ISE 311 HOMEWORK 1 Spring 2024
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North Carolina State University *
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311
Subject
Industrial Engineering
Date
Feb 20, 2024
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docx
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Uploaded by ElderBoar327
ISE 311- SPRING 2024: ENGINEERING ECONOMIC ANALYSIS
HOMEWORK 1
(Due January 24, 2023 Wednesday by 11:59 pm)
1)
(2 points) Some of the following problems would be suitable for solution by engineering economic analysis. Which ones are they?
a. Would it be better to buy a car with a diesel or gasoline engine? b. Should an automatic machine be purchased to replace three workers now doing a task by hand? c. Would you be better off if you changed your major? d. One of the people you might marry has a job that pays very little money, while another has a professional job with an excellent salary. Which one should you marry? 2)
(1 point) If there are only two alternatives available and both are unpleasant and undesirable and there is no “do nothing” option, what should you do?
3) (2 points) In the 1970’s the Ford Motor Company sold its subcompact Pinto model with known design defects. In particular, the gas tank’s design and location led to rupture, leaks and explosion in low-speed, rear-impact collisions. Fifty-nine people burned to death in Pinto accidents. In a cost-benefit analysis weighing the cost of fixing the defects ($11 per vehicle) versus the firm’s potential liability for lawsuits on behalf of accident victims. Ford had placed the value of a human life at $200,000. Ford eventually recalled 1.4 million Pintos to fix the gas tank problem for a cost around $35 million. In addition, the automaker ultimately paid out millions more in liability settlements and incurred substantial damage to its reputation. What should engineers do when the product they are designing has a known safety defect with an inexpensive remedy?
4)
(3 points)
Two new rides are being compared by a local amusement park in terms of their annual operating costs. The two rides are assumed to be able to generate the same level of revenue (therefore the focus on costs). The Tummy Tugger has a fixed cost of $12,000 per year and a variable cost of $3 per visitor. The Head Buzzer has a fixed cost of $5,000 per year a variable cost of $5 per visitor. Provide answers to the following questions: a. (1 pt) Mathematically determine the breakeven number of visitors per year for the two rides to have equal annual costs.
b. (2 pts) Develop a breakeven graph that illustrates the following: i. Accurate total cost lines for the two alternatives (show lines and equations)
ii. The breakeven point for the two rides in terms of number of visitors. iii. The ranges of visitors per year where each alternative is preferred.
5)
(1 point)
Fun Toys is considering a machine that will cost $35,000 to buy. After 6 years its salvage value will be $10,000. An overhaul costing $4,000 will be needed in Year 4. Operating and Maintenance (O&M) costs will be $3000 per year. Draw the cash flow diagram. 6) (1 point)
Peace Village needs some additional recreation fields. Construction will cost $250,000 and the annual O&M expenses are $80,000. The city council estimates that the value of
the added youth leagues is about $200,000 annually. In Year 5 another $75,000 will be needed to
refurbish the fields. The salvage value is estimated to be $90,000 after 10 years. Draw the cash flow diagram.
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