Engineering Economy, Student Value Edition (17th Edition)
Engineering Economy, Student Value Edition (17th Edition)
17th Edition
ISBN: 9780134838137
Author: William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher: PEARSON
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Chapter 3, Problem 7P
To determine

Calculate the estimated cost.

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Sally Statistics is implementing a system of statistical process control (SPC) charts in her factory in an effort to reduce the overall cost of scrapped product. The current cost of scrap is $X per month. If a 75% learning curve is expected in the use of the SPC charts to reduce the cost of scrap, what would the percentage reduction in monthly scrap cost be after the charts have been used for 6 months? (Hint: Model each month as a unit of production.)
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As a manager have been asked to estimate the total cost of producing 40 engines in your company. Current engines have an output of 135-hp per engine. 7 years ago, a similar 180-hp engine cost was 4450 KD. Beside that due to extreme competition in the industry, the cost of an engine has decreased with 9% only for 3 intervals of time throughout this period. Total cost consists of engine cost, direct labor cost and other labor-related costs. Pertinent data are as follows: Direct labor cost per hour 20 KD per hour Factory overhead 150% of direct labor Packing costs 80% of direct labor Maintenance costs 10% of engine cost Cost-capacity factor 0.75 Past experience has shown that an 85% learning curve applies to the labor required producing these engines. Maintenance cost will be paid only once at the beginning of the second year. Use the estimated time to complete the 40th engine for the purpose of estimating the direct labor cost. The time to complete the first engine has been estimated to…
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