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Engineering Economic Analysis, Third Edition: Chapter 13

Instructions: For each question, click on the radio button beside your answer. When you have completed the entire quiz, click the “Submit my answers” button at the bottom of the page to receive your results.

A garment manufacturing company is currently manufacturing one of its products on a double-needle chain-stitch machine. The unit cost of the product is $10 and 2,500 units were produced and sold for $18 each during the past year. The company expects that both the future demand of the product and the unit price will remain steady at 2,500 units per year and $18 per unit. The old machine has a remaining useful life of 3 years. The old machine could be used on the open market now for $5,500. In 3 years, the old machine is expected to have a salvage value of $1,300. The new machine would cost $30,000 and the unit manufacturing cost on the new machine is projected to be $9. The new machine has an expected economic life of 4 years and an expected salvage value of $8,000. The appropriate MARR is 13%. The firm does not expect a significant improvement in technology and it needs the service of either machine for an indefinite period.

Question 1:

a) $15,975.41
b) $12445.78
c) $20,655.85
d) $12335.22

Question 2:

a) $12,445.78
b) $15,975.41
c) $12,335.22
d) $20,655.85

Question 3:

a) Yes
b) No
c) Indifferent
d) More information required