FREE Bachelor of Science in Industrial Engineering: Engineering Economics Questions and Answers

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What does it mean to analyze and assess the financial effects of engineering applications, designs, and projects using the theories and principles of economics?

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"Economic analysis" refers to the process of evaluating and understanding the financial consequences and implications of engineering applications, designs, and projects using economic theories and principles. This analysis involves assessing the costs, benefits, risks, and potential outcomes of different engineering options to make informed decisions. It takes into consideration factors such as investment costs, operational costs, potential revenues, and other economic variables to determine the viability and profitability of an engineering endeavor.

What is used to describe the exchange process that connects the producers and consumers of a good, factor of production, or security?

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The term used to describe the exchange process that connects the producers and consumers of a good, factor of production, or security is market. A market is a place or mechanism where buyers and sellers come together to exchange goods, services, or resources. It can be a physical location, such as a store, or a virtual platform, such as an online marketplace. Markets facilitate the buying and selling of various items and play a vital role in the functioning of economies by determining prices, allocation of resources, and overall economic activity.

What is used to describe the products and services needed to meet human needs and activities?

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The term used to describe the products and services needed to meet human needs and activities is necessities. Necessities are essential goods and services required for basic living and well-being. They include items like food, shelter, clothing, healthcare, and other fundamental requirements that individuals need to maintain a decent quality of life.

According to ABC Corporation's policy, any new equipment should have an annual depreciation cost that is no more than 20% of the original cost and has no salvage value. If the SYD method of depreciation is being used, ascertain the duration of service life required.

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Given the policy that the annual depreciation cost should not exceed 20% of the original cost with no salvage value using the Sum-of-the-Years'-Digits (SYD) method of depreciation, and considering the options, the correct answer is 9 years.

What are the fundamental accounting equations?

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This equation represents the basic principle of double-entry bookkeeping, where every financial transaction has an equal impact on both sides of the equation. Assets are what a company owns, liabilities are what it owes, and owner's equity represents the residual interest in the assets of the company after deducting liabilities. This equation is the foundation of the balance sheet, one of the key financial statements in accounting.

The cost of an asset is P9,000.00. After a ten-year anticipated economic life, it will be sold for P 1,000.00. Utilizing the sum-of-years-digit approach, determine the depreciation over the first three years.

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Based on the information you've given (original cost of P9,000.00, anticipated economic life of ten years, and a salvage value of P1,000.00), the correct depreciation over the first three years using the Sum-of-the-Years'-Digits (SYD) method is indeed approximately P 3,927.27.
Here's the breakdown of the depreciation calculation:
First Year: (10 / 55) * 9,000 = P 1,636.36
Second Year: (9 / 55) * 9,000 = P 1,309.09
Third Year: (8 / 55) * 9,000 = P 1,309.09
Total Depreciation over the first three years = P 1,636.36 + P 1,309.09 + P 1,309.09 = P 3,927.54

With an initial investment of $50,000,000, the Saudi Arabian Oil Refinery drilled an oil well that is thought to hold 5,000,000 barrels of oil. What is the depletion fee for the year when 500,000 barrels of oil are produced? When calculating depletion, use the unit or factor technique.

Correct! Wrong!

First, calculate the depletion rate per barrel:
Depletion rate per barrel = Initial investment / Estimated oil reserves
Depletion rate per barrel = $50,000,000 / 5,000,000 barrels = $10.00 per barrel

Now, calculate the depletion fee for the year:
Depletion fee = Depletion rate per barrel * Number of barrels produced
Depletion fee = $10.00 * 500,000 barrels = $5,000,000.00

So, the depletion fee for the year when 500,000 barrels of oil are produced is indeed $5,000,000.00.

Any physical economic activity that directly or indirectly contributes to the gratification of human need is characterized as what?

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Any physical economic activity that directly or indirectly contributes to the gratification of human needs is characterized as services. Services are intangible activities or tasks that individuals, businesses, or governments provide to fulfill various needs and wants. They can include a wide range of activities such as education, healthcare, transportation, entertainment, consulting, and more. Services play a crucial role in modern economies and contribute significantly to economic growth and development.

Which two categories of products and services are there?

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The two categories of products and services are consumer goods (used by individuals) and producer goods (used by businesses in production).

The labor cost of producing a certain item is P 115, the material cost is P 76, and the variable cost is P 2.32. How many units must be produced each month at a unit price of P 600, with a monthly overhead of P 428,000, for the company to break even?

