1.

All of the following are examples of unethical practices in engineering economics except which
one? d

a. Using faulty or inaccurate data

b. Failing to bring attention to a potential safety problem in construction due to
fear of retribution
c. When weighing alternatives, using optimistic estimates for one alternative
while using pessimistic estimates for others
d. Identifying all feasible alternatives for a given project
2. All of the following are examples of engineering ethical dilemmas, past and present, involving
trade-offs between safety and cost except which one? b

a. Should all new cars be mandated to have shatter-proof windows?

b. Should engineers receive an annual salary increase of 10 percent per year?
c. Should the levies in New Orleans be built to withstand a category 5 hurricane?
d. Should all new skyscrapers be built to withstand a 7.5 magnitude earthquake?
3. Engineering economics may be useful for answering all of the following except c

a. Determining which projects are worthwhile

b. Determining which projects have higher priority
c. Determining how safe a project is to construct
d. Determining how a project should be designed
4. Engineering economics can help answer all of the following questions except d

a. Which project/alternative is more economical?

b. How long will it take before I have $1,000,000 in my bank account?
c. Shall I lease or buy a backhoe for my construction company?
d. How can I maintain a high standard of on-the-job safety for my employees?

1. In breakeven analysis, the profit at the breakeven point is equal to

a. The total cost

b. Zero
c. The total revenue
d. The variable cost multiplied by the number of items sold

2. A large utilities contractor bought five used trucks for $100,000 from a smaller bankrupt
utilities contractor. Six years ago, the vehicles were purchased for $300,000. It is estimated
that the annual maintenance costs for the vehicles will be $1,500 per year and each vehicle
will have a salvage value of $5,000 in four years. Which of the following would the large
utilities contractor not include in her economic analysis?

a. Original purchase price of $300,000

b. The used purchase price of $100,000
c. The annual maintenance costs of $1,500
d. The salvage value of the vehicles
3. A company manufactures electrical metering devices that monitor power quality. The
company"s fixed cost is $68,000 per month. The variable cost is $80 per metering device. The
selling price per device can be modeled by S = 170 " 0.05 Q, where S is the selling price
and Q is the number of metering devices sold. How many metering devices must the company
sell per month in order to realize a maximum profit?

a. 900 metering devices

b. 1800 metering devices
c. 3400 metering devices
d. As many metering devices as it can
4. All of the following are usually included in an engineering economic analysis except

a. Fixed costs
b. Variable costs
c. Sunk costs
d. Total revenue
5. A manufacturing firm's specialty circuit board division has annual fixed costs of $100,000 and
variable costs of $20.00 per board. If they charge $100 per circuit board, how many circuit
boards must they produce and sell in order to break even?

a. As many boards as possible

b. 5
c. 1,000
d. 1,250

Chapter 2 Engineering Costs and Cost Estimating Results

You answered 2 out of 5 questions correctly, for a score of40%.

1. Correct. You answered: b. Zero.

In breakeven analysis, the profit at the breakeven point is equal to
The correct answer was: b. Zero.
References: Solution: In economic analysis, the breakeven point is the point at
which the total revenue is equal to the total cost and neither a profit nor a loss is
incurred. Thus, since total revenue " total cost = total profit and both revenue and
cost are equal, the total profit must be zero, so (b) is the correct answer.
2. Incorrect. You answered: b. The used purchase price of $100,000 .
A large utilities contractor bought five used trucks for $100,000 from a smaller bankrupt
utilities contractor. Six years ago, the vehicles were purchased for $300,000. It is estimated
that the annual maintenance costs for the vehicles will be $1,500 per year and each vehicle
will have a salvage value of $5,000 in four years. Which of the following would the large
utilities contractor not include in her economic analysis?
The correct answer was: a. Original purchase price of $300,000.
References: Solution: The original purchase price of $300,000 (answer (a)) is
considered a sunk cost and is irrelevant to the economic analysis for the large
utilities contractor. She should only be concerned with the costs that directly impact
her business now such as the salvage value of the vehicles, her purchase price of
$100,000, and the annual maintenance costs.
3. Incorrect. You did not provide an answer.
A company manufactures electrical metering devices that monitor power quality. The
company"s fixed cost is $68,000 per month. The variable cost is $80 per metering device. The
selling price per device can be modeled by S = 170 " 0.05 Q, where S is the selling price
and Q is the number of metering devices sold. How many metering devices must the company
sell per month in order to realize a maximum profit?
The correct answer was: a. 900 metering devices .
4. Correct. You answered: c. Sunk costs.
All of the following are usually included in an engineering economic analysis except
The correct answer was: c. Sunk costs.
References: Solution: Fixed and variable costs are usually part of the total costs
considered while revenue is part of the benefits. Sunk costs, however, are costs
incurred as a result of a former decision and are not included in an economic
analysis of a current project. So, the answer is (c).
5. Incorrect. You answered: c. 1,000.
A manufacturing firm's specialty circuit board division has annual fixed costs of $100,000 and
variable costs of $20.00 per board. If they charge $100 per circuit board, how many circuit
boards must they produce and sell in order to break even?

The correct answer was: d. 1,250.

References: Solution: To break even, total costs = total revenue, where total costs =
total fixed costs + total variable costs. $100,000 + $20X = $100X. X =
$100,000/$80 = 1250 circuit boards.