Solutions to Chapter 2 Problems
A Note To Instructors: Because of volatile energy prices in today's world, the instructor is encouraged to vary energy
prices in affected problems (e.g. the price of a gallon of gasoline) plus and minus 50 percent and ask students to
determine whether this range of prices changes the recommendation in the problem. This should make for stimulating in-
class discussion of the results.
2-1 The total mileage driven would have to be specified (assumed) in addition to the variable cost of fuel per
unit (e.g. $ per gallon). Also, the fixed cost of both engine blocks would need to be assumed. The
efficiency of the traditional engine and the composite engine would also need to be specified
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,2-2 (a) 4 – sunk
(b) 5 – opportunity
(c) 3 – fixed
(d) 2 – variable
(e) 6 – incremental
(f) 1 – recurring
(g) 7 – direct
(h) 8 – nonrecurring
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exist. No portion of this material may be reproduced, in any form or by any means, without permission in writing from the publisher.
, 1,000,000 miles/year
2-3 (a) # cows = = 182.6 or 183 cows
(365 days/year)(15 miles/day)
Annual cost = (1,000,000 miles/year)($ miles) = $166,667 per year
(b) Annual cost of gasoline = 1,000,000 miles/year
30 miles/gallon
× $4/gallon = $133,333 per year
It would cost $33,334 more per year to fuel the fleet of cars with gasoline.
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exist. No portion of this material may be reproduced, in any form or by any means, without permission in writing from the publisher.
, 2-4 Cost Site A Site B
Rent = $5,000 = $100,000
Hauling (4)(200,000)($1.50) = $1,200,000 (3)(200,000)($1.50) = $900,000
Total $1,205,000 $1,000,000
Note that the revenue of $8.00/yd3 is independent of the site selected. Thus, we can maximize
profit by minimizing total cost. The solid waste site should be located in Site B.
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exist. No portion of this material may be reproduced, in any form or by any means, without permission in writing from the publisher.
