SELECTION IN
PRESENT
ECONOMY
CHAPTER 5
• There are many cases in engineering economy studies where interest is not a factor, these
studies are frequently called present economy problems such studies usually involve the
selection between alternative designs materials or methods.
• ( 5-1) am electrical contractor has a job which should be completed in 100 days. At
present he has 80 men on the job and it is estimated that they will finish the work in 130
days. If of the 80 men. 50 are paid P190 a day, 25 at P220 a day and 5 at 300 a day and if
for each day beyond the original 100 days, the contractor has to pay P2000 liquidated
damages
(a) How many more men should the contractor add so he can complete the work on time?
(b) If the additional men of 5 are paid P200 a day and the rest at P 190 a day, would a
contractor save money by employing more men and not paying fine?
SOLUTION
(a) Let x = number of men to be added to complete the job on time.
Equating man days, we have
( x + 80) (100) = (80)(130)
x = 24 men
SOLUTION
(b) 80 men on the job: 104 men on the job:
Wages (50 + 19) (P190) (100) = P 1,311,000
Wages (50y) (P190) (130) = P 1,235,000
(25+5) (220) (100) = 650,000
(25) (220) (130) = 715,000 (5) (P300)(100) = 150,000
__________
(5) (P300) (130) = 195,000 Total expense = P 2,121,000
Damages (2,000) (30) = 60,000 Saving by employing more men
= P2,205,000 - P2,121,000
___________ = P84,000
Total expense = P 2, 205,000
• (5-2) The monthly demand for ice cans being manufactured by Mr. Cruz is 3,200 pieces. With a
manually operated guillotine, the unit cutting cost is P25.00. An electrically operated hydraulic
guillotine was offered to Mr. Cruz at a price of P275,000 and which will cut by 30% the unit cutting
cost. Disregarding the cost of money, how many months will Mr. Cruz be able to recover the cost of
the machine if he decides to buy now?
CUSTOMIZE THIS TEMPLATE
Solution
Manually Operated Guillotine
Monthly cutting cost (3,200) (P25) = P80,000
Electrically Operated Hydraulic Guillotine
Monthly cutting cost (3,200) (P25) (1-0,30) = P56,000
Savings = P80,000-P56,000 P24,000 per month
No. of months to recover cost of machine = P275,000
________
P24,000
=11.5
(5-3) The making of rivets holes in structural steel members can be done by two methods. The first
method consists of laying out the position of the holes in the members and using a drill press costing
P30,000 The machinist is paid P35 per hour and he can drill 30
holes per hour.
The second method makes use of a multiple-punch machine costing P27.500. The punch operator is
paid P30 an hour and he can punch out 4 holes every minute. This method also requires an expense of
P1.75 per hole to set the machine
(a) If all other costs are assumed equal, what is the total cost for each machine for 6,000 holes,
assuming the total cost of each machine to be charged to these holes?
(b) For how many holes will the costs be equal?
SOLUTION
(a) Drill Press:
Time to drill 6,000 holes = 6,000
wage of machinist = (P35) (200) = P 7,000 cost of drill press
Multiple Punch Machine:
Total cost
Time to punch 6,000 holes =30.000
P37,000
6,000
=25 hours
(4) (60)