Mohammed Taha Mohammed Mohammed Ali

ENGINEERING ECONOMY

Sheet 1 (Cost)

Problem 1:
As A General Manager of El-Nagah Company. You Were Asked To Determine The
Selling Price Of A New Product. Information Available Shows That:
Direct Material Cost Per Unit Is 3 L.E.
Direct Labor Cost Per Unit Is 1.5 L.E.
The Total Value Of Equipment Used For Production Is 1,000,000 L.E. To Be
Depreciated Over 10 Years.

The Market Study Showed That The Annual Sales Volume Is 100,000 Units. The
General Overhead Of The Company Is 25% Of The Direct Cost. The General Policy of
the Company to Realize 20% Profit over the Total Cost.

Solution:

Cost Over 10 Years

Depreciation Cost (Annual) = 1,000,000⁄10 = 100,000 𝐿. 𝐸./𝑌𝑒𝑎𝑟

Depreciation Cost (Unit) = 100,000⁄100,000 = 1 𝐿. 𝐸./𝑈𝑛𝑖𝑡

Direct Cost = 1 + 3 + 1.5 = 5.5 𝐿. 𝐸./𝑈𝑛𝑖𝑡

Overhead Cost = 5.5 ∗ 0.25 = 1.375 𝐿. 𝐸./𝑈𝑛𝑖𝑡

Total Cost = 1.375 + 5.5 = 6.875 𝐿. 𝐸./𝑈𝑛𝑖𝑡

Selling Price = 1.2 ∗ 6.875 = 8.25 𝐿. 𝐸./𝑈𝑛𝑖𝑡

 Mohammed Taha Mohammed Mohammed Ali
ENGINEERING ECONOMY

Problem 2:

A manager is trying to decide whether to purchase a certain part or to have it produced

internally.
Internal production could use either of two processes. One would entail a variable cost
of 17 L.E. per unit and an annual fixed cost of 20,000 L.E. the other would entail a
variable cost of 14 L.E. per unit and annual fixed cost of 20,400 L.E..
Three vendors are willing to provide the part.
- Vendor A has a price of 20 L.E. per unit for any volume up to 30,000 units.
- Vendor B has a price of 22 L.E. per unit for demand of 1000 units or less, and 18
L.E. per unit for large quantities.
- Vendor C offers a price of 21 L.E. per unit for the first 1000 Units, and 19 L.E.
per unit for additional units.
If the manager expects an annual volume of 10000 units, which alternative would be
best from cost stand point? For 20000 units, which alternative would be best?

Solution:

Internal production Process 1:

T. C. For 10,000 Unit = 20,000 + 17 ∗ 10,000 = 190,000 𝐿. 𝐸.
T. C. For 20,000 Unit = 20,000 + 17 ∗ 20,000 = 360,000 𝐿. 𝐸.

Internal production Process 2:

T. C. For 10,000 Unit = 20,400 + 14 ∗ 10,000 = 160,400 𝐿. 𝐸.
T. C. For 20,000 Unit = 20,400 + 14 ∗ 20,000 = 300,400 𝐿. 𝐸.

Vendor A:
T. C. For 10,000 Unit = 20 ∗ 10,000 = 200,000 𝐿. 𝐸.
T. C. For 20,000 Unit = 20 ∗ 20,000 = 400,000 𝐿. 𝐸.

Vendor B:
T. C. For 10,000 Unit = 18 ∗ 10,000 = 180,000 𝐿. 𝐸.
T. C. For 20,000 Unit = 18 ∗ 20,000 = 360,000 𝐿. 𝐸.

