ET2051 Engineering Management - Staff.city.ac.uk - City University

(b) Julian Carruthers is making cases of Coupled Cutlery, where each case contains 12
Knorks, 12 Sporks and 12 Spifes. Material costs are:
• Strip metal @ £35 per case of cutlery
• Lubricants @ £3 for 36 implements
• Packing @ £2 per case.
In addition, part-time labour costs £100 for 10 cases. There are three full-time
workers, who cost the firm £100 a week each. Overheads are £200 per week. The
machines cost £26,000 and are depreciated over 5 years. Finance has been partly
from Mr Carruthers's own money and partly from a loan of £25,000 at 20% per
annum, repayable in full after 1 year.
(i) List the fixed costs per week and find their total. (Round to nearest £100.)
[4 marks]
(ii) List the variable costs per case and find their total.
[4 marks]
Question 4.
(iii) Draw a graph of total absorption cost versus quantity over the range 5 to
20 cases per week.
[4 marks]
(iv) Julian Carruthers found he could sell 5 cases per week at £200 per case,
and estimated that he could sell 15 cases per week at £150 per case. Use this
information together with your graph under (b)(iii) above to estimate the
profitable range of production.
[3 marks]
(a) (i) If a certain piece of process equipment is designed to carry a throughput, Q
0
,
and has a capital cost, C
0
, write down the general power law expression for the
capital cost, C, of a similar piece of equipment designed for a different throughput, Q.
[3 marks]
(ii) A compressor costing £600,000 has a throughput of 3 m 3 /s. Given that the
exponent in the power law is 0.8, estimate the cost of a compressor of the same
pressure ratio giving a throughput of 4 m 3 /s.
[2 marks]
(b) The table below gives the summary capital costs for a 500 te/day methanol plant,
built on a new, green-field site.
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ET2051 Engineering Management II Jun07.doc