Economic Engineering

Chapter # 03

Problem 3-6
Solution:

a)

Particulars Requirement per Annual Rate Per Annual Bill

Month (a) Requirement Kwh (b*c)
(a*12) > (b) (c)
Customer 400 KwH 4800 KwH 0.10 --
Requirement Per
Month
Less: Green Power 150 KwH 1800 KwH 0.02 48
Conventional Power 250 KwH 3000 Kwh 0.10 300
Total Annual Bill 348.00

b)

Per kwH Green Power Cost = Total Cost Per Block/kwH block

= 4/150 kwH

= $ 0.027 per kwH

c) Green Power Energy project initial investment cost is higher than other conventional means of
energy sources as it is capital intensive industry and needs more capital investment is shape of land
requirement, solar modules or wind turbines. While production or running cost of the green power is
relatively low as compare to conventional power means.

Problem 3-7

Solution:

Items Cash Flow Estimation Method of Estimation

Cost of Land Easy to estimate Through Person Contact with
Real Estate Broker Agent
Cost of Building (Cinder Block Easy to estimate Through market search and
Construction)
Initial Working Capital
Capital Investment Cost
First Year Labor & Material
Cost
First Year’s Sales Revenue
Difficult to estimate
Easy to estimate
Easy to estimate
Difficult to estimate
contact with contractors
Sources within & outside firm
and information can be obtained
from market competitors as
well.
Within Firm and publication
data available
Information can be obtained
through published material.
Sources within and outside
firm. Market research may be
helpful in creating sales
anticipation and subsequent
cash flow projections

Problem 3-34

Solution

Time required for 50th Unit is under:

Learning Curve Exponent = b

B = Log (learning Curve in Decimal Form) / Log 2

= Log o.80 / log 2
= -0.0969 / 0.30102
= -0.3219

T50 = T1 * (n)^b
= 1.76 * (50) ^ -0.3219
= 1.76 * 0.283858
= 29.97 Min
29.97 Min requires for 50th unit production

Unit Estimation Cost:

Direct Labor Production Factory Packing Cost Desired Profit Total

Cost ($15/h Material overhead (75% of DL (20% of Selling
*29.97) (375/100) (125% of DL cost) Manufacturing Cost
 cost) Cost)
$7.50 $3.75 $9.38 $5.63 $5.25 $31.52

Problem 3-35

Solution:

Total Cost Calculation per Unit:

Direct Labor Cost $ 21/Hour > a

Direct Labor Hour 0.20/unit > b

Per Unit Direct Labor Hour (a*b) $ 4.20

Direct Material Cost $ 4.00
Overhead Cost (120% of Direct Labor) $ 5.04
Packaging and Shipping Cost $ 1.20

Total Cost Per Unit $14.44

Calculation of Units for achieving desired profit of $ 25000

Unit Required = Desired Profit / (Per unit selling price – per unit cost price)

= 25000/ (20-14.44)

Units Required = 4496.41 units