(PLEASE LOOK AT THE ATTACHMENT FILE WHICH IS THE “SAMPLE CASE STUDY” TO HAVE AN IDEA ON HOW TO CHOOSE OR TO DO THE PROJECT) CON E 330: Case Study 50 Points: All Individual work; You will be required to apply information that you learn to the Case Study Tasks Recommend: a) Select a Case-Study to cover 3-4 topics in your field of study; related to Process developments for Product design or Application and Implementation of capital equipment’s selections. Interest and Equivalence Economic; Present Worth and Annual Cash Flow Analysis Choosing the Best Alternative; Income Tax; Replacement Analysis; Inflation and Price Change Safety and Environmental Needs in the Public or Private Sector. b) Research Report MS word format 8 pages double space. All Individual case study report Bring Hard copy to class no POSTING on Bb. c) All Case Study Assignment due Wednesday May 1; 2019 at the beginning of the class
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CON E 330 Section-1&2 Study Spring 2019
I.
Case Study 50 Points: All Individual work;
You will be required to apply information that you learn to the Case Study Tasks
Recommend:
a) Select a Case-Study to cover 3-4 topics in your field of study; related to Process developments
for Product design or Application and Implementation of capital equipment’s selections.
Interest and Equivalence Economic; Present Worth and Annual Cash Flow Analysis
Choosing the Best Alternative; Income Tax; Replacement Analysis; Inflation and Price Change
Safety and Environmental Needs in the Public or Private Sector.
b) Research Report MS word format 8 pages double space. All Individual case study report
Bring Hard copy to class no POSTING on Bb.
c) All Case Study Assignment due Wednesday May 1; 2019 at the beginning of the class
Select a Case Study to meet Course Learning Outcomes:
Application: Case Study:
50 Points
Proposal of Case Study; Explain the Issues or concerns and report
5 points
Apply various Engineering Economy techniques (at least 3methods) and
15 points
Apply relevant formulas for financial analysis.
5 points
Explain engineering economy analysis in the Private or Public sector
10 points
Apply economic analysis in managerial decision and recommendations
10 points
With alternatives and future risk factor
5 points
CASE STUDY EVALUATION FORM
Area
Outstanding (9-10)
Facts
The detail and
cope of the
information
incorporated into
the project
demonstrates
considerable
familiarity.
Facts, key
concepts and
principles were
presented in an
orderly fashion
with logically
sound
conclusions.
The student
brought together
ideas around to
create a
meaningful,
coherent essay.
The student could
have provided
greater detail and
scope.
The student had
some difficulty
furnishing
sufficient evidence.
The student
failed to provide
information that
is accurate and
relevant to the
project.
The student’s
presentation of
facts, and principles
was orderly; with
one erroneous
inference.
Some of the facts,
are presented in a
disorderly fashion
with some
erroneous
inferences.
The student brought
together ideas,
however, sufficient
context is lacking.
The student has
demonstrated
vocabulary and
variety in
expression
superior to this
grade level.
The student
consistently uses
correct
grammar,
syntax, spelling,
punctuation, and
capitalization.
The student has
demonstrated
vocabulary and
variety in expression
expected at this
grade level.
The essay contains
satisfactory factual
and conceptual
content, but is
presented in a
disjointed,
“grocery list”
fashion.
The student has
not demonstrated
vocabulary or
variety in
expression
expected at this
grade level.
The student has an
average of 3 or 4
errors per page in
grammar, syntax,
spelling,
punctuation, and
capitalization.
Presentation of
facts, key
concepts and
principles is
disorderly and
there are
multiple errors in
reasoning.
The student has
failed to
construct a
coherent essay
built around an
identifiable
organizing theme
or concept.
The student has
utilized a
vocabulary with
little or no range
and/or no variety
in expression.
The student has
used a wide
variety of
informative and
relevant sources.
The student has
used a sufficient
number of sources.
The student has
provided sources
but had difficulty
integrating them.
Less than 12%
12-15%
15-20%
Analysis
Synthesis
Vocabulary
/Rhetoric
Mechanics and sentence
structure
Research (if applicable)
Turnitin Originality
Good (7.5-9)
The student has an
average of fewer
than 3 errors per
page in grammar,
syntax, spelling,
punctuation, and
capitalization.
Fair (6-7.5)
Poor (below 6)
The student has
an average of
more than 4
errors per page
in grammar,
syntax, spelling,
punctuation, and
capitalization.
The student has
failed to provide
sufficient
relevant sources
for this
assignment.
