ENGINEERING ECONOMY

Quiz #2 - Present Economy

Name: _____________________________ Score: ____

Class Schedule: ____________________

Due Date: On or before 4pm of January 12, 2015

Solve the following problems. (Show all your solutions
and round off your final answer into two decimal places.
For #1 & #2, 25 points each and for #3, 50 points)

1. A manufacturer makes 7,900,000 memory chips

per year. Each chip takes 0.4 minutes of direct
labor at the rate of $8 per hour. The overhead
costs are estimated at $11 per direct labor hour.
A new process will reduce the unit production
time by 0.01 minutes. If the overhead cost will
be reduced by $5.50 for each hour by which
total direct hours are reduced, what is the
maximum amount you will pay for the new
process? Assume that the new process must
pay for itself by the end of the first year.

2. The quarrying cost of marble and granite blocks

plus deliver cost to the proessing plant for each
is P20,400 per cubic meter, Processing cost of
marble into tiles is P2,000 per sq.m, and that of
granite into tiles is P6,000 per sq.m.
If marble has a net yield of 40 sq.m of
tiles per cu.m. of block and sells at P4,000 per
sq.m, and granite gives a net yield of 50 sq.m.
of tiles per cu.m of block and sells P10,000 per
sq.m., determine the more profitable material
considering all other costs to be the same, and
by how much?

3. A building contractor is faced with the problem of possibly paying liquidated damaged of P20,000 per day for the
delay in the completion of his work in accordance with the contract. The facts are as follows:
(a) Number of delays left on the contract = 30 days.
(b) At present the working force is:
40 skilled workers with a daily wage of P400.00 each
20 unskilled workers with a daily wage of P320.00 each
(c) The daily wage is based on an 8-hour days work
(d) If he maintains the present number of men he will finish the work in 50 days
(e) Overtime rate is 25% more than the regular rate.
Analyze the following cases:
Case 1: If he allows the present working force to work overtime of 2 hours a day, in how many days will he finish the
work? How much savings are his saving or loss?
Case 2: If the contractor puts additional men maintaining the ratio of two skilled workers to one unskilled worker in order to
finish the work on time, how many will he add? Consider no overtime work?
Case 3: Should the contractor allow overtime work of two hours a day, how many men will he add in order to finish the
work on time? How much will he save or loss?