NAME: Obligacion, Elzen Mathew COURSE/YEAR: BSECE II-GG

Supremo, Angelo

EXERCISE 1

Analyze and answer the following.

1. While studying for the engineering economy final exam, you and two friends find
yourselves craving a fresh pizza. You can’t spare the time to pick up the pizza
and must have it delivered. “Pick-Up-Sticks” offers a 1-1/4-inch-thick (including
toppings), 20-inch square pizza with your choice of two toppings for Php650
plus 15% sales tax and a Php50 delivery charge (no sales tax on delivery
charge). “Fred’s” offers the round, deep-dish Sasquatch, which is 20 inches in
diameter. It is 1-3/4 inches thick, includes two toppings, and costs Php750 plus
5% sales tax and free delivery.
a. What is the problem in this situation? Please state it in an explicit and precise
manner.
b. Systematically apply the seven principles of engineering economy to the
problem you have defined.
c. Assuming that your common unit of measure is pesos (i.e., cost), what is the
better value for getting a pizza based on the criterion of minimizing cost per
unit volume.
d. What other criteria might be used to select which pizza to purchase?

Answers

A. We will use the cravings of me and my two friends at the same time we cannot
pick up the pizza as the problem of this statement.

B. Principle 1- Develop the Alternatives

Option 1- order a pizza from “Pick-Up-Sticks”

Option 2- order a pizza from “Fred’s”

Principle 2- Focus on the Differences

In the state, there are two options where to order pizza it’s either from pick-up
sticks or Fred’s. There are lots of differences between the two shops like in ingredients
quality used to make pizza, the products that they offer and lastly the main difference
here is the products price.

Principle 3 - Use a Consistent Viewpoint

We can consider the problem from the perspective of the three costumer’s point
of view that are craving for a pizza and looking for a good quality one. In this situation it
is necessary to order good quality pizza rather than being disappointed.
 Principle 4- Use common Unit of Measure

Here in the Philippines we are going to use Philippine peso(PHP) as our currency.
In part we are going to use cost based metric.

Principle 5- Consider all Relevant Criteria

Before choosing where to order pizza and what type of pizza to order the
costumers must consider some factors not only the price but also the quantity and
quality of the ingredients of the pizza.

Principle 6- Make Uncertainty Explicit

In this problem we have two options to consider where to order pizza it’s either in
Pick-up Sticks or Fred’s. There are lots of uncertainties that may happen in the future.
There are some things to consider ordering a delicious pizza that will satisfy the
costumers craving like the delivery time and the price of the pizza. Knowing those two
will help the costumer to decide what and where to order.

Principle 7- Revisit Your Decision

After having your pizza and you noticed that when the pizza arrived in your home
it is cold. Because of that next time you order you can adjust your decisions to have a
good quality and hot pizza. This principle will help you to improve your decision making
by learning in your past decisions.

C. Volume formula= (length)(width)(height)

OPTION 1(Pick-up Sticks) OPTION 2(Fred’s)

Volume= 20x20x1.25 = 500 in.^3 Volume=(3.1416)(10)^2(1.75)= 550 in.^3

Total Cost= 650+650(.15)+50= 797.5php Total Cost= 750+(750)(.05)= 787.5php

Cost per in.^3= 797.5/500= 1.595php Cost per in^3= 787.5/550= 143php

Based on the computed data the cost per cubic inch of pizza from Fred’s is lower
than pick-up Sticks.

D. Typically as a costumer we will consider the time of delivery and the availability
of flavors we prepare. After knowing how to get the cost per inch I will say that it
is also good to consider the price per cubic inch as one of the basis to order.
2. 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 Php350,000 exists (in the warehouse) that can be
modified for the new drill bit. The in-house technicians have given an estimate of
Php40,000 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 the production requirements at full capacity. An outside company,
McDonald Inc., made the machine seven years ago and can easily do the same
modifications for Php60,000. 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 Php450,000. McDonald Inc. has promised this
machine before the startup date and is willing to pay any late costs. Your
company has Php100,000 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.