Javier, Kenneth - GC22

Department of Civil Engineering

Ateneo de Naga University
PROBLEM SET 3 COST ESTIMATION TECHNIQUES

Problem 1:
Estimate the cost of an oil change (5 quarts of oil) and a new oil filter for
your automobile at a local service station. It takes 20 minutes to do this job.
Compare your estimate with the actual cost of an oil change at the service
station. What percent markup is being made by the service station?

Service station: CBROS GENUINE AUTOPARTS & ACCESSORIES

Type/Brand of Automobile: MITSUBISHI ADVENTURE( MODEL 2012)
Type of fuel: Gasoline & Diesel (The price applies for both type of fuel)
Type of oil: Synthetic oil

GIVEN:

Estimated cost:
(Source of estimated cost: Mr. & Mrs. Obias)

Oil - ₱2000
Oil Filter - ₱600
Flushing - ₱150
Labor - ₱250

Total estimated cost for Oil change:

CT = 2000 + 600 + 250 + 150

𝐶𝑇 = 3000𝑃ℎ𝑝

GEAL201 ENGINEERING ECONOMICS

SY 2019-2020
Javier, Kenneth - GC22
Department of Civil Engineering
Ateneo de Naga University
Actual cost:

Oil - ₱2100
Oil Filter - ₱500
Flushing - ₱180
Labor - ₱250

Total actual cost for Oil change:

CT = 2100 + 500 + 250 + 180

𝐶𝑇 = 3030𝑃ℎ𝑝

Find Percent Markup:

Markup = Actual cost - Estimated cost

= 3030 − 3000
Markup = 30Php

 Markup 
Percent Markup =  
 Estimated cost 

 30 
Percent Markup =  (100%)
 3000 

Percent  Markup = 1%

GEAL201 ENGINEERING ECONOMICS

SY 2019-2020
Javier, Kenneth - GC22
Department of Civil Engineering
Ateneo de Naga University

Problem 2
A large electric utility company releases 62 million tons of greenhouse
gases (mostly carbon dioxide) into the environment each year. This
company has committed to spending 1.2 million USD in capital over the
next five years to reduce its annual emissions by 5%. More will be spent after
five years to reduce greenhouse gases further.

a. What is the implicit cost of a ton of greenhouse gas?

Given:

Annual emission of GHG - 62 million tons

Capital - 1.2 million / 5years
Reduction of 5% to the total emission for 5 years

Implicit cost =
(1.2million)
( Annual emission)(5 years)(5%)

Implicit cost =
(1.2million)
(62million tons)(5 years) 5% 
 100 

𝐼𝑚𝑝𝑙𝑖𝑐𝑖𝑡 𝑐𝑜𝑠𝑡 = 0.077𝑚𝑖𝑙𝑙𝑖𝑜𝑛/𝑡𝑜𝑛

Therefore, the electric utility company will spend an implicit cost of

0.077million per ton ≈＄77,000 per ton of greenhouse gases they
release.

b. If the US produces 3 billion tons of greenhouse gases per year, how

much capital must be spent to reduce total emissions by 3% over the next
five years based on your answer in Part (a)?

GIVEN:

GEAL201 ENGINEERING ECONOMICS

SY 2019-2020
Javier, Kenneth - GC22
Department of Civil Engineering
Ateneo de Naga University

Total emission per year = 3 billion tons

Implicit cost per ton = 0.077 million per tone
Duration = 5 years
Percent reduction= 3%

Find the capital:

Capital = (Implicit cost)(Total emission per year)(Number of years)(3%)

Capital = (0.077million)(3billion)(5years)(3%)

Capital = $34,650,000

Thus, the US will be needing ＄34,650,000 to reduce the total

emission of greenhouse gases by 3% in the next 5 years

c. If the Philippine government decided to account for GHG emissions by

the energy industry(limited to non-renewable power plants) for the
Philippines in the respective year of your group, how much should the
Department of Budget expect to spend?

Group 2 - 2017

Note:
MtCO2e = metric tons of carbon dioxide equivalent

GEAL201 ENGINEERING ECONOMICS

SY 2019-2020
Javier, Kenneth - GC22
Department of Civil Engineering
Ateneo de Naga University

GIVEN:

Total GHG Emission in year 2017 – 118.48 MtCO2e

Implicit cost = 0.077 million USD/ ton ≈ Php 3.910 million Php/ ton

GEAL201 ENGINEERING ECONOMICS

SY 2019-2020
Javier, Kenneth - GC22
Department of Civil Engineering
Ateneo de Naga University
Find the cost per year:
Annual cost(2017) = (3.910 million) (118.48 MtCO2e)

Annual cost(2017) = 463,256,800 million

Therefore, the Department of Budget should prepare

atleast ₱463,256,800 million compensate for 5 percent GHG
emission.

GEAL201 ENGINEERING ECONOMICS

SY 2019-2020