The University of Jordan

School of Engineering
Civil Engineering Department
CE 0901420 Engineering Economy Fall, 2023 – 2024
Take-home Quiz 1 Due Date: November 15,
2023
Name: N i z a r J a m a l M o u s a Student Number:
0207850

Instructions
- This assignment is worth 15 points and is intended to cover chapters 2 and 3 of the
Engineering Economy course.
- This is an individual assessment (no groups), and any signs of cheating will result in a zero
score for this assignment and may result in an F grade in the class.
- Use this Microsoft Word File by typing any necessary equations, formulas, or text onto
the same file, and make sure that your work is well-organized and presented neatly. Messy
work will not receive the full mark even if the math is correct.
- Print your name/student ID, save the file as PDF, and upload it to eLearning (scanned
copies will not be accepted).
- The deadline is at 23:55 on November 15, 2023. Late submissions will receive a zero score.

Problem 1
A lash adjuster keeps the pressure constant on engine valves, increasing automobile engines' fuel
efficiency. The relationship between price (p) and monthly demand (D) for lash adjusters made by
the Wicks Company is given by this equation: D = (2,000 − p)/0.10.
a) What is the demand (D) when total revenue is maximized?
b) What important data are needed if maximum profit is desired?

Problem 2
Six years ago, an 80-kW diesel-electric set cost $160,000. The cost index for this class of
equipment six years ago was 187 and is now 194. The plant engineering staff was considering a
120-kW unit of the same general design to power a small isolated plant that would have cost
$211,707.
Based on the information above the plant engineering staff is considering a 100-kW unit of the
same general design to power a small isolated plant. Assume we want to add a pre-compressor,
which (when isolated and estimated separately) currently costs $13,000. Determine the total cost
of the 100-kW unit
Problem 3

The structural engineering design section within the engineering department of a regional electrical
utility corporation has developed several standard designs for a group of similar transmission line
towers. The detailed design for each tower is based on one of the standard designs. A transmission
line project involving 50 towers has been approved. The estimated number of engineering hours
needed to accomplish the first detailed tower design is 126. Assuming a 95% learning curve.
What is your estimate of the number of engineering hours needed to design the eighth tower and
to design the last tower in the project?

Problem 4
A construction company is planning their projects for the year 2023. The company is considering
the construction of 18 buildings, each is 2,900 m2. In 2018, they have built similar buildings but
with smaller areas, and the material costs associated with those buildings are shown in the
following table:
Building # Area (m2) Cost ($)
1 1,430 311,812
2 1,475 313,744
3 1,655 331,893
4 1,790 339,479
5 1,961 356,153
6 2,015 359,265
7 2,375 383,146
8 2,533 385,265

The materials cost index values are as shown in the following table:
Year Cost index
2017 321
2018 332
2019 348
2020 368
2021 379
2022 398
2023 406
In the past couple of years, the company began constructing larger units (2,900 m2 units compared to those in
2018 as shown in the first table). The labor hours required to complete the first 2,900 m2 unit back then was
24,000 hours but the labor hours decreased exponentially with time due to the experience gained by workers
at a 90% learning slope until reaching the 15th unit, after which a steady state was reached. Assume the 2023
average labor wage is $20 per hour and the Company’s fixed annual cost (overhead) is $2,300,000.
(a) What is the breakeven selling price per unit?
(b) What is the selling price per unit assuming the company wishes to earn 10% profit on top of
the total costs incurred?

Solutions
Problem (1) :
(a) First of all , the equation that show the relationship between the price(p) and the monthly
demand (D) can be rewritten as follow :

D = (2000 - p)10 or will be : D = 20000 - 10p ……. (1)

We know the Total revenue = price × demand = p × D ………….. (2)
The goal is to substitute (p) in equation 2 and multiply it with (D) , then maximize the total
revenue which mean derive it by D and equate it to zero
Therefore :

p = (20,000 - D)/10

20000 − 𝐷
Total revenue = ( 10 ) × D = 2000D – 0.1D²
(TR)/dD = 2000 – 0.2D = 0
2000 – 0.2D = 0
Therefore : the demand when total revenue is maximized is D = 10000

(b) We know that Profit = Total revenue - Total cost, therefore in this problem total cost is not
given and to find the maximum profit the information about the total cost is required to calculate
it .
Problem (2) :

First of all , assume that :

# Cost of 120-kW unit = Ca = $211,707 , Cost of 80-kW unit before six years = Cb = $160,000
Cost of 100-kW unit = Cc = ??

