DINGLASAN, NADINE C.
SCORE:
GUTIERREZ, RHINA MAE I.
DATE: MARCH 5, 2024
BSCE II – GB
EXERCISE 1
1. While studying for the engineering economy final exam, you and two friends find yourselves
craving a fresh pizza. You can’t spare the time to pick up the pizza and must have it delivered.
“Pick-Up-Sticks” offers a 1-1/4-inch-thick (including toppings), 20-inch square pizza with your
choice of two toppings for Php650 plus 15% sales tax and a Php50 delivery charge (no sales tax
on delivery charge). “Fred’s” offers the round, deep-dish Sasquatch, which is 20 inches in
diameter. It is 1-3/4 inches thick, includes two toppings, and costs Php750 plus 5% sales tax and
free delivery.
a. What is the problem in this situation? Please state it in an explicit and precise manner.
 The problem is to determine which pizza option provides the best value
considering factors such as cost, size, thickness, toppings, sales tax, and delivery charges.
b. Systematically apply the seven principles of engineering economy to the problem you have
defined.
1. Identify the problem: Determine the best pizza option considering cost, size, thickness,
toppings, sales tax, and delivery charges.
2. Define the criteria: Criteria include cost per unit volume, taste preference, convenience, and
any dietary restrictions.
3. Develop alternatives: Compare the "Pick-Up-Sticks" square pizza and the "Fred's" round, deepdish Sasquatch pizza.
4. Analyze the alternatives: Calculate the total cost for each pizza option, including sales tax and
delivery charges.
5. Select the best alternative: Choose the pizza option that offers the best value based on the
defined criteria.
6. Conduct sensitivity analysis: Assess how changes in factors such as toppings or delivery charges
impact the overall value of each pizza option.
7. Make a decision: Select the pizza option that aligns with preferences and provides the best
overall value.
c. Assuming that your common unit of measure is pesos (i.e., cost), what is the better value for
getting a pizza based on the criterion of minimizing cost per unit volume.
 Minimizing Cost per Unit Volume (to compare the pizzas based on minimizing
cost per unit volume)
Pick-Up-Sticks Pizza:
- Cost: Php650 + 15% sales tax + Php50 delivery charge.\
- Volume: 20 inches * 20 inches * 1.25 inches.
- Cost per unit volume = 0.63
Fred's Sasquatch Pizza:
- Cost: Php750 + 5% sales tax (free delivery)
- Volume: (1/4) * π * (20 inches)^2 * 1.75 inches.
- Cost per unit volume = 0.30
 Upon comparing the cost per unit volume for both pizzas, we determined that Fred's
Sasquatch Pizza has the better value of 0.30.
d. What other criteria might be used to select which pizza to purchase?
1. Taste Preference: Consider personal preference for square or deep-dish pizza.
2. Convenience: Evaluate delivery time and ease of ordering.
3. Toppings Selection: Compare the variety and quality of toppings offered by each restaurant.
4. Dietary Restrictions: Assess if any pizza options cater to specific dietary needs such as glutenfree crust or vegetarian toppings.
5. Portion Size: Consider the number of people being served and portion sizes offered by each
pizza option.
2. During your first month as an employee at Greenfield Industries (a large drill-bit manufacturer),
you are asked to evaluate alternatives for producing a newly designed drill bit on a turning
mchine. boss’ memorandum to you has practically no information about what the alternatives
are and what criteria should be used. The same task was posed to a previous employee who could
not finish the analysis, but she has given you the following information: An old turning machine
valued at Php350,000 exists (in the warehouse) that can be modified for the new drill bit. The in-
house technicians have given an estimate of Php40,000 to modify this machine, and they assure
you that they will have the machine ready before the projected start date (although they have
never done any modifications of this type). It is hoped that the old turning machine will be able
to meet the production requirements at full capacity. An outside company, McDonald Inc., made
the machine seven years ago and can easily do the same modifications for Php60,000. The cooling
system used for this machine is not environmentally safe and would require some disposal costs.
McDonald Inc. has offered to build a new turning machine with more environmental safeguards
and higher capacity for a price of Php450,000. McDonald Inc. has promised this machine before
the startup date and is willing to pay any late costs. Your company has Php100,000 set aside for
the start-up of the new product line of drill bits. For this situation,
a. Define the Problem:
Greenfield Industries has to decide how to make a new drill bit. Either fix up their old
machine, buy a modified one from another company, or get a brand-new machine with more
capacity and environmental features. Also, to analyze which option will be cost efficient and
effective for producing the newly designed drill bit on a turning machine.
b. List Key Assumptions:
1. The existing turning machine can be modified efficiently to fulfill production needs.
2. Modifications can be completed promptly by either internal technicians or McDonald Inc.
3. The cost projections from both choices are precise.
4. The disposal expenses for the cooling system of the old machine are manageable
environmentally.
5. The success of the new product line doesn't rely on the particular turning machine selected.
c. List alternatives facing Greenfield Industries:
1. Modify the existing turning machine in-house (Php40,000).
2. Modify the existing turning machine with McDonald Inc. (Php60,000).
3. Acquire a new turning machine from McDonald Inc. with enhanced environmental protection
and increased capacity (Php450,000).
d. Select a criterion for evaluation of alternatives
Cost-effectiveness: Compare how much each option will cost, including the money needed to
modify the machines, get rid of old equipment, and any extra money needed to start up. See if
these costs fit within the company's budget limits.
e. Introduce risk into this situation
1. Technical Risk: There's a chance our own technicians might not be able to fix the old machine
because they haven't done it before.
2. Time Risk: If the modifications take too long, it could delay when we can start using the
machine, costing us money or opportunities.
3. Environmental Risk: Getting rid of the old machine's cooling system might cost more than we
thought, affecting how much money we save overall.
4. Supplier Risk: Depending on McDonald Inc. to fix the machine or give us a new one has risks
like whether the work will be good quality, if they'll finish on time, and any issues with our
contract.
f. Discuss how nonmonetary considerations may impact the selection.
1. Environmental Impact: Picking the new eco-friendly machine matches our company's goal of
being socially responsible, even if it costs more.
2. Capacity and Efficiency: The new machine can do more work, which might help us save
money in the long run, even though it costs more at first.
3. Supplier Relationship: We should also think about how reliable and well-known McDonald
Inc. is as a supplier when we decide whether to fix the old machine or get a new one.
Thinking about all these things, not just the cost, can help Greenfield Industries make a better
decision.