Tutorial 2

Engineering Economy
Chapter 3: Cost Estimation Techniques
Question 1
In 2002 Acme Chemical purchased a large pump for $112,000. Acme keys
their cost estimating for these pumps to the industrial pump index, with a
baseline of 100 established in 1992. The index in 2002 was 212. Acme is now
(2010) considering construction of a new addition and must estimate the
cost of the same type and size of pump. If the industrial pump index is
currently 286, what is the estimated cost of the new pump?
Question 2
Based on the following data, develop a weighted index for the price of a
gallon of gasoline in 2012, when 1994 is the reference year having an
index value of 89.4. The weight placed on regular unleaded gasoline is
three times that of either premium or unleaded plus, because roughly
three times as much regular unleaded is sold compared with premium or
unleaded plus.

Price (Cents/Gal) in Year

1994 2008 2012

Premium 116 242 317
Unleaded plus 105 232 307
Regular unleaded 95 223 287