FINAL EXAMINATION SEMESTER I SESSION 2012/2013

Q1
a) What is Engineering Economy? (3 Marks)
 It involves the systematic evaluation of the economic merits of proposed solutions to
engineering problems.
b) Implementation of a discipline must start with a solid foundation. The principles of engineering
economy can be divided into (7) seven parts. List a set of principles that provides a complete
implementation of the regulations. (7 Marks)

1-Develop the alternatives

 Carefully define the problem, then the choice (decision) is among alternatives. The alternatives
need to be identified and then defined for subsequent analysis.

2-Focus on the differences

 Only the differences in expected future outcomes among the alternatives are relevant to their
comparison and should be considered in the decision.

3-Use a consistent viewpoint

 The prospective outcomes of the alternatives, economic and other, should be consistently
developed from a defined viewpoint (perspective)

4-Use common unit of measure

 Using a common unit of measurement to enumerate as many of the prospective outcomes as
possible will simplify the analysis of the alternatives.

5-Consider all relevant criteria

 Selection of a preferred alternative (decision making) requires the use of a criterion (or several
criteria). The decision process should consider both the outcomes enumerated in the monetary
unit and those expressed in some other unit of measurement or made explicit in a descriptive
manner.
6- Make uncertainty explicit
 Risk and uncertainty are inherent in estimating the future outcomes of the alternatives and
should be recognized in their analysis and comparison.

7-Revisit your decisions

 Improved decision making results from an adaptive process; to the extent practicable, the initial
projected outcomes of the selected alternative should be subsequently compared with actual
results achieved.
c) Cost is one of criteria need to be considered in engineering economy analysis.
Explain briefly any four (4) of the following type of cost. (8 Marks)

(i) Maintenance Cost

 Expense items in operation phase. The direct and indirect costs of operation associated with 5
resources area (people, machines, materials, energy and information)
 Example:- Cost operation and maintenance cycle for operation.

(ii) Book Cost

 Book cost is a cost that does not involve a cash payment or payment voucher.
 Example:- Payment receive by cheque ( progress payment of project)

(iii) Sunk Cost

 Sunk Cost is a cost that has occurred in the past and has no relevance to estimates of future
costs and revenues related to an alternative course of action.

(iv) Opportunity Cost

 The monetary advantage foregone due to limited resources. The cost of the best rejected
opportunity.
 The opportunity cost that can be deducted / denied implicitly.
Example:-
 Company must pay for income tax for every year. Cost for reduce tax ex: entertains client, bonus
for staff etc.

(v) Indirect Cost

 This Cost is difficult to attribute or allocate to a specific output or work activity (also overhead or
burden)
 Example: - Cost from machinery maintenance or broke down which need to be cover by
company.

(vi) Investment Cost

 Capital investment required for most activities in the acquisition phase.

(vii) Standard Cost

 Standard cost are planned cost per unit of output, established in advance of production or
service delivery. For example having a listed of cost for each materials which is cost control for
standard cost.
 Standard costs play an important role in cost control and other management functions,
I. Estimating future manufacturing costs.
II. Measuring operating performance by comparing actual cost per unit with the standard
unit cost.

(viii) Disposal Cost

 Nonrecurring cost of shutting down or handover the operation at the end of life cycle. These
costs will be offset in some instances by receipts from the sale of assets with remaining market
value.
Q2

a) List fixed cost and variable cost from the cost factor listed in the table. (2 marks)
 Fixed Cost
I. Rental site
II. Authority Permit
III. Flag person
IV. Cost to set up & remove Equipment

 Variable Cost
I. Hauling expense

b) Compute all fixed costs and variable cost for all three sites – Ayer Hitam, Yong Peng and Labis.
Which site will you choose and why? (17 marks)

c) For each site - Ayer Hitam, Yong Peng and Labis, list Total Cost (TC) equation correspond to the site.
Hint: use linear equation y = mx + c (3 marks)

d) If Total Revenue (TR) is equal to Total Cost (TC), calculate how much cubic meter you have to be
delivered before you starting making a profit. Compute only the site you already chose in (b).
Question 2 (B and D)
Question 2c
FINAL EXAMINATION SEMESTER I SESSION 2013/2014
FINAL EXAMINATION SEMESTER I SESSION 2013/2014

Q1 B
(a) List fixed and variable costs factor given in the Table Q2.

 Fixed Cost
V. Rental site
VI. Authority Permit
VII. Flag person
VIII. Cost to set up & remove Equipment

 Variable Cost
II. Plant Cabling Cost

(b) Calculate all fixed, variable and total costs for both sites A and B.

(c) Explain the site you will choose if you have limited fund to invest.

(d) Calculate the length of the cables you have to install before you start making a profit from the
chosen site in (c), if total revenue (TR) is equal to total cost (TC).

Question 1B (a,b,c,d)
FINAL EXAMINATION SEMESTER I SESSION 2014/2015

Q1 A

(a) Twenty (20) years ago, your company has purchased a small factory building costing RM 300,000.
However, book value of the building remains RM 230,000 only due to the decrease in market value. The
factory is sold at the price of RM180,000. Determine the value from each of the following cost;

(i) Cash Cost (2 marks)

 RM 300 000

(ii) Book Cost (2 marks)

 RM 230 000

(iii) Sunk Cost (2 marks)

 Rm 120 000

(IV) Opportunity Cost (2 marks)

 0%

(v) Standard Cost (2 marks)

 RM 180 000

Q1 B

(i) Calculate the Total Variable Cost (VC)& Fixed Cost (FC) (4 marks)

(ii) Determine the Breakeven Point units per month (4 marks)

(iii) Suggest the most profitable plant for production if the consumer demand is 500 units
per month. (4 marks)

(iv) The selling price has reduced by RM5.00 for site chosen in (iii). Calculate how many
units to be sold if the company is to maintain a profit level of RM2,880.00
Q1 B (1,2)
Q1 (3,4)