑔𝑒 =
ℎ𝑟
𝑃100
𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑜𝑛 𝐶𝑜𝑠𝑡 =
ℎ𝑟
𝑋 𝑃100 ℎ𝑟 𝑿 + 𝑷𝟏𝟎𝟎
𝐶𝑜𝑠𝑡 𝑝𝑒𝑟 𝑝𝑖𝑒𝑐𝑒 𝑜𝑓 𝑊𝑜𝑟𝑘𝑒𝑟 𝐵 = + = /𝒑𝒄
ℎ𝑟 ℎ𝑟 120𝑝𝑐𝑠 𝟏𝟐𝟎

𝑿 + 𝑷𝟏𝟎𝟎
𝐵. = 𝑷𝟏. 𝟐𝟓
𝟏𝟐𝟎
𝑿 = 𝑷𝟏. 𝟐𝟓 𝟏𝟐 − 𝑷𝟏𝟎𝟎 = 𝑷𝒉𝒑 𝟓𝟎/𝒉𝒓
Comparison of Proficiency of Workers

Two workers, A and B, each produce

200 pieces of a product per hour. Because
of defects, 2% of the pieces produced by B
are rejected. These defective pieces are
repaired at a unit cost of P0.60 per piece.
The cost of materials per piece is P2.50.
A. If each worker is paid P20.00 per hour,
determine the cost per acceptable piece.
B. How much should A receive per hour in
order that his cost per acceptable piece
will equal that of B?
Comparison of Proficiency of Workers
𝐴. 𝑊𝑜𝑟𝑘𝑒𝑟 𝐴:
𝑃2.50
𝑀𝑎𝑡𝑒𝑟𝑖𝑎𝑙 𝐶𝑜𝑠𝑡 = ∙ 200𝑝𝑐𝑠 = 𝑃500
𝑝𝑐
𝑊𝑎𝑔𝑒 = 𝑃20
𝑇𝑜𝑡𝑎𝑙 = 𝑃500 + 𝑃20 = 𝑃520
𝑃520
𝐶𝑜𝑠𝑡 𝑝𝑒𝑟 𝑎𝑐𝑐𝑒𝑝𝑡𝑎𝑏𝑙𝑒 𝑝𝑖𝑒𝑐𝑒 = = 𝑷𝟐. 𝟔𝟎
200𝑝𝑐𝑠

𝑊𝑜𝑟𝑘𝑒𝑟 𝐵:
𝑃2.50
𝑀𝑎𝑡𝑒𝑟𝑖𝑎𝑙 𝐶𝑜𝑠𝑡 = ∙ 200𝑝𝑐𝑠 = 𝑃500
𝑝𝑐
𝑊𝑎𝑔𝑒 = 𝑃20
𝑃0.60
𝑅𝑒𝑝𝑎𝑖𝑟 𝐶𝑜𝑠𝑡 = ∙ 0.02(200𝑝𝑐𝑠) = 𝑃2.40
𝑝𝑐
𝑇𝑜𝑡𝑎𝑙 = 𝑃500 + 𝑃20 + 𝑃2.40 = 𝑃522.40
𝑃522.40
𝐶𝑜𝑠𝑡 𝑝𝑒𝑟 𝑎𝑐𝑐𝑒𝑝𝑡𝑎𝑏𝑙𝑒 𝑝𝑖𝑒𝑐𝑒 = = 𝑷𝟐. 𝟔𝟔𝟓𝟑
196𝑝𝑐𝑠
𝑋 + 50
𝐵. = 2.6653
200
𝑋 = 2.6653 200 − 500 = 𝑷𝟑𝟑. 𝟎𝟔
Economy of Tool and Equipment Maintenance

A machine used for cutting

materials in a factory has the following
outputs per hour at various speeds and
requires periodic tool regrinding at the
intervals cited.
Speed Output per Hour Tool Regrinding
A 200 pcs Every 8 hours
B 250 pcs Every 7 hours
C 280 pcs Every 5 hours
Economy of Tool and Equipment Maintenance

