UNIVERSITY OF SOUTHERN MINDANAO

ENGINEERING ECONOMY
EngSci 19
 Selection in Present Economy
There are many cases in engineering
economy studies where interest is not a
factor, these studies are frequently
called present economy problems. Such
studies usually involve the selection
between alternative designs, materials
or methods.

EngSci 19 – Engineering Economy 2

 Example:
An electrical contractor has a job which should be
completed in 100 days. At present, he has 80 men on
the job and it is estimated that they will finish the
work in 130 days. If of the 80 men, 50 are paid ₱190 a
day, 25 at ₱ 220 a day, and 5 at ₱300 a day and if for
each day beyond the original 100 days, the
contractor has to pay ₱2000 liquidated damages:
a. How many more men should the contractor add
so he can complete the work on time?
b. If the additional men of 5 are paid ₱220 a day and
the rest at ₱190 a day, would the contractor save
money by employing more men and not paying
the fine?

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 Example:
The monthly demand for ice cans being
manufactured by Mr. Cruz is 3200 pieces.
With a manually operated guillotine, the
unit cutting cost is ₱25.00. An electrically
operated hydraulic guillotine was offered
to Mr. Cruz at a price of ₱275,000.00 and
which will cut by 30% the unit cutting cost.
Disregarding the cost of money, how many
months will Mr. Cruz be able to recover the
cost of the machine if he decides to buy
now?

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 Example:
The making of rivet holes in structural steel members can
be done by two methods. The first method consists of
laying out position of the holes in the members and using
a drill press costing ₱30,000. The machinist is paid ₱35 per
hour and he can drill 30 holes per hour.
The second method makes use of multiple-punch machine
costing ₱27,500. The punch operator is paid ₱30 an hour
and he can punch out 4 holes every minute. This method
also requires an expense of ₱1.75 per hole to set the
machine.
a. If all other costs are assumed equal, what is the total
cost for each machine for 6,000 holes, assuming the
total cost of each machine to be charged to these
holes?
b. For how many holes will the costs be equal?

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 Example:
The volume of the raw material required for a
certain machine part is 2.02 cu. cm. The
finished volume is 1.05 cu. Cm. The time for
machining each piece is 45 seconds for steel
and 30 seconds for brass. The cost of steel is
₱32.50 per kg and the value of steel scrap is
negligible. The cost of the brass is ₱60.00 per kg
and the value of brass scrap is ₱25.00 per kg.
The wage of the operator is ₱40.00 per hour
and the overhead cost of the machine is ₱50.00
per hour. The weight of steel and brass are
0.0081 and 0.0088 kg per cu. cm. respectively.
Which material will you recommend?
EngSci 19 – Engineering Economy 6
 Example:
High carbon steel or alloy steel can be used for the set of
tools on a lathe. The tools must be sharpened periodically.
Data for each are as follows:
High Carbon Steel Alloy Steel
Output per hour 60 pcs 70 pcs
Time between tool grinds 4h 6h
Time required to change tools 1h 1h

The wage of the lathe operator is ₱50.00 per hour, based on

actual working hours. The tool changer costs ₱60.00 per hour.
Overhead costs for the lathe are ₱45.00 per hour, including
tool-change time. A set of unsharpened high carbon steel
costs ₱500 and can be ground ten times; a set of unsharpened
alloy steel costs ₱850 and can be ground five times. Which
type of steel should be used?
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