Engineering Economics

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  Dr. A. Q. Khan Institute of Computer Sciences & Information Technology, Kahuta ASSIGNMENT # 1 Program: BSCE-VIII Semester: Spring 2019 Course Title: Engineering Economics Credit Hours: 2 (2-0) Course Instructor: Dr. Salman Iqbal Date of Submission: March 27, 2019 Note: Thoroughly study the cases and answer to the questions asked. Q. No. 1:  Explain why the subject of engineering economics is important to the practicing engineer? Q. No. 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: Anold turning machine valued at $350,000 exists (in the warehouse) that can be modified for the new drill bit. The in-house technicians have given an estimate of $40,000 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 production requirements at full capacity. An outside company, McDonald Inc., made the machine seven years ago and can easily do the same modifications for $60,000. 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 $450,000. McDonald Inc. has promised this machine before the startup date and is willing to pay any late costs. Your company has $100,000 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. g.   Describe how a postaudit could be performed.  Q. No. 3:  Consider this situation faced by a first-semester senior in civil engineering who is exhausted from extensive job interviewing and penniless from excessive partying. Mary’s impulse is to accept immediately a highly attractive job offer to work in her brother’s successful  manufacturing company. She would then be able to relax for a year or two, save some money, and then return to college to complete her senior year and graduate. Mary is cautious about this impulsive desire, because it may lead to no college degree at all! a.   Develop at least two formulations for Mary’s  problem. b.   Identify feasible solutions for each problem formulation in Part (a).  Be creative!   Q. No. 4:  Storm doors have been installed on 50% of all homes in Anytown, USA. The remaining 50% of homeowners without storm doors think they may have a problem that a storm door could solve, but they’re not sure. Use Activities 1, 2, and 3  in the engineering design process (Table 1-1 on book) to help these homeowners systematically think through the definition of their need (Activity 1), a formal statement of their problem (Activity 2), and the generation of alternatives (Activity 3). The design process begins in Figure 1 with a statement of need and terminates with the specifications for a means of fulfilling that need. Figure 1 Q. No. 5:  You have been invited by friends to fly to Germany for Octoberfest next year. For international travel, you apply for a passport that costs $97 and is valid for 10 years. After you receive your passport, your travel companions decide to cancel the trip because of “insufficient funds.” You decide to also cancel your travel plans because traveling alone is no fun. Is your passport expense a sunk cost or an opportunity cost? Explain your answer. Q. No. 6:  A friend of yours has been thinking about quitting his regular day job and going into business for himself. He currently makes $60,000 per year as an employee of the Ajax Company, and he anticipates no raise for at least another year. He believes he can make $200,000 as an independent consultant in six-sigma  “black belt”  training for large corporations. His start-up expenses are expected to be $120,000 over the next year. If he decides to keep his current job, what is the expected opportunity cost of this decision? Attempt to balance the pros and cons of the option that your friend is turning away from. Q. No. 7:  A large wood products company is negotiating a contract to sell plywood overseas. The fixed cost that can be allocated to the production of plywood is $800,000  per month. The variable cost per thousand board feet is $155.50 . The price charged will be determined by  = $600 − (0.5)    per 1,000  board feet. a.   For this situation, determine the optimal monthly sales volume for this product and calculate the  profit (or loss) at the optimal volume. b.   What is the domain of profitable demand during a month? Q. No. 8:  A company produces and sells a consumer product and is able to control the demand for the  product by varying the selling price. The approximate relationship between price and demand is: =$38+2,700−5,000  ,  >1  where    is the price per unit in dollars and    is the demand per month. The company is seeking to maximize its profit. The fixed cost is $1,000  per month and the variable cost (   ) is $40  per unit.
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