𝑆𝑝𝑒𝑒𝑑 𝐴 (200 𝑝𝑐𝑠 𝑝𝑒𝑟 ℎ𝑟, 𝑒𝑣𝑒𝑟𝑦 8 ℎ𝑟𝑠):

𝑃1,800
𝑇𝑜𝑜𝑙 𝐶𝑜𝑠𝑡 = = 𝑃90
20
𝑅𝑒𝑔𝑟𝑖𝑛𝑑𝑖𝑛𝑔 𝐶𝑜𝑠𝑡 = 𝑃18
𝑃28
𝑊𝑎𝑔𝑒 𝑜𝑓 𝑀𝑎𝑐ℎ𝑖𝑛𝑒 𝑂𝑝𝑒𝑟𝑎𝑡𝑜𝑟 = ∙ 9ℎ𝑟𝑠 = 𝑃252
ℎ𝑟
𝑃25
𝑊𝑎𝑔𝑒 𝑜𝑓 𝑇𝑜𝑜𝑙 𝐺𝑟𝑖𝑛𝑑𝑒𝑟 = ∙ 1ℎ𝑟 = 𝑃25
ℎ𝑟
𝑃54
𝑀𝑎𝑐ℎ𝑖𝑛𝑒 𝐶𝑜𝑠𝑡 = ∙ 8ℎ𝑟𝑠 = 𝑃432
ℎ𝑟
𝑇𝑜𝑡𝑎𝑙 = 𝑃817
𝑃817 ℎ𝑟
𝐶𝑜𝑠𝑡 𝑝𝑒𝑟 𝑝𝑖𝑒𝑐𝑒 = ∙ = 𝑷𝟎. 𝟓𝟏𝟎𝟔
8ℎ𝑟𝑠 200𝑝𝑐𝑠
Economy of Tool and Equipment Maintenance

𝑆𝑝𝑒𝑒𝑑 𝐵 (250 𝑝𝑐𝑠 𝑝𝑒𝑟 ℎ𝑟, 𝑒𝑣𝑒𝑟𝑦 7 ℎ𝑟𝑠):

𝑃1,800
𝑇𝑜𝑜𝑙 𝐶𝑜𝑠𝑡 = = 𝑃90
20
𝑅𝑒𝑔𝑟𝑖𝑛𝑑𝑖𝑛𝑔 𝐶𝑜𝑠𝑡 = 𝑃18
𝑃28
𝑊𝑎𝑔𝑒 𝑜𝑓 𝑀𝑎𝑐ℎ𝑖𝑛𝑒 𝑂𝑝𝑒𝑟𝑎𝑡𝑜𝑟 = ∙ 8ℎ𝑟𝑠 = 𝑃224
ℎ𝑟
𝑃25
𝑊𝑎𝑔𝑒 𝑜𝑓 𝑇𝑜𝑜𝑙 𝐺𝑟𝑖𝑛𝑑𝑒𝑟 = ∙ 1ℎ𝑟 = 𝑃25
ℎ𝑟
𝑃54
𝑀𝑎𝑐ℎ𝑖𝑛𝑒 𝐶𝑜𝑠𝑡 = ∙ 7ℎ𝑟𝑠 = 𝑃378
ℎ𝑟
𝑇𝑜𝑡𝑎𝑙 = 𝑃735
𝑃735 ℎ𝑟
𝐶𝑜𝑠𝑡 𝑝𝑒𝑟 𝑝𝑖𝑒𝑐𝑒 = ∙ = 𝑷𝟎. 𝟒𝟐
7ℎ𝑟𝑠 250𝑝𝑐𝑠
Economy of Tool and Equipment Maintenance