Vendor C:
T. C. For 10,000 Unit = 21 ∗ 1,000 + 19 ∗ 9,000 = 192,000 𝐿. 𝐸.
T. C. For 20,000 Unit = 21 ∗ 1,000 + 19 ∗ 19,000 = 382,000 𝐿. 𝐸.
Comment: Internal production Process (2) is The Best Choice for Production.
 Mohammed Taha Mohammed Mohammed Ali
ENGINEERING ECONOMY

Problem 3:

As a general manager of the eternal happiness company. You were asked to determine
the selling price of a new product. You gathered the following data from different
departments:
1. Material cost 2 L.E./Unit
2. Machines cost 1,000,000 L.E.
3. Economic life of machines 10 years.
4. Labor cost:
a. Production labor 0.1 L.E. / Unit
b. Supervision labor 5,000 L.E. / Month
5. Power consumption:
a. Machines 50 L.E. / Hr.
b. Light 10 L.E. / Hr.
6. Production rate is 1000 Unit/Shift (1 shift = 8 hours)
7. Department overhead is 20 % of direct cost.
8. Company's general overhead is 40 % over all other costs.
9. Net profit is 20% of total cost.
10.Taxes are 40% of gross profit.

Solution:

For the machine:

Depreciation = 1,000,000⁄10 = 100,000 𝐿. 𝐸./𝑌𝑒𝑎𝑟

The working hours of year = 8 ∗ 300 = 2400 𝐻𝑟.

D/Hr. = 100,000/2400 = 41.666666667 𝐿. 𝐸./𝐻𝑟.

D/Unit = 41.667 ∗ 8⁄1000 = 0.3336 𝐿. 𝐸./𝑈𝑛𝑖𝑡

Direct Cost = Material + Machine Cost + Production Labor + Machine Power

Direct Cost = 2 + 0.1 + (50 ∗ 8/1000) + 0.3336 = 2.8336 𝐿. 𝐸./𝑈𝑛𝑖𝑡

Department overhead = 0.2 ∗ 2.8336 = 0.56672 𝐿. 𝐸./𝑈𝑛𝑖𝑡

 Mohammed Taha Mohammed Mohammed Ali
ENGINEERING ECONOMY

Indirect Cost = Supervision labor + Light + Department overhead

5000 8
Indirect Cost =( ) + (10 ∗ 1000) + 0.56672 = 0.813386 𝐿. 𝐸./𝑈.
30∗1000

General Overhead = 0.4 ∗ 0.813386 = 0.3253546666666667 𝐿. 𝐸./𝑈𝑛𝑖𝑡

Total Cost = 2.8336 + 0.325354667 + 0.813386 = 3.97234 𝐿. 𝐸./𝑈.

Net profit = 0.2 ∗ 3.97234 = 0.794468 𝐿. 𝐸./𝑈𝑛𝑖𝑡

Net Profit = Gross Profit – Taxes

∴ 0.8047 = 𝐺𝑃 − 0.4 𝐺𝑃

Gross profit = 1.32411 𝐿. 𝐸./𝑈𝑛𝑖𝑡

Selling Price = 𝑇𝑜𝑡𝑎𝑙 𝐶𝑜𝑠𝑡 + 𝐺𝑟𝑜𝑠𝑠 𝑃𝑟𝑜𝑓𝑖𝑡 = 5.2964 𝐿. 𝐸./𝑈𝑛𝑖𝑡

 Mohammed Taha Mohammed Mohammed Ali
ENGINEERING ECONOMY

Problem 4:

A Company Is Considering the Production of New Product. Production Department

Estimated the Cost of Production as Follows:
1. Material Cost 10 LE/Unit
2. Product is Produced on One Machine That Costs 100,000 LE
 The Economic Life of The Machine is 5 Years
3. Machining Time of One Unit is 20 Minute
4. Labor Cost is 20 LE/Hour
5. Production Overhead is 25% of the Production Cost
6. Unit of Production is Kilogram.
The Taxes are 40% of the Gross Profit. Sales Cost is 0.5 LE/Unit. The Policy of the
Company is to realize 20% Profit over Total Cost. If the General Overhead of the
Company is 30% what should be The Selling Price That Meet the Policy of The
Company

