Deck 2: Estimating Engineering Costs and Benefits

Question 1

Table 1
Tech Engineering in TN is making a product for the overseas market.
The following cost data for the product has been compiled.
$$\begin{array} { | l | l | } \hline \text { Item } & \text { Cost } \\\hline \text { Selling price } & \$ 167 \\\hline \text { Materials and purchased parts } & \$ 25 / \text { unit } \\\hline \text { Direct Labor } & 2 \mathrm { hrs } \text { at } \$ 20 \text { per hour } \\\hline \text { Fixed Cost } & \$ 1,400,000 \\\hline\end{array}$$

-If the overhead expenses are charged at 80 % of labor cost, determine the manufacturing cost per unit.

A) $72
B) $97
C) $65
D) None of these

Answer 1

$97

Question 2

Table 1
Tech Engineering in TN is making a product for the overseas market.
The following cost data for the product has been compiled.
$$\begin{array} { | l | l | } \hline \text { Item } & \text { Cost } \\\hline \text { Selling price } & \$ 167 \\\hline \text { Materials and purchased parts } & \$ 25 / \text { unit } \\\hline \text { Direct Labor } & 2 \mathrm { hrs } \text { at } \$ 20 \text { per hour } \\\hline \text { Fixed Cost } & \$ 1,400,000 \\\hline\end{array}$$

-The breakeven volume for this product is ____________.

A) 14,433
B) 8,383
C) 20,000
D) None of these

Answer 2

20,000

Question 3

Table 1
Tech Engineering in TN is making a product for the overseas market.
The following cost data for the product has been compiled.
$$\begin{array} { | l | l | } \hline \text { Item } & \text { Cost } \\\hline \text { Selling price } & \$ 167 \\\hline \text { Materials and purchased parts } & \$ 25 / \text { unit } \\\hline \text { Direct Labor } & 2 \mathrm { hrs } \text { at } \$ 20 \text { per hour } \\\hline \text { Fixed Cost } & \$ 1,400,000 \\\hline\end{array}$$

-What is the profit per unit if 30,000 units are sold?

A) $23.33
B) $20.81
C) $24.35
D) None of these

Answer 3

$23.33

Question 4

Table 1
Tech Engineering in TN is making a product for the overseas market.
The following cost data for the product has been compiled.
$$\begin{array} { | l | l | } \hline \text { Item } & \text { Cost } \\\hline \text { Selling price } & \$ 167 \\\hline \text { Materials and purchased parts } & \$ 25 / \text { unit } \\\hline \text { Direct Labor } & 2 \mathrm { hrs } \text { at } \$ 20 \text { per hour } \\\hline \text { Fixed Cost } & \$ 1,400,000 \\\hline\end{array}$$

-To reduce the breakeven volume to 15,000 units, what should be the selling price?

A) $210.33
B) $190.33
C) $241.35
D) None of these

Question 5

A 2000-gallon metal tank to store hazardous materials was bought 15 years ago at cost of $100,000. What will a 5,000-gallon tank cost today if the power-sizing exponent is 0.57 and the construction cost index for such facilities has increased from 180 to 600 over the last 15 years? Choose the closest value.

A) $337,175
B) $666,667
C) $561,960
D) None of these.

Question 6

Case Study 2
A product that is very labor intensive assembled at Boyds Aero Structure in Memphis has an average labor cost of $20/hr. Overhead expenses are charged at 100% of labor at this company.
Time for the very first unit = 10 hours
Time for the fourth unit = 8.1 hours.

-The learning curve percentage for this operation is ________.

A) 90%
B) 85%
C) 95%
D) 75%

Question 7

Case Study 2
A product that is very labor intensive assembled at Boyds Aero Structure in Memphis has an average labor cost of $20/hr. Overhead expenses are charged at 100% of labor at this company.
Time for the very first unit = 10 hours
Time for the fourth unit = 8.1 hours.

-What is the cumulative time for 100 units to be made?

A) 869.12 hrs
B) 581.33 hrs
C) 761.84 hrs
D) 621.68 hrs

Question 8

The learning curve percentage is 80% if the learning curve exponent is given as
-0.3214.

Question 9

The breakeven volume is the quantity for which the unit cost is minimized.

Question 10

Sunk costs must be ignored in engineering economic decision making as sunk costs are money
already spent and do not have any consequence on decision making.

Question 11

An opportunity cost is associated with using a resource in one activity instead of another.

Question 12

Life cycle costs (LCC) are costs incurred on a product from cradle to grave, (i.e) concept generation to retirement.