Selections in Present Economy : Problem Set

Method:
1. In a mining site in Mindoro, the ore contains, on the average, one ounce of gold per
ton. One method of processing “A” costs Php 1,500 per ton and recovers 90% of the
gold. Another method “B” costs only Php 1,200 per ton and recovers 80% of the gold.
If the gold can be sold at Php 4,000 per ounce, which method is better and by how
much?

2. The making of rivet 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 Php 30,000. The machinist is paid Php 20 per hour and he
can drill 30 holes per hour.
The second method makes use of a multiple-punch machine costing Php 27,500. The
punch operator is paid Php 18 an hour and he can punch out 4 holes every minute.
This method also requires an expense of Php 0.70 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 that the total cost of each machine is charged to these
holes?
b. For how many holes will the costs be equal?

3. The monthly demand for ice cans being manufactured by Mr. Cool is 3,200 pieces.
With a manually operated guillotine, the unit cutting cost is Php 25. An electrically
operated hydraulic guillotine was offered to Mr. Cool at a price of Php 275,000 and
which will cut by 30% the unit cutting cost. Disregarding the cost of money, how
many months will Mr. Cool be able to recover the cost of the machine if he decides to
buy now?

Material:

1. GMA will be visiting an automobile plant. It was decided by the plant management
that they must paint the plant.
Boysen paint costs Php 70 per gallon and covers 350 sq. ft. per gallon. The
manufacturer claims that it will last 5 years and can be applied at a rate of 100 sq. ft.
per hour.
General paint costs Php 100 per gallon and covers 500 sq. ft. per gallon. It will last
for 4 years and can be applied at a rate of 125 sq. ft. per hour. If the painter is Paid
Php 15 per hour, which paint should be used?

2. The volume of raw material required for a certain product is 2.02 cu. cm. The finished
product volume is 1.05 cu. cm. The time for machining each piece of the product is
45 seconds for steel and 30 seconds for brass. The cost of steel is Php 26.50 per kg.
and the value of steel scrap is negligible. The cost of brass is Php 51.25 per kg. and
the value of brass scrap is Php 16 per kg. The wage of the operator is Php 25 per hour
and the overhead cost of the machine is Php 15 per hour. The weight of steel and
brass are 0.0081 and 0.0088 kg. per cu cm., respectively. Which material will you
recommend?

ENGECON: Selections in Present Economy 1

3. High carbon steel or alloy steel can be used for the set of tools on a lathe. The tools
must be sharpened periodically. Data for each are as follows:
High Carbon Steel Alloy Steel
Output per hour 60 pcs. 70 pcs.
Time between tool grinds 4 hours 6 hours
Time required to change tools 1 hour 1 hour
The wage of the lathe operator is Php 24 per hour, based on the actual working hours.
The tool changer costs Php 30 per hour. Overhead costs for the lathe are Php 14 per hour,
including tool-change time. A set of unsharpened high carbon steel costs Php 500 and can
be ground ten times; a set of unsharpened alloy steel costs Php 650 and can be ground
five times. Which type of steel should be used?

Design:

1. A company manufactures 1,000,000 units of a product yearly. A new design of the

product will reduce materials cost by 12%, but will increase processing cost by 2%. If
materials cost is Php 1.20 per unit and processing will cost Php 0.40 per unit, how
much can the company afford to pay for the preparation of making the new design
and making changes in equipment?

Site Selection:

1. A certain masonry dam requires 200,000 cu. M. Of gravel for its construction. The
contractor found two possible sources for the gravel with the following data:
Source A Source B
Average distance, gravel pit 3.0 km. 1.2 km.
to dam site
Gravel cost / cu. m. At pit NA PHP 10.00
Purchase price of pit Php 800,000 NA
Road construction Php 450,000 NA
necessary
Overburdened to be NA 90,000 cu. m.
removed
@ Php 4.20 / cu. m.
Hauling cost per cu. m. per Php 4.00 Php 4.00
km.

Which of the two sites will give lesser cost?

ENGECON: Selections in Present Economy 2

Equipment Maintenance:

1. A machine used for cutting materials in a factory has the following outputs per hour
at various speeds and requires periodic tool regrinding at the intervals cited.
Speed Output per Hour Tool Regrinding
A 200 pieces Every 8 hours
B 280 pieces Every 5 hours
A set of tools costs Php 1,260 and can be ground twenty times. Each regrinding costs
Php 54 and the time needed to regrind and change tool is 1 hour. The machine operator is
paid Php 19.20 per hour, including the time the tool is changed. The tool grinder who
also sets the tools to the machine is paid Php 21 per hour. The hourly rate chargeable
against the machine (based on machine operating time) is Php 38, regardless of machine
speed. Which speed is the most economical?

Economy and Proficiency of Labor / Workers:

1. An 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 Php 62 a day, 25 at Php 68 a day, and 5 at Php 75 a day
and if for each day beyond the original 100 days, the contractor has to pay Php 250
liquidated damages:
a. How many more men should the contractor add so he can complete the work on
time?
b. Of the additional men, 5 are paid Php 68 a day and the rest at Php 62 a day.
Would the contractor save money by employing more men and not paying the
fine?

2. A certain product is being made by hand in a small factory. The workers were paid
Php 0.20 per acceptable piece produced. It was found that if a worker produced 80
pieces per day, 5% would be rejected. If 90 pieces were produced per day, 10%
would be rejected, and at the rate of 100 pieces, 20% would be rejected. The cost of
materials was Php 0.50 per piece, and the materials in any rejected piece had to be
thrown away. There was a fixed overhead expense of Php 10.00 per day per worker,
regardless of considerable change in output.
a. At which of the three outputs did the worker make the highest wage?
b. At what output did the factory achieve the lowest unit cost?

3. An executive receives an annual salary of Php 240,000 and his secretary a salary of
Php 60,000 a year. A certain task can be performed by the executive working alone in
4 hours. If he delegates the task to his secretary it will require him 30 minutes to
explain the work and another 45 minutes to check the finished work. Due to the
unfamiliarity of the secretary to do task, it takes her an additional time of 6 hours
after being instructed. Considering salary cost only, determine the cost of performing
the task by each method if secretary works 2,400 hours a year and the executive 3,000
hours a year.

ENGECON: Selections in Present Economy 3