Engineering Economics — Quiz 3

Questions in this quiz (10)

1. A project includes the following costs: $$120000$$ at time zero, $$12000$$ per year for years $$1$$ through $$6$$, and an additional $$30000$$ at the end of year $$4$$. Using a $$MARR$$ of $$9\%$$, what is the equivalent annual cost over the $$6$$-year period?

   • $$39,200$$
   • $$42,750$$
   • $$43,486$$
   • $$49,300$$

2. An amount of $$15000$$ is invested today. The investment earns $$6%$$ annually for the first $$4$$ years and $$9%$$ annually for the next $$4$$ years. What is the future value at the end of year $$8$$?

   • $$24,560$$
   • $$25,880$$
   • $$26,733$$
   • $$29,100$$

3. Two machines are being evaluated for a project. Machine $$A$$ costs $$45000$$, has annual operating costs of $$9000$$, a salvage value of $$6000$$, and a life of $$5$$ years. Machine $$B$$ costs $$65000$$, has annual operating costs of $$6000$$, a salvage value of $$10000$$, and a life of $$7$$ years. Using $$MARR=10\%$$, the equivalent annual cost of Machine $$B$$ is most nearly:

   • $$16,880$$
   • $$18,420$$
   • $$20,150$$
   • $$21,930$$

4. A project requires an initial investment of $$100000$$ and generates annual net benefits of $$18000$$ for $$9$$ years. The salvage value is $$12000$$ at the end of year $$9$$. If the $$MARR$$ is $$11%$$, based on rate of return analysis, should the project be accepted?

   • Yes, because $$IRR\approx13.2%$$ which exceeds $$MARR$$
   • Yes, because $$IRR\approx12%$$ which exceeds $$MARR$$
   • No, because $$IRR\approx10.2%$$ which is less than $$MARR$$
   • No, because $$IRR\approx8.9%$$ which is less than $$MARR$$

5. A concrete supplier has fixed costs of $$60,000$$ per month and variable costs of $$28$$ per cubic yard. If the company produces $$2500$$ cubic yards in a month, what is the total monthly cost?

   • $$98000$$
   • $$110,000$$
   • $$130,000$$
   • $$140,000$$

6. A manufacturing plant reports total costs of $$220000$$ when producing $$5000$$ units and $$300000$$ when producing $$7000$$ units. Assuming a linear cost relationship, the variable cost per unit is most nearly:

   • $$30$$
   • $$35$$
   • $$40$$
   • $$45$$

7. An engineering firm is considering investing $$100000$$ in a project that will return $$15000$$ per year. The firm could alternatively invest the money at $$8\%$$ annual interest. The annual opportunity cost of choosing the project is:

   • $$7000$$
   • $$8000$$
   • $$12000$$
   • $$15000$$

8. A company allocates indirect costs based on direct labor hours. Total indirect costs are $$240,000$$. Department $$A$$ uses $$5000$$ direct labor hours, Department $$B$$ uses $$3000$$ hours, and Department $$C$$ uses $$2000$$ hours. The indirect cost allocated to Department $$A$$ is most nearly:

   • $$80,000$$
   • $$100,000$$
   • $$120,000$$
   • $$140,000$$

9. Using the high-low method to separate mixed costs, a company observes total costs of $$340000$$ at $$8000$$ units and $$190000$$ at $$3000$$ units. The fixed cost component is most nearly:

   • $$80,000$$
   • $$100,000$$
   • $$120,000$$
   • $$140,000$$

10. A precast concrete company has fixed costs of $$180000$$ per year. Each concrete panel sells for $$75$$ and has a variable cost of $$45$$. The number of panels that must be sold to break even is most nearly:

    • $$4000$$ units
    • $$5000$$ units
    • $$6000$$ units
    • $$7200$$ units