Solution:

Machine Life (24/7 Working) = 5*365*24 = 43,800 Hour

No. of Units = 43,800*3 = 131400 Unit

Labor Cost (20 LE/Hour) = 20/3 = 6.6667 L.E./Unit

Material Cost (10 LE/Unit) = 10 L.E./Unit

Machine Cost = 100,000/43,800/3 = 0.761 L.E./Unit

Production Cost = 6.6667 + 10 + 0.761 = 17.4277 L.E./Unit

Production Overhead Cost = 0.25*17.4277 = 4.356925 L.E./Unit

Total Cost = 1.3*(Production Cost + Overhead + Sales)

Total Cost = 1.3*(4.3569 + 17.4277 + 0.5) = 28.96998 L.E./Unit

Net Profit = 0.2*28.96998 = 5.793996 L.E./Unit

Net Profit = Gross Profit – Taxes ∴ 5.793996 = 𝐺𝑃 − 0.4 𝐺𝑃

Gross Profit = 9.65666 L.E./Unit

Selling Price = Gross Profit + Total Cost = 9.65666 + 28.96998 = 38.62664 L.E./Unit
 Mohammed Taha Mohammed Mohammed Ali
ENGINEERING ECONOMY

Sheet 2 (Depreciation)

Problem 1:

A Special Purpose Machine Has Been Purchased For 10,000 L.E. And Has No Salvage
Value At The End Of 10 Years. Calculate The Book Value And The Total Depreciation
At The End Of The Eighth Year By Using Straight Line And Declining Balance
Methods. "Comment on the Results."

Solution:

Machine Purchase = 10,000 L.E.

No. of Years = 10 Years

Salvage Value |10 = 0.0 L.E.

- By Using Straight Line Method

𝑃−𝑆 10,000−0
Depreciation = = = 1000 𝐿. 𝐸.
𝑛 10

Depreciation |8 = 8 ∗ 1000 = 8,000 𝐿. 𝐸.

Salvage Value |8 = 10,000 − 8,000 = 2,000 𝐿. 𝐸.

- By Using Declining Balance Methods

1 1
𝑆 𝑛 0 10
Depreciation Rate =1− (𝑃) =1−( ) =1
10,000

2
Thea Range of the Depreciation Rate (d) is 0 < 𝑑 < ∴ 𝑑 = 0.2
𝑛

𝐵𝑉𝑡 = 𝐵(1 − 𝑑)𝑡 → ∴ 𝐵𝑉8 = 10,000 ∗ (1 − 0.2)8 = 1677.72 𝐿. 𝐸.

Total Depreciation |8 = 𝐵 − 𝐵𝑉8 = 10,000 − 1677.72 = 8322.278 𝐿. 𝐸.

 Mohammed Taha Mohammed Mohammed Ali
ENGINEERING ECONOMY

Problem 2:

The Salvage Value Of A Drilling Machine Is Expected To Be One Tenth Of Its Initial
Price. The Book Value Is 5000 L.E, At The End Often Half-Life Of The Machine.
 Calculate The Initial Machine Price By Using Straight-Line Method And Declining
Balance, Method And Mention, Which Method Is The Best By The Aid Of A Graph.
 Calculate The Book Value After 75% Of The Machine Life By Using Both Straight
Line And Declining Balance Methods.

Solution:

The Initial Machine Price

𝑆 = 0.1 𝐵 , 𝐵𝑉𝑛/2 = 5,000 𝐿. 𝐸.

