1) The annual equivalent wiring cost of the specialty wiring device is given by

Question

1) The annual equivalent wiring cost of the specialty wiring device is given by (where

An electrical contractor is considering the purchase of a specialty wiring device which has a 5100,000 price tag and a zero salvage value after 10 years. The device's annual operating costs are estimated to be S20 per hour in the first year of operation increasing each year thereafter by $0.50 per hour. The device is capable of wiring an average of 50 feet per hour. MARR = 10% An alternate method of wiring is to hire four (4) workers at S15 per hour per worker with hourly operating costs increasing each year thereafter by $0.50 per hour per worker. The four workers can install, on average, a total of 30 feet of wire per hour. MARR = 10%. Use a 10-year period of analysis.

Explanation / Answer

1) Annual equivalent wiring cost = Annual eqv cost of intial investment + eqv cost of annual operating cost

= 100,000(A/P,10%,10) +Common cost + Increment cost

= 100,000(A/P,10%,10) + x*20/50 + x*0.5*(A/G,10%,10)/50

= 100,000(A/P,10%,10) + x{[20+0.5(A/G,10%,10)]/50}

(A/P,10%,10) gives you annual equivalent payment for an investment of $1 @ 10% for 10 years

(A/G,10%,10) gives you equivalent cost of an annual increment

Common Cost = 20* Total wiring / Wiring per hour

2) Annual equivalent wiring cost =   Common cost + Increment cost

= 4x(15)/30 + 4x(0.5)(A/G,10%,10)]/30}

Common Cost = 15* Number of Workers*Total wiring / Wiring per hour

(A/G,10%,10) gives you equivalent cost of an annual increment

3) Since the breakeven point is exceeded, the one with the Fixed cost should be chosen because beyond breakeven point, fixed cost component per item gets reduced and it makes sense to make the investment

option a is correct

Related Questions

Navigate

• Browse (All)
• Browse 1
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.