# Sa = 120 KW , Sb = 80 kW , Sc = 100 kW , cost capacity factor = x = ??

# Cost index before six years = Ik = 187 , Cost index now = In = 194

Now , we should first calculate the Cb nowadays which will be via Index ratio technique

194
Therefore , Cb = 16000 × = 165989.304 $
187

Now for Cc , unfortunately we don’t have capacity factor to use it in power size technique , but
can calculate it by the same technique and by Ca and Cb as follow :

𝐶𝑎 𝑆𝑎
= ( )𝑥 , therefore :
𝐶𝑏 𝑆𝑏

211707 120 𝑥
=( ) , therefore, by calculator x = 0.60
165989.304 80

100
Now Cc = 165989.304 × ( )0.60 = 189769.368 $
80
Note: we can calculate Cc either by Ca or Cb and both will give the same
answer

Finally , the total cost of the 100-kW unit = 189769.368 $ + $13,000 =

202769.5249 $
Problem (3)

First of all, this is a Learning curve problem , so we need to identify the

following parameters :

S = Learning curve slope = 95% , K = hours needed for 1st to accomplish

the first detailed tower design = 126 hours , u1 = output unit number for
8th tower = 8 , u2 = output unit number for 50th tower (last one) = 50

Therefore ,

log(0.95)
𝑍8𝑡ℎ = 126 × (8) log(2) = 108.029 ℎ𝑜𝑢𝑟𝑠
log(0.95)
𝑍50𝑡ℎ = 126 × (50) log(2) = 94.329 ℎ𝑜𝑢𝑟𝑠
Problem (4) Part (a)

we need to consider both the material costs and the labor costs. We'll first calculate
the total costs per unit, and then we'll determine the selling price accordingly.
In Some steps , we will use Excel spreadsheets due to there are to much
calculations .

1st step : we will Calculate Material Costs for a 2,900 m² Building at 2023
Firstly ,the costs in the table in the problem was not for 2,900 m², so we must adjust
area to 2,900 m² by power technique , we will calculate ( X ) for every two areas and
then take an average , after that we will adjust the nearest area, which is 2533 m²
to 2900 m² , note that both costs are at 2018 , therefore :
2
2900 0.223366
𝐶𝑜𝑠𝑡 𝑜𝑓 𝑏𝑢𝑖𝑙𝑑𝑖𝑛𝑔 𝑎𝑡 𝑠𝑖𝑧𝑒 𝑜𝑓 2900 m 𝑎𝑡 2018 = 385.265 × ( )
2533
= 397086.5$
Now , we will adjust this cost to 2023 by index ratio technique , therefore :

𝐶𝑜𝑠𝑡 𝑜𝑓 𝑏𝑢𝑖𝑙𝑑𝑖𝑛𝑔 𝑎𝑡 𝑠𝑖𝑧𝑒 𝑜𝑓 2900 m2 𝑎𝑡 2023 (𝑀𝑎𝑡𝑒𝑟𝑖𝑎𝑙 𝑐𝑜𝑠𝑡 )

406
= 397086.5 × ( ) = 485593.8 $
332

𝑀𝑎𝑡𝑒𝑟𝑖𝑎𝑙 𝐶𝑜𝑠𝑡 𝑓𝑜𝑟 18 𝑏𝑢𝑖𝑙𝑑𝑖𝑛𝑔𝑠 = 485593.8 × 18 = 8740688 $

All calculations were solved using EXCEL
Cost of
building
Cost of
at size of Material
Building Area building
Cost ($) x xavg 2900 at
# (m2) at size Cost for
2023
of 2900 18
(Material
Cost ) buildings
1 1,430 311,812 0.199361
2 1,475 313,744 8740688
3 1,655 331,893 0.288205
4 1,790 339,479 0.223366 397086.5 485593.8
5 1,961 356,153 0.320264
6 2,015 359,265
7 2,375 383,146 0.085632
8 2,533 385,265
2nd Step : Calculating Labor Costs :

First of all , we need to consider the exponential decrease in labor hours. The labor
hours decreased with a 90% learning slope until the 15th unit, and then a steady
state was reached. We can calculate the labor hours for each unit using the learning
curve formula , then make a summation for all these hours and multiply it with
labor wage which is $20 per hour .
Therefore, the labor hours using excel will be :

Labor
units u Z SUM(Z) cost
1 1 24000 320024.6 6400491
2 2 21600
3 3 20308.94
4 4 19440
5 5 18791.68
$
6 6 18278.05 𝐿𝑎𝑏𝑜𝑟 𝐶𝑜𝑠𝑡 = 320024.6 hr × 20 =
7 7 17854.75 hr

8 8 17496 6400491 $
9 9 17185.55
10 10 16912.51
11 11 16669.26
12 12 16450.24
13 13 16251.31
14 14 16069.27
15 15 15901.63
16 16 15746.4
17 17 15601.96
18 18 15466.99

we can see the steady state from 16th to 18th unit by the below plot :
 20

15
y = -0.0021x + 46.824

10
units

0
0 5000 10000 15000 20000 25000 30000

-5
Z

3rd Step : Calculating the Total Costs

The breakeven selling price per unit =Total Costs per Unit = Material Costs + Labor
Costs + Overhead

Therefore , The breakeven selling price for 18 buildings =

8740688 $+ 6400491 $+ 2,300,000$ = 17441148.6 $

The breakeven selling price per unit will be = 17441148.6

18
= 968952.702 $

Part (b)

Selling Price with 10% Profit Margin per Unit = The breakeven selling price per unit + (10% of the
breakeven selling price per unit)

Therefore :

Selling Price with 10% Profit Margin per Unit = 968952.702 + (10% × 968952.702 )
= 1065847.972 $
My work on excels for this problem :

……………. Kind Regards ……………..