Solution manual Engineering Economy, Exams of Engineering Economy

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Solution manual Engineering Economy, 17th

Global Edition, by Brian, Mugo, Muthee

What is engineering economy? Engineering economy is the application of mathematical formulas to account for the time value of money and balance current and future revenues and costs. What principle explains that $1 today is worth more than $1 in the future? The time value of money. What are sunk costs? Costs that have already been incurred or dollars that have already been spent. Who are stakeholders in an engineering project? Those affected by the project, including employees, customers, users, managers, owners, and stockholders. What does satisficing mean in decision making? Choosing a satisfactory alternative rather than searching for the best alternative. What is economic efficiency? Economic efficiency is measured by dividing the dollar value of outputs by the dollar value of inputs. Why might a building without insulation be cheaper to build but more expensive to operate?

It has lower initial construction costs but higher heating and cooling costs. What is the significance of the time value of money in engineering economy? It allows for the consideration of interest or income that can be earned on money over time. What is the role of interest rates in engineering economy? Interest rates serve as the exchange rate for the time value of money. What types of decisions can engineering economy help analyze? Decisions such as choosing between materials for construction, evaluating loan options, and assessing project investments. What does the phrase 'Engineering is the art of doing well with one dollar what any bungler can do with two' imply? It emphasizes the importance of efficiency and cost-effectiveness in engineering practices. What is the first step in the decision-making process in engineering economy? Define the problem and identify the alternatives. What is the importance of balancing current and future costs in engineering economy? It ensures that decisions are made with a comprehensive understanding of long-term financial implications. What is a common misconception about efficiency in engineering projects?

It includes making decisions about materials, costs, and operational efficiencies. What is the impact of long-term planning in engineering economy? Long-term planning allows for better financial forecasting and resource allocation. What is a common application of engineering economy in infrastructure projects? Choosing between different construction materials or methods based on cost-effectiveness. How does engineering economy contribute to sustainability in engineering? By analyzing costs and benefits over time, it promotes choices that are economically and environmentally sustainable. What is the primary focus of engineering economy? Balancing current and future revenues and costs. What does the principle of 'Common Measure' emphasize? Stating consequences in a common monetary measure. Why should all consequences be included in economic evaluation? Because important outcomes may be difficult to quantify in monetary terms. What should be ignored according to the principle 'Only Differences Matter'? Sunk costs. What is the significance of separable decisions in engineering economy?

It allows for evaluating decisions independently to avoid poor outcomes. What viewpoint should be adopted in economic decision-making? A systems viewpoint, considering the entire organization or agency. What is an example of an irreducible consequence? Maintaining morale by avoiding layoffs. What is the relevance of time value of money in engineering economy? It provides a mechanism for stating outcomes in monetary terms. What does the principle of addressing uncertainty involve? Considering the variability and unpredictability of future outcomes. What is the correct argument regarding the use of old machines in the HiTek example? HiTek should keep the Lemons since they will be worth only $80K if sold. What does the term 'current worth' refer to? The present value of an asset, ignoring past costs. What is a common mistake in economic decision-making? Including sunk costs in evaluations. What is the implication of only considering differences between alternatives? It simplifies the evaluation of engineering design problems. What is an example of a quantifiable measure in engineering economy?

Choosing a financing method and selecting a project to invest in. What is the impact of ignoring sunk costs in decision-making? It leads to more rational and economically sound decisions. What should be the focus when comparing alternatives in engineering design? Only the differences in costs and benefits relevant to the decision. What is the correct approach when evaluating the use of existing assets? Consider their current value and potential future benefits. Why is it important to include intangible factors in economic evaluations? Because they can significantly impact overall outcomes and decisions. What is the first step in the decision-making process? Define the problem. What should be used to avoid misleading differences in project justification? A Common Planning Horizon. Why is addressing uncertainty important in engineering economy? Because economic data are often less certain than physical data, and future consequences of decisions are based on estimates. What are the steps involved in the decision-making process?

1. Define problem, 2. Choose objective(s), 3. Identify alternatives, 4. Evaluate consequences, 5. Select, 6. Implement, 7. Audit. What does Step 6 of the decision-making process entail?

Implementing the chosen alternative. What is the purpose of Step 7 in the decision-making process? To audit the decision and evaluate the process to identify lessons learned. What can result from a well-structured decision-making process? Turning a mess into a problem that can be solved. What is a common mistake in defining the problem? Defining it too narrowly or too broadly. What should be considered when choosing objectives? The time value of money and all associated costs and benefits. What is the significance of evaluating consequences? To enumerate each alternative's advantages and disadvantages with respect to the objectives. What is the difference between effectiveness and efficiency? Effectiveness is doing the right things, while efficiency is doing things the right way. What technique can improve creativity in identifying alternatives? Brainstorming. What is the goal of brainstorming? To generate as many ideas as possible without immediate criticism. What is the consequence of focusing too narrowly on alternatives? The best alternative may be overlooked. What should be included in the evaluation of alternatives?

It defines the steps for decision making, although real-world processes are often nonlinear. What is the relationship between effectiveness and strategic direction? Effectiveness focuses on aligning actions with the firm's strategic goals. What should be done if the problem is defined too narrowly? Explore broader definitions to allow for more creative solutions. What is the impact of considering multiple objectives in decision- making? It allows for a more holistic view of the situation and better outcomes. What is the first step in the engineering decision-making process? Define the problem. What is the second step in the engineering decision-making process? Choose objective(s). What is the third step in the engineering decision-making process? Identify alternatives. What is the fourth step in the engineering decision-making process? Evaluate consequences. What is the fifth step in the engineering decision-making process? Select the best alternative. What is the sixth step in the engineering decision-making process? Implement the chosen alternative. What is the seventh step in the engineering decision-making process?

