Professional Documents
Culture Documents
CAPITAL INVESTED
PAYOUT PERIOD
NET ANNUAL CASH FLOW
Present Economy involves the analysis of
problems for manufacturing a product or
rendering a service based on present or
immediate costs.
Present economy studies occur in the
following situations:
Selection of Material
Selection of Method
Selection of Design
Site Selection
Comparison of Proficiency of Workers
Economy of Tool and Equipment
Maintenance
Economy in the Utilization of Personnel
A machine part to be machined may be made
either from an alloy of aluminum or steel.
There is an order for 8000 units. Steel costs
P3.80 per kg, while aluminum costs P8.70 per
kg. If steel is used, the steel per unit weighs
110g; for aluminum, 30g. When steel is used,
50 units can be produced per hour; for
aluminum, 80 units per hour with the aid of a
tool costing P640, which will be useless after
the 8000 units are finished. If all other costs
are identical, determine which material will
be more economical.
Material
Cost
110
3.80 P 30
8.70 P
1,000 1,000
0.418 0.261
Labor and 10.80 10.80
Machine 50 80
0.216 0.135640
Tool ----- -----
8000
0.080
Cost per pc P P
Cost of 8000 0.634 0.476
units
P 5, P 3,
072 808
A Diesel engine uses Type A filter and high –
grade lubricating oil costing P5.50/L. With this
filter, the oil and the filter have to be changed
every 500 hours of operation and 5 liters of oil
have to be added every 100 hours. This filter
costs P148 a piece. 80 liters of oil fill the engine.
Another type, filter B, costing P120 may be used
with a lower grade of oil costing P4.80 per liter.
However, if this filter is used, the oil and filter
have to be changed every 300 hours and 10 liters
are added after each 150 hours the engine is
used. Which type of filter and oil would you
The ore of a gold mine in the Mountain Province
contains, on the average, 0.5g of gold per ton.
One method of processing costs P1,650 per ton
and recovers 93% of the gold, while another
method costs only P 1, 500 per ton and recovers
81% of the gold. If gold can be sold at P8, 500
per gram, which method is better and by how
much?
A certain manufacturing company received an
order for producing 100, 000 pieces of a certain
machine part. A jig is necessary for production
and two designs are presented whose properties
are as follows: JIG A JIG B
Estimated Life 100, 000 pcs 100, 000 pcs
First Cost P5, 000 P4, 200
Hourly Wage of P30 P 25
Operator
No. of pcs 100 80
produced/hr
I Pin
The total amount F to be repaid is equal to the
sum of the principal and the total interest earned:
F P 1 in
Ordinary simple interest is computed on the basis
of one banker’s year (360 days).
Continuous Compounding
F Pe rn
If the sum of P12, 000 is deposited in an account
earning interest at the rate of 9% compounded
quarterly, what will it become at the end of 8
years?
At a certain interest rate compounded quarterly,
P1000 will amount to P4, 500 in 15 years. What
is the amount at the end of 10 years?
A man possesses a promissory note, due 3 years
hence, whose maturity value is P6, 700.48. If the
rate of interest is 10% compounded semi –
annually, what is the value of this note now?
The expansion plan of a business form requires
the purchase of a parcel of land on which to
build a structure, which they will need 5 years
hence. The current costs are: land, P1, 000, 000;
building P3, 500, 000. Since these are not
needed immediately, the firm plans to defer the
purchase of the land and the construction of the
building until they are needed. If the value of the
land and the cost of the building are expected to
appreciate at the rates of 20% and 8% per
annum, respectively, what will be the total cost
of the land and the structure 5 years hence?
Nominal Rate of Interest
For compound interest, the rate of interest
usually is quoted is nominal rate of interest
which specifies the rate of interest and the
number of interest periods per year.