𝑆𝑝𝑒𝑒𝑑 𝐶 (280 𝑝𝑐𝑠 𝑝𝑒𝑟 ℎ𝑟, 𝑒𝑣𝑒𝑟𝑦 5 ℎ𝑟𝑠):

𝑃1,800
𝑇𝑜𝑜𝑙 𝐶𝑜𝑠𝑡 = = 𝑃90
20
𝑅𝑒𝑔𝑟𝑖𝑛𝑑𝑖𝑛𝑔 𝐶𝑜𝑠𝑡 = 𝑃18
𝑃28
𝑊𝑎𝑔𝑒 𝑜𝑓 𝑀𝑎𝑐ℎ𝑖𝑛𝑒 𝑂𝑝𝑒𝑟𝑎𝑡𝑜𝑟 = ∙ 6ℎ𝑟𝑠 = 𝑃168
ℎ𝑟
𝑃25
𝑊𝑎𝑔𝑒 𝑜𝑓 𝑇𝑜𝑜𝑙 𝐺𝑟𝑖𝑛𝑑𝑒𝑟 = ∙ 1ℎ𝑟 = 𝑃25
ℎ𝑟
𝑃54
𝑀𝑎𝑐ℎ𝑖𝑛𝑒 𝐶𝑜𝑠𝑡 = ∙ 5ℎ𝑟𝑠 = 𝑃270
ℎ𝑟
𝑇𝑜𝑡𝑎𝑙 = 𝑃571
𝑃571 ℎ𝑟
𝐶𝑜𝑠𝑡 𝑝𝑒𝑟 𝑝𝑖𝑒𝑐𝑒 = ∙ = 𝑷𝟎. 𝟒𝟎𝟕𝟗
5ℎ𝑟𝑠 280𝑝𝑐𝑠

𝑺𝒑𝒆𝒆𝒅 𝑪 𝒊𝒔 𝒕𝒉𝒆 𝒎𝒐𝒔𝒕 𝒆𝒄𝒐𝒏𝒐𝒎𝒊𝒄𝒂𝒍.

Economy in the Utilization of Personnel

An electrical contractor has a job

which should be completed in 100
days. At present, he has 80 men on the
job and it is estimated that they will
finish the work in 130 days. If of the 80
men, 50 are paid P120 a day, 25 at
P180 a day, and 5 at P250 a day and if
for each day beyond the original 100
days, the contractor has to pay P500
liquidated damages:
Economy in the Utilization of Personnel

A. how many more men should the

contractor add so he can complete the
work on time?

B. If the additional men of 2 are paid

P180 a day and the rest at P120 a day,
would the contractor save money by
employing more men and not paying
the fine?
Economy in the Utilization of Personnel

𝐴. 𝐸𝑞𝑢𝑎𝑡𝑖𝑛𝑔 𝑚𝑎𝑛 − 𝑑𝑎𝑦𝑠:

𝑋 + 80 100 = 80 130
100𝑋 + 8000 = 10400
10400 − 8000
𝑋= = 𝟐𝟒 𝒎𝒆𝒏
100
𝐵. 104 𝑚𝑒𝑛 𝑜𝑛 𝑡ℎ𝑒 𝑗𝑜𝑏, 100 𝑑𝑎𝑦𝑠:
𝑃120 𝑃180
𝑊𝑎𝑔𝑒𝑠 = 72𝑚𝑒𝑛 ∙ 100𝑑𝑎𝑦𝑠 ∙ 𝑚𝑎𝑛 + 27𝑚𝑒𝑛 ∙ 100𝑑𝑎𝑦𝑠 ∙ 𝑚𝑎𝑛
𝑑𝑎𝑦 𝑑𝑎𝑦
𝑃250
+5𝑚𝑒𝑛 ∙ 100𝑑𝑎𝑦𝑠 ∙ 𝑚𝑎𝑛 = 𝑷𝒉𝒑 𝟏, 𝟒𝟕𝟓, 𝟎𝟎𝟎
𝑑𝑎𝑦
Economy in the Utilization of Personnel

