Engineering Economy Exam

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ESE400/540 EXAM #1

Practice Instructions: Write your name on both this exam cover-page and on the answer booklet. Be sure to hand in both documents at the end of the exam, together with the interest tables, the normal distribution table, and the calculator. You must use the provided calculator. Personal calculators are not permitted. There are 10 questions in this exam. You are required to answer the first 7 questions: • Questions #1, #2 and #3: 20 points each • Questions #4, #5, #6 and #7: 10 points each. Your exam grade is based on these 7 questions. If time permits, you may answer any or all of the additional 3 questions for extra credit. Each of the extra credit questions is worth 10 points. Only scores from the 7 required questions will count toward your total exam grade. Extra credit scores, if any, will be considered when calculating your final course grade at the end of the term. All work is to be clearly shown in the answer booklet. The graders must be able to see how your answer was derived. Clearly identify all answers. Do not write on these question sheets. FAILURE TO USE THE MOST EFFICIENT PROBLEM SOLVING METHODS TAUGHT IN ESE400/540 WILL BE PENALIZED.

Question #1 (REQUIRED: 20 Points)

The total cost (including direct costs, indirect costs and the contractor’s profit margin) in 1996 for an integrated circuit manufacturing facility in Denver was $10,000,000. The facility’s direct costs were comprised of labor (40%), materials (25%), and equipment (35%). Indirect costs were equal to 15% of total direct costs. The construction company’s profit margin was 7% of direct plus indirect costs. Cirrus Semiconductor is considering building a similar facility today (year 2004) in San Diego; however, the new facility would have a production capacity of 9,000 boards/month whereas the earlier facility’s capacity was 5,000 boards/month. Also, the new facility will incorporate a burn-in department at a total cost...