20-25%
Course Objectives
•
•
•
•
•
•
•
To Offer Framework for cost management in engineering Projects.
To offer assistance in managerial decision making
To introduce fundamentals of Personal, Private and Public-sector Financing Engineering Projects
Apply Mathematics of finance to engineering and managerial decision making.
Introduce the fundamentals of economic analysis used in engineering decision making.
To introduce Economic Analysis of Replacement and Retention Decisions
To prepare students for PE/FE Examinations
Course Learning Outcomes:
This course is one of many that you will take towards your degree in Civil, Construction or
Environmental Engineering. Each of our courses is designed as part of your career development in your
respective Engineering profession. Program Outcomes are intended to provide a broad base of
knowledge to find your career. However, each course in the curriculum emphasizes particular aspects of
that overall body of knowledge. Although other outcomes may also be addressed, this course is intended
to have a particular emphasis on the following program outcomes
OUTCOME 9: Apply relevant techniques, skills and modern engineering tools to solve a simple
problem
Assessed by: Homework, Midterm and Final Exam
a) Formulate and solve time value of money problems
b) Apply various Engineering Economy techniques to compare engineering alternatives.
OUTCOME 12: Explain key concepts and problem-solving processes used in management
Assessed by: Homework
a) Apply results of economic analysis in managerial decision making
b) Apply relevant formulas for financial analysis
OUTCOME 13: Explain key concepts and problem-solving processes used in business, public
policy and public administration
Assessed by: Homework and Quizzes
a) Explain relevance of engineering economy analysis in the private sector
b) Explain relevance of engineering economy analysis in the public sector
Writing a Research Paper
Some general guidelines to keep in mind while writing a research paper.
Finding a Researchable Topic
•
•
•
Try to narrow down two or three topics that truly interests you
Talk with your course instructor and classmates about your topics
Pose your topics as a question to be answered or a problem to be solved
Finding, Selecting, and Reading Sources
You will need to look at the following types of sources:
•
•
•
•
Look up library books using catalog on Moodle or library page on the website. Search
using the keyword or subject.
Use LIRN. This database has peer reviewed full text articles, E-books, newspaper articles
etc.
Open courseware, Magazine and newspaper articles can provide you with some facts.
Primary vs. secondary sources
Documenting Information
The following systems will help keep you organized:
•
•
•
Create an annotated bibliography for all your resources. This allows you to cite,
summarize and evaluate resources.
Use Bibme, Citefast or Refdot etc. to organize your content
If you want to use 10 references, plan to research three times more that would be around
30.
Start your paper from bottom up
•
•
•
•
Start by writing references.
Once you have enough material to start, work on the topic, its significance, etc.
Use your referenced material to enhance your topic, refute it or build on it.
Any time a quote is used from the above organized material, provide in text citation.
Writing the Body
•
•
•
•
Use outline and prospectus as flexible guides
Build your essay around points you want to make (i.e., don’t let your sources organize
your paper)
Integrate your sources into your discussion
Summarize, analyze, explain, and evaluate published work rather than merely reporting it
Writing Abstract
•
After completing your paper, write an abstract summarizing the paper.
References
•
•
Make sure all the in text citations have references. In APA, references have to be
alphabetized. They have to follow hanging indentation.
Generally, balance your references by having some from peer-reviewed journals, some
from books and some from internet resources.
Revise the Final Draft
•
•
•
•
Go through the APA format checklist.
Make sure there is no bias in writing.
Put the paper through plagiarism detector
Check capitalizations, indents, levels of headings, in text citations, tables etc. for correct
usage
CON E 430
FALL 2012
CASE STUDY
Dr. Hossein Hemati
Jonathan Madrigal
Class ID # 52
12/3/12
1
Case Study: Economic Analysis of a
Modified Conveyor System at BuickOldsmobile-Cadillac
2
1 Background
The Buick-Oldsmobile-Cadillac (BOC) plant in Lansing, Michigan, is involved in the fabrication and
assembly of the Olds Calais, Buick Somerset Regal, and Pontiac Grand Am. A small part of the total
operation is the sheet molding compound (SMC) area where plastic parts are formed from sheets of
plastic material. Front-end panels (the front part of the car where the lights are housed) are
produced here, and a conveyor system is used to transport the panels after they are formed. This
case study examines an economic justification analysis for a proposed modification of the conveyor
system that would decrease the number of workers needed while improving quality and facilitating
material flow.