By Straight-Line Method

𝐵−𝑆 𝐵 − 0.1 𝐵 𝑛
𝐵𝑉𝑡 = 𝐵 − ( )∗𝑡 → 5,000 = 𝐵 − ( )∗
𝑛 𝑛 2
0.9𝐵
∴ 5,000 = 𝐵 − ( ) = 𝐵 − 0.45𝐵 = 0.55𝐵 → 𝐵 = 9090.9 𝐿. 𝐸.
2
By Declining Balance Method

1 1 𝑡
𝑆 𝑛 𝑆 𝑛
𝑑 =1−( ) , 𝐵𝑉𝑡 = 𝐵(1 − 𝑑)𝑡 = 𝐵 (1 − 1 + ( ) )
𝐵 𝐵

1⁄ 𝑛/2
0.1𝐵 𝑛 1
∴ 𝐵𝑉𝑛/2 = 𝐵 (( ) ) → 5,000 = 𝐵(0.1)2 → ∴ 𝐵 = 15811.4 𝐿. 𝐸.
𝐵

The Book Value After 75% of The Machine Life

By Using Straight Line

0.9𝐵
𝐵𝑉0.75𝑛 = 𝐵 − ( ) ∗ 0.75 𝑛 = 𝐵(1 − 0.9 ∗ 0.75) = 2954.54 𝐿. 𝐸.
𝑛
Declining Balance Method

𝐵𝑉0.75𝑛 = 𝐵(0.1)0.75 = 2811.70870 𝐿. 𝐸.

 Mohammed Taha Mohammed Mohammed Ali
ENGINEERING ECONOMY

Problem 3:

A Machine Has Been Purchased For 20,000 L.E. The Book Value At The End Of The
Sixth Year Is 11000 L.E. And The Estimated Life Is 10 Years. By Using Straight Line
& Declining Balance Methods:
 Find The Scrape Value.
 Find The Total Depreciation At The End Of The Fourth Year.

Solution:

𝐵 = 20,000 𝐿. 𝐸. 𝐵𝑉6 = 11,000 𝐿. 𝐸. 𝑛 = 10 𝑌𝑒𝑎𝑟𝑠

By Straight Line Method

𝐵𝑉𝑡 = 𝐵 − 𝐷 ∗ 𝑡 → ∴ 11,000 = 20,000 − 6𝐷 → ∴ 𝐷 = 1500 𝐿. 𝐸.

𝐵−𝑆
𝐷= → ∴ 𝑆 = 𝐵 − 𝑛𝐷 = 20,000 − 15,000 = 5,000 𝐿. 𝐸.
𝑛
Depreciation |4 = 4 ∗ 1,500 = 6,000 𝐿. 𝐸.

By Declining Balance Method

1 𝑡 1 6
𝑆 𝑛 𝑆 10
𝐵𝑉𝑡 = 𝐵(1 − 𝑑)𝑡 = 𝐵 (( ) ) → ∴ 𝐵𝑉6 = 20,000 ∗ (( ) ) = 11,000
𝐵 20,000

1 4
7384.16 10
∴ 𝑆 = 7384.16 𝐿. 𝐸. , 𝐵𝑉4 = 20,000 ∗ (( ) ) = 13,425.75 𝐿. 𝐸.
20,000

Total Depreciation |4 = 𝐵 − 𝐵𝑉4 = 20,000 − 13,425.75 = 6,574.25 𝐿. 𝐸.

 Mohammed Taha Mohammed Mohammed Ali
ENGINEERING ECONOMY

Sheet 3 (Break Even Analysis)

Problem 1:

A producer of pottery is considering the addition of a new plant to absorb the increasing
demand. The primary location being considered will have fixed costs of 92,00 L.E. per
month and variable cost of 70 P.T. per unit produced. Each item is sold to retails at price
that average 90 P.T.
a. What volume per month is required in order to break even?
b. What volume will be needed to obtain a profit of 16,000 L.E. per month?
c. What volume is required to provide a revenue of 23,000 L.E. per month? (BEP)

Solution:

