KENYATTA UNIVERSITY

FOURTH YEAR SECOND SEMESTER CAT EXAMINATION FOR THE DEGREE OF

BACHELOR OF CIVIL & ELECTRICAL ENGINEERING
ECU 402 ENGINEERING ECONOMICS
CAT
Instruction to Candidates:
1) Attempt all questions
A. Explain life cycle costing with a neat sketch.

(10 marks)

B. Briefly discuss the following cost classification:

i.
First cost
ii.
Operation and maintenance cost
iii.
Marginal cost.
(10 marks)
C. Discuss the elements of the following types of budgets:
i.
Production budget
ii.
Material and purchase budget.
(10 marks)
D. List and briefly discuss the various liquidity ratios and leverage ratios.
(10 marks)
E. Explain with suitable/relevant examples different engineering economic problems an
engineer confronts with, in day-to-day life.
(10marks)
F. An engineering economist solves problem and takes appropriate decision using time
honored scientific method. Explain with a suitable diagram.
(10 marks)
G. Explain life cycle costing with a neat sketch.
H. List and explain the conditions for present worth comparisons.
(10 marks)
I. Your engineering firm needs a rapid prototyping machine. The company gives you two
options. In Option 1 you purchase the machine outright for $50,000, pay a maintenance
contract of $1,000 per year, and expect to be able to resell the machine after 10 years at a
salvage value of $10,000. In Option 2, you lease the machine at $7,000 per year and pay
no maintenance, but receive no salvage. Assume that you will be able to take in $8,000
per year in income from this machine. Also assume that an additional option is not to buy
the machine at all, but to put the money in the bank at 5% interest. Which option will be
best for the firm?
(10 marks)
J. Explain with examples the various causes of depreciation.
(10 marks)
K. Explain any five basic concepts underlying financial accounting.
(10 marks)

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