Audit the results. Why is stakeholder involvement important in the decision-making process? It ensures that those affected by the project are considered in earlier steps. What can happen if the wrong objective is chosen in the selection process? The wrong alternative may be selected. What is a common issue that can arise during the implementation phase? Some individuals may not believe the best alternative was chosen, affecting their commitment. What is a potential consequence of omitting the audit step? It can lead to a lack of learning from past decisions and mistakes. What is meant by a nonlinear decision-making process? It involves feedback loops and simultaneous activities rather than a strict linear sequence. How does iterative modeling support decision-making? It allows for refining uncertain data and recalculating models as more information becomes available. What should be done if actual results differ from predicted performance? Conduct an audit to learn what should be done differently next time. What role do communication skills play in the decision-making process?

What is the importance of maintaining an audit trail? It helps in tracking data sources and ensuring accountability in decision- making. What can lead to project failure in Third World countries? Lack of maintenance expertise or violation of local customs and power structures. What is the significance of minimizing life-cycle costs in project selection? It ensures that the most cost-effective and sustainable option is chosen. What should be done if departmental infighting affects decision- making? Address the conflicts to ensure the best alternatives are selected based on objective criteria. What is the primary philosophy of modeling in engineering? Build simple models first and add detail only where needed. Why are spreadsheets popular in engineering economic modeling? They allow easy updates of calculations based on new estimates of costs, revenues, or project life. What is sensitivity analysis in engineering? It involves using results from one iteration to refine data estimates for the next iteration. What is the cost comparison between a slurry pipeline and a sludge conveyor for volumes greater than 16,000 liters per day? The sludge conveyor is less expensive but has a capacity limit of less than 17,000 liters per day.

What is a key factor in building trust with decision makers? Establishing a reputation for thorough analysis and reasonable assumptions. What is the significance of communication skills in engineering? They are essential for effective teamwork and conveying ideas clearly. What is the best approach when an assignment is unclear? Ask questions to clarify the assignment. What should you do if colleagues disagree with your viewpoint? Restate their viewpoint in your own words to their satisfaction. What is the consequence of delaying decisions for further analysis? The cost of delay usually exceeds the expected improvement in results. What does 'satisficing' mean in decision making? Choosing a satisfactory alternative rather than searching for the best one. Who received the Nobel Prize for Economics in 1978 for describing decision-making behavior? Professor Herbert Simon. What is the role of interest groups in public decision making? They attempt to influence regulations, laws, and policies. Why is adopting a systems viewpoint important in decision making? It helps to consider the conflicting interests of all stakeholders. What is a common communication weakness in engineering economic evaluations?

They emphasize the need for effective communication and collaboration. What is the significance of documenting assumptions in engineering evaluations? It provides transparency and clarity in the decision-making process. What should engineers focus on when analyzing alternatives? The benefits of action rather than just the quality of analysis. How does the decision-making process relate to engineering projects? Each project is part of a larger stream of decisions made annually. What is the importance of establishing a good relationship between departments in engineering? It facilitates cooperation and effective decision making. What are the three categories of engineering economy problems?

1. Too small to merit applying engineering economy. 2. Solution determined by engineering economy. 3. So big that engineering economy is only one factor. When can the time value of money be ignored in engineering economy? When the dollars per year are small and the time is short. What is an example of a problem too small to merit engineering economy? Grocery shopping and comparing unit prices of two package sizes. What is an example of a problem where the time value of money is not significant?

Choosing between shipping methods like express air, regular air, or truck. What does it mean when engineering economy dominates decision making? If money is spent or received over a year or more, engineering economy is required to evaluate alternatives. What are the three types of criteria important in decision making?

1. Time value of money. 2. Other quantifiables. 3. Irreducibles. What are recurring costs? Costs that occur more than once, usually every period. What are nonrecurring costs? Costs that occur only once. What are life cycle costs? Costs that include all expenses for purchase, use, repair, and sale. What is the difference between fixed and variable costs? Fixed costs are all-or-nothing costs, while variable costs depend on volume or use. What is average cost? Total cost divided by the number of units. What is marginal cost? The cost of producing one more unit. What is incremental cost? The cost for a specified number of incremental units.

What is the indirect assembly line cost per unit for overtime? $2.232. What was the marginal cost saving per unit when using a second shift? 29.6¢ per unit. What error did Mario make in his analysis? He did not account for the second shift's minimum length of 4 hours. What are some fixed costs that may not increase with overtime? Benefits like vacation time, insurance, and sick leave. What additional costs must be considered when hiring for a second shift? Costs for advertising, interviews, initial training, and time to reach full productivity. What factors must be included in the detailed computation for labor costs? Costs for advertising, interviews, initial training, and time to reach full productivity. What percentage of total labor costs are estimated for shutdown or termination costs if the second shift is temporary? 25% What is the formula for calculating the incremental cost for overtime? Costovertime = 120($13.85/60 • 1.5 · 1.08 · 1.053 + $2.232)

What is the incremental cost per unit for overtime calculated in the document? $2.63/unit What does the incremental cost for a second shift include? 4 hours of labor, indirect costs, 10% shift premium, 19% benefit expense, and 25% increase in administrative expenses. What is the total cost per unit for the second shift as mentioned in the notes? $2.88/unit What is the first step in the decision-making process of engineering economy? Define the problem. What principle states that only differences between alternatives should be considered in economic analysis? Ignore sunk costs. What is meant by adopting a systems viewpoint in economic analysis? Considering the entire system rather than isolated parts. What does the decision-making process in engineering economy include? Define the problem, choose the objective, identify alternatives, evaluate consequences, select, implement, and audit. What is a common tool used in the decision-making process for refining data? Spreadsheets.