2 Description of Present SMC Prime and Finish Process
The SMC prime and finish operation starts on the first floor with stud drivers. Here a machine
screws a two-ended bolt into each front end panel so that it can be attached to the car later. The
conveyor then moves the panels upstairs where they are washed and primed. Next, the conveyor
moves the panels through an oven to heat-treat the prime coating and then returns them to the first
floor. An inspector checks each panel for pits and defects and marks them for the pit filler, who uses
compound to fill in the defects. The compound must dry before it is sanded (the next operation),
but the current setup does not allow sufficient room for this to happen every time. After the panel is
sanded down, it travels up to the second floor again, where it is inspected for any major repairs that
must be made. If repairs are needed, the panel is taken off the conveyor; otherwise, it moves on to
the washer, where any dust and debris is removed. The conveyor then moves the panel up to the
third floor to the second prime spray booth and back down to the second floor, where it is
processed through an oven.
The panel is inspected again, and the pit fill and sand operations are performed as necessary. Again,
the area currently allocated to this operation does not always allow the compound enough time to
dry. The conveyor moves the panels to final inspection and to the packing area. Once the panels are
packed, they must be moved via elevator to the first floor, where the shipping docks are located.
There is only one elevator, and if it malfunctions, there is no way to transport the parts to the first
floor.
The existing system is producing good quality front-end panels, but the current arrangement
requires that the conveyor travel frequently between three floors and separates two similar
operations, requiring two supervisors. The finished and packed parts must also be moved from the
second floor packing area down to the first floor with an elevator. In addition, the repair and
maintenance for the conveyor system will require an estimated $180,000 in the upcoming year
alone in order to keep it in operable condition. Projected maintenance costs for later years are
unavailable but they are estimated to be around $100,000 per year.
3
3 The Proposed System
The proposed system would be a modification of the current prime and finish conveyor system. It
would reduce the number of trips made between floors, use just one supervisor to oversee similar
operations, eliminate the need for the elevator, and reduce the number of employees needed for the
prime and finish operation. The proposed system under would still be used to move the panels
along a specified route while different operations are performed on them. The major change is that
almost all of the major operations would be performed on the second floor. The areas needed for
the two pit fill and sanding operations would be located in the same general area, thus requiring
only one supervisor; the result should be better control of and more uniform standards for those
operations. There would be more room between the pit filling station and the sanding operation so
the compound would have an adequate amount of time to dry, resulting in better quality. A sanding
station for hood line sanding would be added after the stud driver machines in the proposed
process. (The hood line is where the front-end panel meets the hood of the car{an area very visible
to the consumer.)
In an effort to improve quality, it has been determined that this job should receive careful attention
and be performed before the initial priming process. The inspectors associated with the pit filling
operations would be eliminate in the proposed process, leaving that job to the pit fillers themselves.
The major repair area would be relocated so that it would be near the final inspection point and
repaired parts could easily be sent through the second priming station again. After the final
inspection, the conveyor would carry the panels down to the first floor to be packed and shipped.
This would completely eliminate the need for the elevator and facilitate a steady material flow.
The proposed system would be designed and built to satisfy ergonomic considerations. So jobs
would be easier to perform, and the number of required employees would be reduced. Also, the
inspection stations would be minimized, which would further reduce the total number of
employees needed for the prime and finish operation. The question is, will the savings that would
be derived from the reduction in labor justify the cost of the proposed system?
3.1 Site preparation
Before installation of the new system, the old equipment must be removed, rearranged, and
painted. This site preparation would be done by the in house staff at the cost of $337,000. The firm
could elect to expense the preparation cost at the time the new system is installed. Some of the
existing machines would be relocated, but all would be retained in the new system; thus there
would be no replacement of equipment.
3.2 Cost of New Equipment
The proposed system requires a new conveyor, a drive, and a new sanding machine to be located
near the first prime area. The cost for purchasing and installing the new equipment is estimated at
$598,000. (The installation would take place during the regularly scheduled plant maintenance
period, so that no shut down costs are expected.) It also requires an increase in net working capital,
4
costing $85,000. This additional working capital must be considered part of the initial net cash
outlay, but it can be recovered in full at the time of project closing. The economic life of this new
system is not precisely known, but the firm’s past experience with this type of equipment indicates
that the system has about 10 years of useful life, even though the physical life could easily extend
almost 20 years with proper maintenance.
Since automobile models are changing from a conventional to a more aero-dynamic look, however,
the BOC plant is planning to install an entirely new system within 5 years. Therefore, BOC
management would not expect the modified system to serve more than 5 years if installed. The
purchased equipment falls in the 7-year MACRS category, with no investment tax credit allowed.