𝐹𝑖𝑥𝑒𝑑 𝐶𝑜𝑠𝑡 = 92,000 𝐿. 𝐸./𝑀𝑜𝑛𝑡ℎ, 𝑉𝑎𝑟𝑖𝑎𝑏𝑙𝑒 = 0.70 𝐿. 𝐸./𝑈𝑛𝑖𝑡,

𝑅𝑒𝑣𝑒𝑛𝑢𝑒 = 0.9 𝐿. 𝐸./𝑈𝑛𝑖𝑡

𝑃𝑟𝑜𝑓𝑖𝑡 = 𝑟 ∗ 𝑄 − 𝐹. 𝐶. −𝑣 ∗ 𝑄
𝐹. 𝐶. 92,00
𝑎. 𝑄 = = = 46,000 𝑈𝑛𝑖𝑡/𝑀𝑜𝑛𝑡ℎ.
𝑟 − 𝑣 0.9 − 0.7
𝑏. 16,000 = 𝑄 ∗ (0.9 − 0.7) − 92,000 ∴ 𝑄 = 126,000 𝑈𝑛𝑖𝑡/𝑀𝑜𝑛𝑡ℎ

𝑐. 𝑅 = 𝑟 ∗ 𝑄 ∴ 𝑄 = 𝑅/𝑟 = 23,000/0.9 = 25,555.556 𝑈𝑛𝑖𝑡/𝑀𝑜𝑛𝑡ℎ

 Mohammed Taha Mohammed Mohammed Ali
ENGINEERING ECONOMY

Problem 2:

A nonprofit (i.e. sales = cost) municipal water department has a total variable cost of 5
million L.E. per year. The current annual revenue, based on the service of 200,000
houses, is 20 million L.E. the water production manager wishes to add equipment that
will raise the fixed cost by 1 million L.E. and reduce the variable cost by 20%. If the
price paid by customer is not changed, what is the number of served houses to justify
the new equipment? (BEP)

Solution:

𝑉𝐶 = 5,000,000 𝐿𝐸/𝑌𝑒𝑎𝑟, 𝑄 = 200,000 𝐻𝑜𝑢𝑠𝑒/𝑌𝑒𝑎𝑟,

𝑅 = 20,000,000 𝐿𝐸/𝑌𝑒𝑎𝑟
𝑅 𝐹𝐶 + 𝑉𝐶 20,000,000
𝑟= = = = 100 𝐿𝐸/𝐻𝑜𝑢𝑠𝑒
𝑄 𝑄 200,000

𝐹𝐶 = 𝑅 − 𝑉𝐶 = 15,000,000𝐿𝐸/𝑌𝑒𝑎𝑟

𝐹𝐶2 = 16,000,000𝐿𝐸/𝑌𝑒𝑎𝑟 , 𝑉𝐶2 = 0.8 ∗ 5,000,000 = 4,000,000𝐿𝐸/𝑌𝑒𝑎𝑟

𝐹𝐶 + 𝑉𝐶 20,000,000
𝑄2 = = = 200,000 𝐻𝑜𝑢𝑠𝑒
𝑄 100
 Mohammed Taha Mohammed Mohammed Ali
ENGINEERING ECONOMY

Problem 3:

A manager is trying to decide whether to purchase a certain part or to have it produced

internally. Internally production could use either of two processes. One would entail a
variable cost of 17 L.E. per unit and an annual fixed of 20,000 L.E., the other would
entail a variable cost of 14 L.E. per unit and annual fixed cost of 20,400 L.E..
Three vendors are willing to provide the part.
- Vendor A has a price of 20 L.E. per unit for any volume up to 30,000 units.
- Vendor B has a price of 22 L.E. per unit for demand of 1000 units or less, and 18
L.E. per unit for large quantities.
- Vendor C offers a price of 21 L.E. per unit for the first 1000 Units, and 19 L.E.
per unit for additional units.
If the manager expects an annual volume of 10000 units, which alternative would be
best from cost stand point. For 20000 units, which alternative would be best?

