Example-P of Engg ECO

AN EXAMPLE PROBLEM
(Principles of engineering economy)
While studying for the Engineering Economy

final exam, you and two friends find yourselves
craving for a fresh pizza. You can’t spare the
time to pick up the pizza and must have it
delivered.
1
• “Pick-Up-Sticks” offers a 1” thick (including
toppings), 20” square pizza with your choice of two
toppings for $15 plus 5% sales tax and a $1.50
delivery charge (no sales tax on delivery charge).
• “Fred’s” offers the round, deep-dish which is 20

inches in diameter. It is 1-3/4” thick, which includes
two toppings, and costs $17.25 plus 5% sales tax
and free delivery.
2
(a) What is the problem in this situation? Please state it in a
clear manner.
(b) Systematically apply the seven principles of engineering
economy to the problem you have defined in part (a).
(c) Assuming that your common unit of measure is $ (i.e.,
cost), what is the better value for getting a pizza based on
the criterion of minimizing cost per unit of volume?
(d) What other criteria might be used to select which pizza
to purchase?
3
A TYPICAL DISSCUSSION/SOLUTION
• (a) One problem involves how to satisfy the

hunger of three students--assume a delicious
pizza will satisfy this need. (Another problem is
to learn enough about Engineering Economy to
pass--or better yet earn an “A” or a “B”--on the
final examination and top the course. Maybe a
pizza will help solve this problem too?)
• Let’s use “hunger satisfaction with a pizza” as
the problem/need definition.
4
(b) Principle 1 - Develop the Alternatives

• i) Alternative A is to order a pizza from
“Pick-Up-Sticks.”
• ii) Alternative B is to order a pizza from
“Fred’s.”
• Other options probably exist but we’ll stick to
these two alternatives.
5
Principle 2 - Focus on the Differences
• Difference in delivery time could be an issue.

• A perceived difference in the quality of the
ingredients used to make the pizza could be
another factor to consider.
• We’ll concentrate our attention on cost
differences in part (c) to follow.
6
Principle 3 - Use a Consistent Viewpoint
• Consider your problem from the perspective of three

customers wanting to get a good deal. Does it make
sense to buy a pizza having a crust that your dog
enjoys, or ordering a pizza from a shop that employs
only college students?
• Use the customers’ point of view in this situation rather
than that of the owner of the pizza shop or the driver of
the delivery vehicle.
7
Principle 4 - Use a Common Unit of
Measure
• Most people use “dollars” as one of the most

important measures for examining differences
between alternatives. In deciding which pizza
to order, we’ll use a cost based metric in part
(c).
8
Principle 5 - Consider All Relevant Criteria
• Factors other than cost may affect the decision

about which pizza to order. For example, variety
and quality of toppings and delivery time may be
extremely important to your choice. Dynamics of
group decision making may also introduce
various “political” considerations into the final
selection (can you name a couple?).
9
Principle 6 - Make Uncertainty Explicit
• The variability in quality of the pizza, its

delivery time and even its price should be
carefully examined in making your selection.
(Advertised prices are often valid under special
conditions--call first to check on this!)
10
Principle 7 - Revisit Your Decision
• After you’ve consumed your pizza and returned

to studying for the final exam, were you
pleased with the taste of the toppings? On the
downside, was the crust like cardboard?
• You’ll keep these sorts of things in mind (good
and bad) when you order your next pizza!
11
(c) Finally some numbers to crunch--don’t forget to list any
key assumptions that underpin your analysis to minimize
the cost per unit of volume (Principles 1, 3, 3, 4 and 6 are
integral to this comparison).
Assumptions: (i) weight is directly proportional to volume (to
avoid a “meringue” pizza with lots of fluff but meager substance),
(ii) you and your study companions will eat the entire pizza (avoids
variable amounts of discarded left-overs and hence difficult-to
predict cost of cubic inch consumed) and (iii) data provided in the
Example Problem are accurate (the numbers have been confirmed
by phone calls).
12
Analysis:
Alternative A “Pick-Up-Sticks”
• Volume = 20” x 20” x 1” = 400 in3
• Total Cost = $15 (.75) + $1.50 = $17.25
• Cost per in3 = $0.043
Alternative B “Fred’s”
• Volume = (3.1416) (10”)2 (1.75”) = 550 in3
• Total Cost = $17.25 (1.05) = $18.11
• Cost per in3= $0.033
• Therefore, order the pizza from “Fred’s” to minimize total cost per
cubic inch.
13
(d) Typical other criteria you and your friends could
consider are:

• cost per square inch of pizza (select “Pick-Up-Sticks”),
• minimize total cost regardless of area or volume(select
“Pick-Up-Sticks”), and
• “Fred’s” can deliver in 30 minutes but “Pick-Up- Sticks”
cannot deliver for one hour because one of their ovens
is not working properly (select “Fred’s”).
14
Discussion

Example-P of Engg ECO

Uploaded by

Copyright:

Available Formats

Example-P of Engg ECO

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Example-P of Engg ECO

Uploaded by

Copyright:

Available Formats

AN EXAMPLE PROBLEM

(Principles of engineering economy)

While studying for the Engineering Economy

• “Fred’s” offers the round, deep-dish which is 20

• (a) One problem involves how to satisfy the

• Difference in delivery time could be an issue.

• Consider your problem from the perspective of three

• Most people use “dollars” as one of the most

• Factors other than cost may affect the decision

• The variability in quality of the pizza, its

• After you’ve consumed your pizza and returned

You might also like