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First, calculate the total fixed costs (which include monthly overhead):
Total Fixed Costs = Monthly Overhead + Total Variable Costs
Total Variable Costs = (Labor Cost + Material Cost) * Number of Units
Total Variable Costs = (P 115 + P 76) * Number of Units

Now, set up the equation for the break-even quantity:
Break-Even Quantity = Total Fixed Costs / (Unit Price - Variable Cost per Unit)
Break-Even Quantity = (Monthly Overhead + Total Variable Costs) / (Unit Price - Variable Cost per Unit)

Solve for the number of units (Break-Even Quantity):
Break-Even Quantity = P 428,000 / (P 600 - P 2.32)

Break-Even Quantity ≈ 1,053 units

So, the company must produce approximately 1,053 units each month at a unit price of P 600, with a monthly overhead of P 428,000, in order to break even.

A manufacturing company runs a single line for assembling signal generators. 35 units per week are needed for the generators. The line is open seven hours a day, five days a week. What is the maximum number of hours the line needs to run in order to produce one unit to satisfy demand?

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Calculate the total available hours per week:
Total Available Hours per Week = Line open hours per day * Days per week
Total Available Hours per Week = 7 hours/day * 5 days/week = 35 hours/week

Now, calculate the time required to produce one unit:
Time per Unit = Total Available Hours per Week / Units needed per week
Time per Unit = 35 hours/week / 35 units/week = 1 hour/unit

So, the maximum number of hours the line needs to run in order to produce one unit to satisfy demand is 1.0 hour per unit.

What is the standard unit that serves as the foundation for a nation's domestic money supply?

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Foreign exchange refers to the conversion of one country's currency into another country's currency for various purposes, including international trade, travel, and investment. It involves the exchange rate between different currencies. Domestic money supply, on the other hand, refers to the total amount of money (currency and deposits) circulating within a country's economy in its own currency.

A reputable shoe maker charges P 900.00 per pair for labor and P 800.00 for materials to create a pair of Lebron James branded shoes. The company has monthly fixed costs of P 5,000,000 and variable expenditures of P 400.00 per pair. Lebron James receives P 1,000 in royalties for each pair of shoes sold. How many pairs must be made each month for the maker to break even if the shoes retail for P 5,000 per pair?

Correct! Wrong!

Total variable cost per pair = Variable cost per pair + Royalties per pair
Total variable cost per pair = P 400.00 + P 1,000.00 = P 1,400.00

Break-Even Quantity = Total Fixed Costs / (Selling Price per Pair - Total Variable Cost per Pair)
Break-Even Quantity = P 5,000,000 / (P 5,000.00 - P 1,400.00)
Break-Even Quantity ≈ 2,632 pairs
So, approximately 2,632 pairs must be made each month for the shoe maker to break even at a selling price of P 5,000 per pair.

3200 ice cans are needed each month, according to Mr. Davis' production. The cost of cutting one unit using a manual guillotine is P25.00. Mr. Davis was offered a P275,000.00 electrically controlled hydraulic guillotine, which reduces the cost of cutting units by 30%. How many months, ignoring the expense of money, will Mr. Davis need to purchase the equipment in order to recoup his investment?

Correct! Wrong!

First, calculate the monthly cost savings with the new equipment:
Cost reduction per unit = P25.00 * 0.30 = P7.50
Monthly cost savings = Cost reduction per unit * Number of ice cans needed = P7.50 * 3200 = P24,000.00

Now, calculate the payback period:
Payback period = Cost of equipment / Monthly cost savings
Payback period = P275,000.00 / P24,000.00 ≈ 11.46 months

Since Mr. Davis can't purchase a fraction of a month, we round up to the next whole month:
Payback period = 12 months
So, Mr. Davis will need approximately 12 months to recoup his investment in the electrically controlled hydraulic guillotine, ignoring the expense of money.

Any tangible economic good that directly or indirectly contributes to the satisfaction of human need is described as what?

Correct! Wrong!

Any tangible economic good that directly or indirectly contributes to the satisfaction of human needs is described as goods or commodities. Goods are physical products that people want and consume, ranging from basic necessities like food and clothing to more specialized items like electronics and vehicles. These goods can be classified into various categories based on their characteristics and uses, such as consumer goods, capital goods, intermediate goods, and more.

Either tinned wire or enameled wire can be used to construct a 100-pair telephone switchboard cable. 400 soldered connections will be present. On an enameled wire, a connection will cost P1.65, but on a tinned wire, it will cost P1.15. A 100-pair cable made of tinned wire costs P 0.75 per linear foot, compared to P 0.55 for cables made of enameled wire. To ensure that each installation costs the same amount, calculate the cable run's length in feet.

Correct! Wrong!

Extra cost for connections = Extra cost for cable length P0.50 * 400 = P0.20 * x

Solve for x:

200 = 0.20 * x
x = 200 / 0.20
x = 1000 feet
So, the cable run's length required to ensure that each installation costs the same amount is 1,000 feet.

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