Solution:

Internal production Process 1:

T. C. For 10,000 Unit = 20,000 + 17 ∗ 10,000 = 190,000 𝐿. 𝐸.
T. C. For 20,000 Unit = 20,000 + 17 ∗ 20,000 = 360,000 𝐿. 𝐸.

Internal production Process 2:

T. C. For 10,000 Unit = 20,400 + 14 ∗ 10,000 = 160,400 𝐿. 𝐸.
T. C. For 20,000 Unit = 20,400 + 14 ∗ 20,000 = 300,400 𝐿. 𝐸.

Vendor A:
T. C. For 10,000 Unit = 20 ∗ 10,000 = 200,000 𝐿. 𝐸.
T. C. For 20,000 Unit = 20 ∗ 20,000 = 400,000 𝐿. 𝐸.

Vendor B:
T. C. For 10,000 Unit = 18 ∗ 10,000 = 180,000 𝐿. 𝐸.
T. C. For 20,000 Unit = 18 ∗ 20,000 = 360,000 𝐿. 𝐸.

Vendor C:
T. C. For 10,000 Unit = 21 ∗ 1,000 + 19 ∗ 9,000 = 192,000 𝐿. 𝐸.
T. C. For 20,000 Unit = 21 ∗ 1,000 + 19 ∗ 19,000 = 382,000 𝐿. 𝐸.
Comment: Internal production Process (2) is The Best Choice for Production.
 Mohammed Taha Mohammed Mohammed Ali
ENGINEERING ECONOMY

Sheet 4 (Money Value)

Problem 1:
1. What equivalent amount will accumulate from each of these present -
investments?
(a)L.E.800 in 20 years at 14 % compounded semiannually.
(b)L.E.11,000 in 10 years at 12 % compounded quarterly.
2. What is the equivalent present-value of these future receipts?
(a)L.E.1,700 12 years from now at 9% compounded monthly.
(b)L.E.6,200 12 years from now at 12 % compounded quarterly.
3. What series of equal payments are equivalent to the following present amounts?.
(a)L.E. 16,000 in 8 years at 17% compounded semiannually with annual
payments.
(b)L.E. 37,000 in 5 years at 12% compounded monthly with monthly payments.
(c)L.E.8,000 in 3 years at 16% compounded quarterly with annual payments.
4. What series of equal payments are equivalent to the following future amounts?
(a)L.E.15,000 in 8 years at 12% compounded quarterly when payments are
quarterly.
(b)L.E.4,000 in 11 years at 11 % compounded semiannually when payments are
annual.
(c)L.E17,000 in 15 years at 20% compounded quarterly when payments are
semiannual.
5. What single amount at the end of the fifth year is equivalent to a uniform annual
series of L.E.1,000 per year for 12 years? The interest rate is 7 % compounded
annually.
6. A series of equal quarterly payments of L.E.650 for 25 years is equivalent to what
present amount at an interest rate of 8 % compounded quarterly; compounded
continuously ?

7. What uniform flow of payments for 7 years is equivalent to a series of equal end-
of-year payments of L..E.750 for 10 years at 8 % compounded continuously?

8. A manufacturer pays a patent royalty of L.E.0.95 per unit of a product he

manufactures, payable at the end of each year. The patent will be in force for an
additional 5 years. For this year he manufactures 8,000 units of the product, but
Its is estimated that output will increase by 10% per year in the 4 succeeding
years. He is considering asking the patent holder to terminate the present royalty
contract in exchange for a 'single payment at present, Or in exchange for equal
annual payments to be made at the end of each of the 5 years. If 8 %interest is
used, what is (a) the present single payment-and (b) the annual payments that are
equivalent to the royalty payments in prospect under the present agreement?
 Mohammed Taha Mohammed Mohammed Ali
ENGINEERING ECONOMY

9. An individual's salary is now L.E.28,000 per year and he anticipates retiring in

30 more years. If his salary is increased by 10% each year and he deposits 10%
of his yearly salary, into a fund that earns 8% interest compounded annually, what
will be the amount accumulated at the time of retirement?

