Republic of the Philippines

Don Mariano Marcos Memorial State University

Mid La Union Campus
COLLEGE OF GRADUATE STUDIES
City of San Fernando 2500 La Union Philippines
Telefax: 072 6075798 http://www.dmmmsu.edu.ph/gs/
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MEM 204 – ADVANCED ENGINEERING ECONOMICS ANALYSIS
CASE STUDY 1

NAME: Navarro, Meljon R. DATE OF SUBMISSION: Oct. 2, 2021

COURSE: MME/FIRST SEMESTER 2021-2022

Case Study – The Economic Daytime Running Light

The use of Daytime Running Lights (DRLs) has increased in popularity with car
designers throughout the world. In some countries, motorists are required to drive
with their headlights on at all times. U.S. car manufacturers now offer models
equipped with daytime running lights. Most people would agree that driving with the
headlights on at night is cost effective with respect to extra fuel consumption and
safety considerations (not to mention required by law!). Cost effective means that
benefits outweigh (exceed) the costs. However, some consumers have questioned
whether it is cost effective to drive with your headlights on during the day. In an
attempt to provide an answer to this question, let us consider the following suggested
data:

75% of driving takes place during the daytime.

2% of fuel consumption is due to accessories (radio, headlights, etc.).
Cost of fuel = $4.00 per gallon.
Average distance traveled per year = 15,000 miles.
Average cost of an accident = $2,800.
Purchase price of headlights = $25.00 per set (2 headlights).
Average time car is in operation per year = 350 hours.
Average life of a headlight = 200 operating hours.
Average fuel consumption = 1 gallon per 30 miles.

Answer the following set of questions:

1. What are the extra costs associated with driving with headlights on during
the day?
2. What are the benefits associated with driving with headlights on during the day?
3. What additional assumptions (if any) are needed to complete the analysis?
4. Is it cost effective to drive with headlights on during the day?

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 Republic of the Philippines
Don Mariano Marcos Memorial State University
Mid La Union Campus
COLLEGE OF GRADUATE STUDIES
City of San Fernando 2500 La Union Philippines
Telefax: 072 6075798 http://www.dmmmsu.edu.ph/gs/
---------------------------------------------------------------------- . . .designing change!---------------
1. What are the extra costs associated with driving with headlights on during
the day?
- the extra costs of driving with headlights on during the day are increased
fuel consumption and more frequent headlight replacement. Headlights
increase visibility to other drivers on the road.

2. What are the benefits associated with driving with headlights on during the day?
- Driving with headlights during the day may reduce the chance of an
accident.

3. What additional assumptions (if any) are needed to complete the analysis?
- Additional assumptions needed to consider in completing the analysis
includes the percentage of fuel consumption due to headlights alone and
how many accidents can be avoided by using the headlights per unit time.

3. Is it cost effective to drive with headlights on during the day?

- As stated above, the extra costs include increased fuel consumption and
more frequent headlight replacement.

Estimated annual fuel cost:

15 ,000 miles 1 gallon 2 doll a rs 1000 dollars

Annual fuel cost = × × =
1 year 30 miles 1 gallon 1 year

According to the data, 2% of fuel consumption is due to normal (night-time) use

of headlights.

1000 dollar s 20 dollars

Fuel cost due to normal headlights = × 2 %=
1 year 1 year

20 dollars 80 dollars
Fuel cost due to continuous use of headlights = 4 × =
1 year 1 year

( )
hr
350
yr 25 dollars 10. 94 dollars
Headlight cost for normal use = ( 2 % ) × =
hr 1 set 1 year
200
yr

Headlight cost for continuous use = ( 350

200 hr / yr )
hr / yr 25 dollars 43.75 dollars
×
1 set
=
1 year

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 Republic of the Philippines
Don Mariano Marcos Memorial State University
Mid La Union Campus
COLLEGE OF GRADUATE STUDIES
City of San Fernando 2500 La Union Philippines
Telefax: 072 6075798 http://www.dmmmsu.edu.ph/gs/
---------------------------------------------------------------------- . . .designing change!---------------
Total cost associated with daytime use =

( $ 80−$ 20 )+ ( $ 43.75−$ 10.94 ) =$ 92.81/ yr

If driving with your headlights on during the day results in at least one accident
$ 2800
being avoided during the next =30 years, then the continuous use of your
$ 92.82/ yr
headlights is cost effective. However, you may be argued that the use of DRLs lead to
higher budget in fuel and replacement of bulb but being involve in an accident caused
by not using headlights can cause you more than the increased budget of your fuel
and bulb replacements.

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