Present Economy Studies * This involves the analysis of problems for manufacturing a product or rendering a service upon the basis of present or immediate costs. Present economy studies usually occur when the effects of time such as interest and depreciation are negligible. Present economy analysis is employed when the alternatives to be compared will provide the same result and the period of time involved in the study is relatively short.Present economy studies occur in the following situations: 1.Selection in present economy 2.Selection of method to be used 3.Selection of design 4.Selection of location or site for a project 5.Comparison of proficiency among workers 6.Economy of tool and equipment maintenance 7.Economy of number of laborers.Rules for Selecting Preferred Alternative Rule 1 - When revenues and other economic benefits are present and vary among alternatives, choose alternative that maximizes overall [profitability based on the number of defect-free units of output. Rule 2 - When revenues and economic benefits are not present or are constant among alternatives, consider only costs and select alternative that fninimizes total cost|per defect- free output.Sample Problem: 1. A building contractor has a contract which will expire in 30 days. He has 80 men on the job and can finish the work in 50 days. The wage per day of 40 men is P20 and that of the other 40 men is P18 each for 8 hours work per day. The fine or liquidated damages for delay in the work is P400 per day. How many more men should the contractor add in order to enable him to complete the work on time? Assuming that the additional men will have a wage of P20 each per day, will the contractor save money by employing enough men to enable him to complete the work on time or not adding men and paying the liquidated damages? How much is the saving if any? No overtime.Solution: Let x = # of men to be added in order to finish on time. Using man-days equation: (80men)(50 days) = (x + 80) men (30 days) x = 53.33 men 54 men 80 men on the job: Wage: 40 men x P20.00/day x 50 days = 40,000 40 men x 18/day x 50 days = 36,000 Liquidated domain 400/day x 20 days =_ 8,000 Total =P 84,000Solution: 134 men: Wages : 40x 20x30 =24,000 40x18x30 =21,600 54x 20x30 = 32,400 Total = 78, 000 Thus, the contractor saves P 6,000.00 and finish completely only when he employed 54 more men.Sample Problem: 2.In manufacturing a certain machine part, it is necessary to make four holes in each part. Each hole will require one minute if drilled with the aid of a jig. The drill jig would cost P 100 to construct and the drill press operator is paid P 2.00 per hour. The four holes can be made in 20 seconds on a punch press, but a die costing P 350 will be required. It requires 4 hour setting up the die on the press and the same period of time to tear it down when the job is completed. Overhead charges for the punch press are P 3.50 per hour. The press operator receives P3.00 per hour and the set-up man is paid P 5.00 per hour. a.)Determine the comparative cost for making 1,000 parts. b.)Determine the number of parts to be made for equal cost.Solution: a.Determine the comparative cost for making 1,000 parts. O Drill jig Time to drill 1000 parts = 1min x 4holes/1part x 1hr/60min 1000 parts = 66.67 hr Wage of drill jig operator = 66.67 hr x P 2.00/hr = 133.34 Cost of drill jig = 100 Total = P 233.34 O Punch Press Time to punch 1000 parts = 20s/1part x 1000parts x 1hr/3600s = 5.56hrs Wage of punch press operator = 5.56hrs x P3.00/hr = 16.67 Wage of set-up man = (1/2+1/2)hr x 5.00/hr = 5.00 Cost of machine = 350 Overhead Cost = 5.56hrs x P350/hr =19.46 Total=P 391.13Solution: b.Determine the number of parts to be made for equal cost. Let x = number of parts Unit cost drill jig = P 233.34/1000 parts = 0.2334/part 0.2334 (x) = 391.13 x= 1675.79 x = 1676 parts The drill jig must procedure 1676 parts in order to equal the cost punched press. Drill press is economical.Sample Problem: 3.Two types of filter are being considered for use in a diesel engine. Filter A requires a premium quality lubricating oil costing P 11.50 per liter. The filter and the oil will have to be changed after 1,000 hours of operation and 4 liters of new oil added after each 100 hours. This filter cost P 150. Forty liters of oil fill the engine crankcase. For filter B a lower grade of oil costing P 5.85 per liter maybe used. This filter cost P 175. In this case the filter would be change each 1000 hours, the oil completely changed after each 500 hours and 4 liters of oil added after 250 hours of use. Which combination should be used?Solution: Type A, filter (consider 1000 hrs. of operation) Cost of filter = 150 Initial cost = (11.50/L) 40L = 460 Cost of additional oil = 9(4L) x (11.50/L) =414 Total = P 1024 Type B, filter (consider 1000 hrs. of operation) Cost of filter =175 Initial cost of oil = 5.85 x (40 L/S500hrs)1000hrs = 468 Cost of additional = 5.85 x (4L/250hrs)500hrs = 46.8 Total = P 689.80 Filter B is cheaper 334.2 by filter A. So it is economical to use for. every 1000 hrs. operation. ~References: LT Blank, A Tarquin. Engineering Economy. McGraw Hill, International Edition, 5th edition, 2002. William G. Sullivan et al. Engineering Economy. 16th Edition. New Jersey: Prentice — Hall,Inc, 2015 GJ Thuesen, WJ Fabrycky, GJ Thuesen. Engineering Economy. Prentice Hall, Upper Saddle River, NY, 2001. Chan S. Park. Contemporary Engineering Economics.2nd Edition.USA:Addison-Wesley Publishing Company,|nc. 1997 Matias A. Arreola. Engineering Economy. 3rd Edition. Philippines: Ken Inc., 1993. G.J. Thuesen and W.J. Fabrycky. Engineering Economy.8th Edition. New Jersey: Prentice — Hall, Inc., 1993 Max Kurtz. Engineering Economics for Professional Engineers’ Examination.2nd Edition. New York: McGraw-Hill, 1975