GDB3023 ENGINEERING ECONOMICS AND

ENTREPRENEURSHIP
JANUARY 2021 SEMESTER
BENG(HONS) MECHANICAL ENGINEERING
ASSIGNMENT 1

GROUP MEMBERS:
SUZIANA ERA BINTI AH YIT @ SUAIP (25400)
EALDVIERIENA JAININ (25412)
REFLEEKA MILSA BINTI MASTAH (25395)
OLIVE UYANG DAVID NGAU (25392)
SUWAIBATUL ASLAMIAH BINTI MOHD AFANDI (25024)
 

 
 Suwaibatul Aslamiah binti Mohd Afandi 25024

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?

Answer(s):

Full tank : 15 gallons

Price in town : 3.90 $/ gallon
Price out town : 3.90 $/ gallon – 0.10 $/gallon = 3.80$/ gallon
Difference in distance travelled to gas station out town : extra 8 miles
Distance travelled per gallon : 25 miles/ gallon
C02 cost impact on environment : 0.02 $

Gas cost in town = price in town x full tank

= 3.90 $/gallon x 15 gallons
= 58.50 $

Extra gas required to travel out town

= distance travelled per gallon ÷ difference in distance travelled to gas station out town
= 8 miles ÷ 25 miles/gallon
= 0.32 gallons

Gas cost out town

= price out town x (full tank + extra gas required)
= 3.80 $/gallon x (15 gallons + 0.32 gallon)
= 58. 216 $
Carbon Print
= CO2 cost impact per mile x difference in distance
= 0.02 $/mile x 8 miles
= 0.16 $

Difference in gas cost in town to out town

= Gas cost in town – gas cost out town – carbon print
= 58.50 $ - 58.216 $ - 0.16 $
= 0.124 $

The cost for gasoline out town is lower than in town . Stan could save 0.124 $. However, this
number is not significant enough if he has to consider as follows:

1. time
2. car maintenance
3. tolls

Hence, Stan should not make the trip to outskirt town to get less price gasoline.
 OLIVE UYANG DAVID NGAU 25392

1-12 During your first month as an employee at Greenfield Industries (a large drill-bit
manufacturer), you are asked to evaluate alternatives for producing a newly designed drill bit on a
turning machine. Your boss’ memorandum to you has practically no information about what the
alternatives are and what criteria should be used. The same task was posed to a previous employee
who could not finish the analysis, but she has given you the following information: An old turning
machine valued at $350,000 exists (in the warehouse) that can be modified for the new drill bit.
The in-house technicians have given an estimate of $40,000 to modify this machine, and they
assure you that they will have the machine ready before the projected start date (although they
have never done any modifications of this type). It is hoped that the old turning machine will be
able to meet production requirements at full capacity. An outside company, McDonald Inc., made
the machine seven years ago and can easily do the same modifications for $60,000. The cooling
system used for this machine is not environmentally safe and would require some disposal costs.
McDonald Inc. has offered to build a new turning machine with more environmental safeguards
and higher capacity for a price of $450,000. McDonald Inc. has promised this machine before the
startup date and is willing to pay any late costs. Your company has $100,000 set aside for the start-
up of the new product line of drill bits. For this situation,

(a.) Define the problem.

(b.) List key assumptions.

(c.) List alternatives facing Greenfield Industries.

(d.) Select a criterion for evaluation of alternatives.

(e.) Introduce risk into this situation.

(f.) Discuss how nonmonetary considerations may impact the selection.

(g.) Describe how a postaudit could be performed.

Answer(s):

a) The turning machine available in the warehouse is not able to produce the newly designed
drill bit. Thus, the alternatives to make a new turning machine has to be evaluated.

b)
 An old turning machine is available in the warehouse that can be modified for the
new drill bit.
 The in-house technicians are able to modify the old turning machine.
 The old turning machine can be resell at $350,000.

c)
 Although the in-house technicians are inexperience in this type of modification,
they promise that they are able to modify the old turning machine and have it ready
before the start date at the price of $40,000.
 An outside company, McDonald Inc., made the machine seven years ago and can
easily do the same modifications for $60,000, although the cooling system used for
the machine is not environmental-friendly and would require some disposal cost.
 McDonald Inc. has suggested to build a new turning machine which is more
environmental-friendly and higher capacity for $450,000, and they promised that
they will be able to complete it before the start-up date and is willing to pay any
late costs.

d) A machine that is environmental-friendly.

e) Choosing a more environmental-friendly alternative will cost the company more money.
f)
 Environmental-friendly

By taking this into consideration, the company will have to go with the last
alternative, which is building a new machine. Though this may be better for the
environment, it will cost the company a whole lot more than modifying the old
turning machine. Plus, the price to build a new one is over the company’s initial
budget.