𝐵. 80 𝑚𝑒𝑛 𝑜𝑛 𝑡ℎ𝑒 𝑗𝑜𝑏, 130𝑑𝑎𝑦𝑠:

𝑃120 𝑃180
𝑊𝑎𝑔𝑒𝑠 = 50𝑚𝑒𝑛 ∙ 130𝑑𝑎𝑦𝑠 ∙ 𝑚𝑎𝑛 + 25𝑚𝑒𝑛 ∙ 130𝑑𝑎𝑦𝑠 ∙ 𝑚𝑎𝑛
𝑑𝑎𝑦 𝑑𝑎𝑦
𝑃250
+5𝑚𝑒𝑛 ∙ 130𝑑𝑎𝑦𝑠 ∙ 𝑚𝑎𝑛 = 𝑃1,527,500
𝑑𝑎𝑦
𝑃500
𝐿𝑖𝑞𝑢𝑖𝑑𝑎𝑡𝑒𝑑 𝑑𝑎𝑚𝑎𝑔𝑒𝑠 = ∙ 30𝑑𝑎𝑦𝑠 = 𝑃15,000
𝑑𝑎𝑦
𝑇𝑜𝑡𝑎𝑙 = 𝑷𝒉𝒑 𝟏, 𝟓𝟒𝟐, 𝟓𝟎𝟎

𝑻𝒉𝒆 𝒄𝒐𝒏𝒕𝒓𝒂𝒄𝒕𝒐𝒓 𝒘𝒊𝒍𝒍 𝒔𝒂𝒗𝒆 𝑷𝒉𝒑 𝟔𝟕, 𝟓𝟎𝟎 𝒃𝒚 𝒆𝒎𝒑𝒍𝒐𝒚𝒊𝒏𝒈 𝒂𝒅𝒅𝒊𝒕𝒊𝒐𝒏𝒂𝒍 𝒎𝒆𝒏.
Economy in the Utilization of Personnel

A man decided to paint his house

himself after office hours. He can paint
25 sq.m. per hour on average. It takes
him 15 minutes to prepare his
materials and 20 minutes to keep the
materials after painting. If there are
900 sq.m. to be painted, how long will
it take him to paint his house if he
devotes 2.5 hours each day?
Economy in the Utilization of Personnel

900𝑚2
𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 ℎ𝑜𝑢𝑟𝑠 𝑟𝑒𝑞𝑢𝑖𝑟𝑒𝑑 = 2
= 36ℎ𝑟𝑠
25𝑚 /ℎ𝑟

2.5ℎ𝑟𝑠 15𝑚𝑖𝑛 + 20𝑚𝑖𝑛 ℎ𝑟 1.9167ℎ𝑟𝑠

𝐴𝑐𝑡𝑢𝑎𝑙 𝑝𝑎𝑖𝑛𝑡𝑖𝑛𝑔 𝑡𝑖𝑚𝑒 = − ∙ =
𝑑𝑎𝑦 𝑑𝑎𝑦 60𝑚𝑖𝑛𝑠 𝑑𝑎𝑦

𝑑𝑎𝑦
𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑑𝑎𝑦𝑠 = 36ℎ𝑟𝑠 ∙ = 𝟏𝟖. 𝟕𝟖~𝟏𝟗 𝒅𝒂𝒚𝒔
1.9167ℎ𝑟𝑠
References
Blank, L. & Tarquin, A. (2018). Engineering
Economy (8th Ed.). McGraw-Hill Education.
Sullivan, W., Wicks, E. & Koelling, C. P.
(2014). Engineering Economy (16th Ed.).
Pearson Education South Asia Pte Ltd.
Sta. Maria, H. (2000). Engineering Economy
(3rd Ed.). National Book Store.
Arreola, M. (1993). Engineering Economy
(3rd Ed.). Ken Incorporated.