10.A construction firm is considering the purchase of an air compressor The

compressor has a first cost of L.E.5,000 and the following end-of year
maintenance costs:

What is the present equivalent maintenance Cost if the interest rate is 12%?
11.A petroleum engineer estimates that the present production of 300,000 barrels of
oil during this year from a group of 10 wells will decrease at the rate of 15% per
year for the next 10 years. Oil is estimated to worth 533 per barrel, If the interest
rate is 10% compounded annually what is the equivalent present amount of the
prospective future receipts from the wells?
12.A student borrowed L.E.1,500 from the ABC Loan Company to buy a used car
with an agreement to repay L.E.500 at the end of each of the first 2 years and
L.E.1,000 at the end of the third year. What rate of interest makes the receipts and
disbursements equal -t each other for this loan agreement?

13.A city power plant wishes to install a feed-water heater in their steam generation
system. It is estimated that the increase in efficiency will pay for the heater on
year after it is installed, and a contractor has promised he can install-the heater in
5 months: If the venture ,is undertaken and it is found that the hater does pay for
itself in a year by saving L.E.1,400 per month, 'what amount was paid to the
contractor at the last of each month of construction? Assume that the saving Of
L.E.1.400.occurs at the last of each month and that the money paid to the
contractor could have been invested elsewhere at 12% compounded monthly.
14.A manufacturing company purchased electrical services to be paid for
L.E.70,000 now and L.E.15,000 per year beginning with the sixth year.
After 2 years service the company, 'having surplus profits, requested to
pay for another 5 years service in advance. If the electrical company
elected to accept payment in advance, what would each company set as
a fair settlement to be paid if (a) the electrical company considered 15 %
compounded annually as a fair re-turn, and (b) the manufacturing
company considered 12 % a fair return.
 Mohammed Taha Mohammed Mohammed Ali
ENGINEERING ECONOMY

15.A governor has two options, to keep the existing bridge which needs -
150,000 L.E. to be reinforced, or to replace the existing bridge by a new
bridge which will cost 1,000,000 I.E. The net salvage value of the
existing bridge is 250,000 I.E. It is estimated that the reinforced bridge
will last-fortY years after which replacement will be required. The scrap
value of the existing bridge will • be 100,000 L.E. after six years from
now and for the new bridge 490000 L.E.' after 15 years. Maintenance
cost for the existing bridge is larger than the maintenance cost for the
new bridge by 19,000 L.E/year.
Which alternative you recommend the governor to select?
Calculate the depreciation and the book value in the first and the second
years for the economical bridge by using the two methods of
depreciation (Assuming the interest rate is 10%)

16.A firm has a semi-automatic machine. It can be sold now for 25,000 L.E.
There is a new is fully automatic machine costing 100;000 L.E. This
machine will be operated economically for 25 years and can be sold for
about-20,000 LT at that time; The old Madhine can be sold for 5,000 L.E
at the end of 25 years. The hourly production rate of the present machine
& the new Machine are 150,300 pieces: Direct labour for old & new
machine is 6,9 L.E/hoL.ri . The annual sales are 60,000 pieces.
Maintenance cost of the new machine is less by 500 LE/ year than that
for the old one. If the interest rate is 10%;
Which machine is more.economical?
For the economical machine, calculate the book value & the depreciation
at the end of the tenth year

17.A certain product has been produced, which needs 15 minutes to be

accomplished. The following data is given: -The machine price.is 30,000
L.E and the salvage value after 10 years is 3000 L.E. The interest and
insurance rates are 10% & 5% respectively.
Labour cost/unit is one L.E and the unit raw material cost is 1.5 L.E. The
annual maintenance cost is 1200 L.E and the Power cost is 2800 L.E.
The number of working hours per year is 2000 hrs. If the contribution
per unit is
25% of the unit cost.