CHAPTER 1 - Homework
MAKING ECONOMIC DECISIONS
1.1. Jim Watts, a senior engineer at a major global company, has been working in a foreign country
all of 2016. He was paid in local currency, FC. One FC = 0.3$. The currency fluctuation in 2016
for each of the four quarters was 6.2, 6.9, 4.2, and 3.8. This contracted salary for the year was that
he would be paid 75,000 in FC per quarter. What was his earnings in $ for 2016?
Reference: Case Study 1
Ross Manufacturing in Atlanta is considering outsourcing a component from an offshore
company. The company has collected the following data to make an economic decision.
Cost to make it in-house = $96 per unit.
Annual Demand = 500,000 units
Price quoted by the Asian company = $90 per unit plus a shipping cost of $20,000 per
shipment.
1.2A. Determine the number of shipments per year that the company can require the supplier to
make in order to justify outsourcing.
1.2B. In addition to cost consideration, what other factors would weigh in decision making?
1.3. In decision making related to engineering projects, based on economics, the most important
non-economic factor is:
A) Operating cost
B) Benefits
C) Morale
D) Taxes
1.4. Decision making in engineering economy is concerned with choosing the best __________.
A) alternative with the longest life.
B) alternative with the smallest cost.
C) alternative with the largest annual benefit
D) alternative that is the most cost-effective
True/False
1.5. In an economic decision making, when the inputs and outputs are fixed, the criterion to use
is minimize the input.
1.6. Most engineering projects that have economic consequences have to be justified using
economic decision making methods.
1.7. An example for fixed input in economic decision making is that the project manager has a
budget of one million dollars for this project.
1.8. In engineering economic cost is a decision making tangible factor.
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