Engineering Economy

| May 27, 2015

You have decided to buy a small apartment building for $110,000 near a local college.  You used $11,000 as a down payment and obtained a mortgage from a local bank for the remaining $99,000.  The annual mortgage payment to the bank is $11,500.  You expect that the annual maintenance on the building and grounds will be $6,500.  There are four apartments (two bedrooms each) in the building that can be rented.  Assuming 100% occupancy all year, how much rent per month must you charge in order to break even, such that your revenue equals your expenses each month.  (Enter your answer as a number without the dollar sign.).

Question Two

You need to get gasoline for your car.  You can drive ten miles (round trip) to a gas station on the outskirts of town and save 10 cents per gallon on the price of gasoline.  If gasoline costs $3 per gallon and your car gets 25 miles per gallon for in-town driving, how many gallons of gasoline must you buy at the edge-of-town station to save enough on your fill up to pay for the cost to going to the station and back?  Ignore the wear-and-tear cost of operating your car in this example.  (Enter your answer as a number without the units of gallons.)

Answer: 12 gallons

Question Three

A company produces a walkie-talkie communications device for use in industrial settings.  The fixed cost (CF) is $60,000 per month, and the variable cost (CV) is 85 per unit.  The selling price per unit is  P = $165 – 0.016(D), in which D is the demand or number of units sold.  Determine the optimal volume for this product; that is, the value of demand D at which profit is maximized.  (Enter your answer as a number without any units.)

Question Four

An engineering testing laboratory measures its output in a standard service hour unit, which is a function of the level of testing to be performed.  The variable cost (CV) is $112 per standard test service hour.  The charge-out rate (i.e., selling price, p) is $135.9 per hour.  The maximum output of the testing lab is 260,000 hours per year, and its fixed cost (CF) is $3,845,000 per year.  For this firm, what is the breakeven point in standard test hours?  (Enter your answer as a number without the units of hours.)

Question Five

A metal part for which annual demand is 140,000 units is made on a CNC machine at a rate of 210 parts per hour.  It can be made using tool steel costing $0.30 per pound or using brass stock costing $1.40 per pound.  The weight per steel piece is 0.0353 pounds and the weight per brass piece is 0.0384 pounds.  When it is made using steel, it was found that 50% of the parts made per hour are defect-free; when it made using brass stock, it was found that 85% of the parts made per hour are defect-free.  If the total labor and overhead cost for operating the machine is $25.00 per hour, how much more does it cost to make 1000 defect-free parts from steel than to make 1000 defect-free parts from brass on this machine?  (Enter your answer as a number without the dollar sign.)

Question Six

A motor capable of delivering 140 HP to steel rolling mill drive is being evaluated in a present economy study.  The selected motor will only be utilized for one year, and it will have no market value at the end of the year.  Pertinent data are summarized as follows:  Motor costs $4,200, requires annual maintenance of $250, and operates with 86 percent efficiency.  If electric power costs $0.1 and the motor will be operated 2,000 hours per year, what is the annual expense for the motor (purchase cost, maintenance, plus electric power consumption)?  (Enter your answer as a number without the dollar sign.)

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Economics
Economics

Category: Economics

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