The depreciation for each year over the study period is calculated as follows:
-Year Depreciation base x MACRS rate Depreciation
1 598,000 x (.1429) = 85,454
2 598,000 x (.2449) = 146,450
3 598,000 x (.1749) = 104,590
4 598,000 x (.1249) = 74,690
5 598,000 x (.0892) = 53,342
Total = $464,526
This adds up to $464,526, leaving a book value of $133,474 at the end of 5 years.
The salvage value of this system after 5 years is also in question, but it is estimated that the value of
the scrap and used parts taken off the system at the end of 5 years would not be large enough to
offset the cost of dismantling and scrapping the system, resulting in a negative salvage value of
about $80,000.
3.3 Expected Cash Savings
The savings involved in this project will come from the reduction of 17 employees from the process.
These employees will all be hourly production workers working one of three shifts (day, afternoon,
or midnight). The BOC plant uses an average figure for employee wages when computing the cost
associated with workers. This figure, the average annual straight time and overtime cost,” is
$47,362/year for hourly production workers. We thus find an annual savings of
(17employees) X ($47,362/employee/year) = $805,154/year
3.4 Operating and Maintenance Costs
The additional operating and maintenance costs associated with the modified system are estimated
to be:
5
-Additional
Year O&M costs ($)
1 18,220
2 17,000
3 18,500
4 31,500
5 21,500
The increased costs are primarily due to additional power requirements in the sanding operation.
The trend in operating costs over the project years reflects the inclusion of an allowance for startup inefficiencies in the first year, cash expenditures for overhauling expenses in the fourth year, and
a gradual loss of operating efficiency thereafter.
3.5 Other Considerations
Another factor for the BOC to consider at this time is the alternative uses for funds. The BOC has
sufficient funds to modify the current operating system; however there are other ways these funds
could be used. The other projects the management is considering at this time have an estimated
return of at least 15% after taxes. This implies that the BOC’s MARR would be 15%. (The marginal
income tax rate at present is 40% and no change in this rate is expected.)
Issues for Consideration
1. Determine the project’s feasibility for the 5-year life of the proposed conveyor system.
2. Suppose that, to install the proposed conveyor system, there would be a 2-day’s of plant shutdown. This translates into a cost of $350,000 in lost production. How should this shut-down cost be
considered in the analysis?
3. Suppose that there is no place to accommodate the 17 workers in the plant and they must let go.
This action would lead to paying $200,000 for severance. How would this payment affect the
profitability of the investment?
4. Recall that the annual savings figures based on displacing 17 workers were assumed to remain
unchanged over the years. Suppose that the wages would increase at the annual rate of 7% over the
years, due to inflation. The annual O&M cost would also increase at the annual rate of 6%.
6
Five Year Analysis
❖ ALTERNATIVE A: Keep same equipment
-Repair & Maintenance Costs
180,000 1st year
400,000, 4 years
$580,000
-Employee Wages Using 7% Rate (17 Employees)
F= 805,154 (F/A, 7%,5) = $4,630,441
Total Cost = 580,000 + 4,630,441 = $5,210,441
❖ ALTERNATIVE B: Modify Equipment
-Installation Cost= $598,000
-Old Equipment Removal Cost= $337,000
-Operating and Maintenance Cost
After using 6% rate and on the yearly values from Section 3.2 and adding them up:
YEAR
1
2
3
4
5
Total
Annual Amount
6%
17000 (1.060)
18500(1.060)
31500(1.060)
21500(1.060)
18,220
18,020
19,610
33,390
22,790
112,030
O & M costs = $112,030
-Book and Salvage Value
After using the Year Depreciation base x MACRS rate Depreciation analysis, the book value
computed is $133,474.
7
Salvage value:
“Is estimated that the value of the scrap and used parts taken off the system at the end of 5 years
would not be large enough to offset the cost of dismantling and scrapping the system, resulting in a
negative salvage value of about $80,000”.
Total Savings = $133,474 – $80,000= $53,474
-Employee Wages (Reduction of 17 employees)
Cost = $0
-Final Cost
Cost = 598,000+ 337,000 + 112,030 – $53,744= $993,556
-CASH FLOW
4,683,915
= $3,363,884
935,000 18,220
18,020
19,610
33,390
22,790
Consideration Analysis
Even with a 2 day plant shut down cost of $350,000 and a $200,000 cost for severance, the tota …
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