JAVIER, KENNETH P.

- GC22
Department of Civil Engineering
Ateneo de Naga University

PROBLEM SET 1 - Application of the Engineering Economic Analysis Procedure

1-1: Stan Moneymaker needs 15 gallons of gasoline to top off his automobile’s gas tank. If he

drives an extra eight miles (round trip) to a gas station on the outskirts of town, Stan can save $0.10

per gallon on the price of gasoline. Suppose gasoline costs $3.90 per gallon and Stan’s car gets 25 mpg

for in-town driving. Should Stan make the trip to get less expensive gasoline? Each mile that Stan

drives creates one pound of carbon dioxide. Each pound of CO2 has a cost impact of $0.02 on the

environment. What other factors (cost and otherwise) should Stan consider in his decision making?

Solutions:

The gas required in the car is 15 gallons. The price of gas in-town is $3.90 per gallon. If the person

drives extra 8 miles, he can save $0.10 per gallon, therefore the cost of gas there is $3.80 per gallon. The

mileage of the car is 25 mpg in town. Each mile drive creates one pound of carbon dioxide which cost

$0.02 on environment

2 ALTERNATIVES:

1.) to obtain gas near the house (in the town)

2.) to obtain gas on the outskirt of the town.

ALTERNATIVE 1:

Savings, If he buy the gas at the outskirts of the town;

𝑆𝑎𝑣𝑖𝑛𝑔𝑠 = (15 𝑔𝑎𝑙 𝑥$0.10 𝑔𝑎𝑙 ) − (8 𝑚𝑖𝑙𝑒𝑠 𝑥 $0.02/𝑚𝑖𝑙𝑒) = $1.34

Per mile, the savings will be:

𝑆𝑎𝑣𝑖𝑛𝑔𝑠 𝑝𝑒𝑟 𝑚𝑖𝑙𝑒 =

$1.34 8 𝑚𝑖𝑙𝑒

= $0.1675/𝑚𝑖𝑙𝑒

ALTERNATIVE 2: Buy the gas in-town.

The mileage of the car is 25 miles per gallon, which means that each gallon will be able to let him

travel up to 25 miles. Thus the 8 miles driving will need amount of gasoline of:

𝐴𝑚𝑜𝑢𝑛𝑡 𝑜𝑓 𝑔𝑎𝑠 𝑓𝑜𝑟 8 𝑚𝑖𝑙𝑒𝑠 𝑑𝑟𝑖𝑣𝑖𝑛𝑔 𝑖𝑛 𝑡𝑜𝑤𝑛 = (8 𝑚𝑖𝑙𝑒𝑠 25 𝑚𝑖𝑙𝑒𝑠/𝑔𝑎𝑙) = 0.32 𝑔𝑎𝑙
JAVIER, KENNETH P. - GC22
Department of Civil Engineering
Ateneo de Naga University

PROBLEM SET 1 - Application of the Engineering Economic Analysis Procedure

The savings using this method will be:

𝑆𝑎𝑣𝑖𝑛𝑔𝑠 = (0.32 𝑔𝑎𝑙 𝑥$3.9 𝑔𝑎𝑙 ) = $1.248

Conclusion: Yes, the person should take the trip to get less expensive gasoline because obtaining the

gasoline on the outskirt of the town gives him higher savings which is $1.34 than savings of obtaining

the gasoline in-town $1.248. The difference of savings from these two methods are:

𝑆𝑎𝑣𝑖𝑛𝑔𝑠 = $1.34 − $1.248 = $0.092

Thus he will get extra $0.092 savings when he take the trip to the outskirts of the town.