 Reliability

By taking the reliability of the staff, the company will have to work with McDonald
Inc. as they are more experienced in this type of modification and will probably get
it done by the start-up date.

g) A post audit can be performed by analysing the outcome of the company’s investment. For
an example, if Greenfield Industries choose to go with building a new turning machine, the
company should analyse the pros and cons of the outcome and if exceeding the company’s
initial budget worth it for a more environmental-friendly machine.
 Suziana Era Binti Ah Yit @ Suaip 25400

1-20. A deep-water oil rig has just collapsed into the Gulf of Mexico. Its blowout-preventer system
has failed, so thousands of barrels of crude oil each day are gushing into the ocean. List some
alternatives for stopping the unchecked flow of oil into the Gulf.

Answer(s):

a) To stop the main switch of the oil production by the deep-water oil rig sometimes.
 The switch of the main supply of the oil should be turned off for some specific
times in order to avoid the crude oil from continuously flowing into the ocean.
b) To apply the containment booms.
 The containment booms can be used in order to slow down the spread of oil in the
ocean as both containment and oil are floating on the surface of water.
c) To use the skimmers.
 Skimmers have the similar function with vacuum cleaner where these machines are
specifically designed to suck up the oil from the water surface thus, it could help to
reduce the amount of oil spill in the Gulf.
d) To apply dispersants.
 Dispersal agents are chemicals which can be sprayed upon the oil spill with the aid
of aircraft or boats in order to speed up the disintegration of oil and ease the process
of slick degradation by microbes.
e) To apply hot water and high-pressure washing.
 This procedure is able to dislodge the inaccessible oil by spraying the hot water into
the ocean as it will assist to force the oil to be flushed out of the ocean and can be
collected by using skimmers or sorbents.
 Ealdvieriena Jainin 25412

1-3 A typical discounted price of a AAA battery is $0.75. It is designed to provide 1.5 volts and
1.0 amps for about an hour. Now we multiply volts and amps to obtain power of 1.5 watts from
the battery. Thus, it costs $0.75 for 1.5 Watt-hours of energy. How much would it cost to deliver
one kilo Watt-hour? How does this compare with the cost of energy from your local electric
utility at $0.10 per kilo Watt-hour?

Answer(s):

Discounted price = $0.75 where V = 1.5V, A = 1.0A for an hour with P = 1.5W

For battery,

1.5Wh of energy costs $0.75.

For 1kWh, 666.67 batteries needed that costs $500.

For local electric utility,

The cost of 1kWh is $0.10.

The cost of for 1kWh by using batteries are more expensive than using local electric utility.
 REFLEEKA MILSA BINTI MASTAH 25395

1.5 Henry Ford’s Model T was originally designed and built to run on ethanol. Today, ethanol
(190-proof alcohol) can be produced with domestic stills for about $0.85 per gallon. When
blended with gasoline costing $4.00 per gallon, a 20% ethanol and 80% gasoline mixture costs
$3.37 per gallon. Assume fuel consumption at 25 mpg and engine performance in general are not
adversely affected with this 20–80 blend (called E20).

(a.) How much money can be saved for 15,000 miles of driving per year?

Number of gallons needed for 15,000 miles

15,000 𝑚𝑖𝑙𝑒𝑠 25 𝑚𝑝𝑔 600 𝑔𝑎𝑙𝑙𝑜𝑛𝑠

Ethanol and gasoline blended = $4.00 per gallon

20% ethanol and 80% gasoline = $3.37 per gallon
Cost saved per gallons
$4.00 $3.37 $ 0.63

Cost saved for 15,000 miles

$ 0.63 600 $ 378

(b.) How much gasoline per year is being converted if one million people use the E20 fuel?

From 600 gallons per person, 80% is gasoline

600 0.8 480

When 1,000 000 people use

480 1,000 000 480 000 000 𝑔𝑎𝑙𝑙𝑜𝑛𝑠

Therefore, when one million people use E20 fuel the amount of gasoline converted is
480 000 000 gallons