CHAPTER 2
ENGINEERING COSTS AND COST ESTIMATING
MULTIPLE CHOICE
1. A television assembly plant has a variable production output ranging from 200 sets to
350 sets a day. The building for both manufacturing and warehousing has an area of
80,000 square feet. It employs about 250 people. Most of the components that go into the
assembly are also produced in the plant.
An example for fixed cost in this plant is ______________.
A. Equipment cost
B. Power cost
C. Labor cost
D. Material cost
Answer: A.
Feedback: Equipment cost stays the same regardless the level of production output once
the plant has been designed to produce at a certain level.
2. An example for variable cost in a typical manufacturing plant is ______________.
A. Building cost
B. Equipment cost.
C. Labor cost.
D. Property taxes
Answer: C
Feedback: Labor cost depends on the output level.
3. The first unit produced in a plant took about 10 hours. If the learning curve is 95%, the
time required to produce the 8th unit may be estimated to be ________.
A. 8 hours.
B. 8.57 hours
C. 6.30 hours
D. 7.6 hours
Answer: B
Feedback:
T8 = T1 (8)b
b = log 0.95/log 2 = -0.074
T8 = 10 (8) -0.074 = 8.57
4. If the time required for the first and eighth units are 7.29 hours and 10 hours
respectively in a production operation determine the learning curve percentage for this
operation.
A. 72.9%
B. 95%
C. 81%
D. 90%
Answer: D
Feedback:
T8 = T1 (8)b
7.29 = 10 (8) b
b = -0.152
Log (X)/log 2 = -0.152
X= 90%
5. Given: Total fixed cost = $420. Variable cost/unit = $20
= $30.
The breakeven volume is _____________.
A. 14
B. 21
C. 42
D. 32
Answer: C
Feedback:
Let the breakeven volume be “X”.
30 X = 420 + 20 X
10 X = 420
X = 42
Revenue/unit
6. Given: Total fixed cost = $420. Variable cost/unit = $20. Revenue/unit = $30.
Determine the profit that can be made for a volume of 50.
A. $80.
B. $500
C. $580
D. 420
Answer: A
Feedback: Profit for 50 units = 50(30) - {420 + 50(20)} = $80
7. At Kal Tech Manufacturing Inc, the time required to make the first unit of an
engineered product is 45 minutes. Determine the time required for 16th unit if the learning
curve percentage is 90%.
A. 36.45 minutes
B. 20.89 minutes
C. 42.1 minutes
D. 29.53 minutes
Answer: D
Feedback:
T16 = T1 (16)b
b = log 0.90/ log 2 = -0.152
T16 = 45 (16) -0.152 = 29.53