Engineering Economy

Chapter 2: Cost Concepts and Design

Economics

Copyright 2012 by Pearson Education, Inc.

Engineering Economy, Fifteenth Edition
Upper Saddle River, New Jersey 07458
By William G. Sullivan, Elin M. Wicks, and C. Patrick Koelling
All rights reserved.
Example #1
In connection with surfacing a new highway, the
contractor has a choice of two sites on which to
set up the asphalt mixing plant equipment. The
contractor estimates that it will cost $1.15 per
cubic yard per mile (yd3 - mile) to haul the
asphalt paving material from the mixing plant to
the job site. Factors relating to the two site
alternatives are as follows ( production costs at
each site are the same):

Copyright 2012 by Pearson Education, Inc.

Engineering Economy, Fifteenth Edition
Upper Saddle River, New Jersey 07458
By William G. Sullivan, Elin M. Wicks, and C. Patrick Koelling
All rights reserved.
Example #1
CostFactor SiteA SiteB
AverageHauling 6miles 4.3miles
Distance
Monthlyrentalof $1000 $5000
site
Costtosetupand $15000 $25000
removeequipment
HaulingCost $1.15/yd3mile $1.15/yd3mile
If site B is selected, there will be an added charge of $ 96 per day for a
flagman

Copyright 2012 by Pearson Education, Inc.

Engineering Economy, Fifteenth Edition
Upper Saddle River, New Jersey 07458
By William G. Sullivan, Elin M. Wicks, and C. Patrick Koelling
All rights reserved.
Example #1

The job involves 50000 cubic yards of mixed asphalt paving

material. It is estimated that 4 months (17 weeks of 5
working days per week) will be required for the job.
Compare the two sites in terms of their fixed, variable, and
total costs. Which is the better site, how many cubic yards
of paving materials does the contractor have to deliver
before starting to make a profit if paid $8.05 per cubic yard
delivered to the job site?

Copyright 2012 by Pearson Education, Inc.

Engineering Economy, Fifteenth Edition
Upper Saddle River, New Jersey 07458
By William G. Sullivan, Elin M. Wicks, and C. Patrick Koelling
All rights reserved.