Construction Cost Analysis

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Questions and Answers

What is the primary focus of engineering economy?

Minimizing environmental impacts

Analyzing and evaluating economic success of engineering projects (correct)

Increasing workforce productivity

Maximizing project timelines

Which of the following is NOT a component of the basic economy study methods in engineering economics?

Decision making under uncertainty

Project design optimization (correct)

Evaluation of project alternatives

Recognition of risk

What does capital represent in engineering economics?

Future earnings from project investments

Any money or property used to generate wealth (correct)

Only physical resources

Economic loss from failed projects

Which method is used to assess the financial viability of an engineering project?

Break even analysis Signup and view all the answers

Which option best describes the effective rate of interest?

A rate that reflects the true return on investment over time Signup and view all the answers

What is the primary outcome expected by students taking the engineering economics course?

Apply economic principles to evaluate project alternatives Signup and view all the answers

What is a common reason for applying amortization in engineering economics?

To estimate depreciation of assets over time Signup and view all the answers

Which of the following evaluation methods helps determine the comparative benefits of a project?

Benefit-cost ratio Signup and view all the answers

What is the total cost of obtaining 200,000 cu.m of gravel from Source A?

P 3,650,000 Signup and view all the answers

What is the purchase price of the gravel pit at Source A?

P 800,000 Signup and view all the answers

How much is the hauling cost for Source A if the average distance to the dam site is 3.0 km?

P 3,650,000 Signup and view all the answers

What additional cost is associated with Source B that is not present for Source A?

Overburden removal Signup and view all the answers

What is the distance to the dam site for Source B?

1.2 km Signup and view all the answers

What is the net receipt from the first method of processing the ore?

P 2,302.50 Signup and view all the answers

How much better is the first method of processing compared to the second method?

P 360.00 Signup and view all the answers

What is the hauling cost per cu.m per km for both sources?

P 4.00 Signup and view all the answers

Which of the following costs is unique to Source A?

Road construction Signup and view all the answers

What is the income generated from the second method per ton of ore?

P 3,442.50 Signup and view all the answers

What percentage reduction in materials cost does the new product design offer?

2% Signup and view all the answers

At Source B, what is the cost to remove overburden?

P 4.20/cu.m Signup and view all the answers

What is the increase in processing cost with the new product design?

2% Signup and view all the answers

What is the total cost associated with the first method?

P 1,650.00 Signup and view all the answers

To what extent does the processing cost change in the new product design?

It increases by 2% Signup and view all the answers

What is the total income generated by the first method of processing per ton of ore?

P 3,952.50 Signup and view all the answers

When are revenues and economic benefits constant, which criterion should guide the selection of an alternative?

Consider the one that minimizes total cost per defect-free unit. Signup and view all the answers

Which of the following considerations is important in material selection for economic product results?

Economic viability and best performance results of materials. Signup and view all the answers

In the context of selecting methods for operations, which of the following is true?

Choose the most economical method among those yielding satisfactory results. Signup and view all the answers

What should be prioritized when selecting a design for a project?

The design best suited for economic efficiency and project requirements. Signup and view all the answers

Which factor is crucial during site selection for projects?

Cost factors including land and construction expenses. Signup and view all the answers

Why is worker proficiency important in the context of engineering economics?

Varying efficiency can be converted into monetary values. Signup and view all the answers

What does economy of tool and equipment maintenance refer to?

Cost considerations related to acquiring and maintaining tools and equipment. Signup and view all the answers

In evaluating alternatives, what aspect should be considered when economic benefits are present and vary?

Choose the one that maximizes overall profitability based on defect-free units. Signup and view all the answers

What is the formula for calculating Simple Interest?

Interest is calculated as principal multiplied by the nominal rate divided by the time period. Signup and view all the answers

How is Compound Interest calculated?

It is computed based on the interest accrued during the previous period. Signup and view all the answers

What does a Benefit Cost Ratio indicate?

It summarizes the overall value for money of a project or proposal. Signup and view all the answers

What defines an Annuity?

A series of equal payments occurring at equal periods of time. Signup and view all the answers

Which of the following best describes Depreciation?

A measure of the decrease in market value of an asset over time. Signup and view all the answers

What is the significance of a Nominal Rate of Interest?

It is the periodic interest rate multiplied by the number of periods in a year. Signup and view all the answers

What does Amortization typically refer to?

An accounting technique to lower the book value of a loan over time. Signup and view all the answers

Which best describes the purpose of Break Even Analysis?

To establish when total costs and total revenues are equal. Signup and view all the answers

Study Notes

Cost Comparison of Gravel Sources

Source A has an average distance of 3.0 km to the dam site, while Source B is only 1.2 km away.
Gravel cost at Source B is P 10.00/cu.m, with a purchase price of P 800,000 for Source A.
Road construction costs P 450,000 for Source A, while Source B requires no road construction.
Source B needs to remove overburden of 90,000 cu.m at a cost of P 4.20/cu.m.
Hauling costs for both sources are the same at P 4.00/cu.m per km.

Total Cost Calculation for Source A

The total cost for 200,000 cu.m of gravel from Source A is calculated as follows:
- Purchase price of pit: P 800,000
- Road construction cost: P 450,000
- Hauling cost: 200,000 (3 km)(P 4.00) = P 3,650,000
Total Cost for Source A: P 3,650,000

Engineering Economics Course Overview

Course explores concepts of time value of money, economic decision making, and project evaluations under uncertainty.
Prerequisite: second-year standing; offers 3 lecture units.
Assessments:
- Preliminary Examination (20%)
- Midterm Examination (25%)
- Final Examination (25%)
- Quizzes (20%)
- Problem Sets (5%)
- Attendance (5%)
A minimum score of 75% is required to pass.

Key Concepts in Engineering Economy

Capital: Money or property used to generate wealth.
Interest Types:
- Simple Interest: Proportional to the time and principal.
- Compound Interest: Earned on both the principal and previously accrued interest.
Discount Rate: Converts future sums to present values; important for project assessments.
Annuity: Series of equal payments at regular intervals.
Break-even Analysis: Determines when total costs equal total revenue.

Economic Decision-Making Rules

Rule for Revenue Variability: Choose the option that maximizes profitability based on defect-free production.
Rule for Constant Economic Benefits: Select the alternative that minimizes total cost per defect-free unit.

Applications of Present Economy Studies

Material Selection: Choose materials that yield the most economical results.
Method Selection: Compare and select the most cost-effective operational methods.
Design Selection: Ensure designs are fit for purpose and promote economic efficiency.
Site Selection: Consider all costs related to land, construction, and transportation.
Worker Proficiency: Account for varying efficiencies among workers and their monetary implications.
Tool and Equipment Maintenance: Factor in acquisition and maintenance costs for optimal economic performance.

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Description

This quiz explores the cost analysis related to gravel sourcing for a construction project. Participants will evaluate different factors such as average distance, purchase price, and gravel costs to determine the most cost-effective option. Ideal for students in construction management or civil engineering courses.