Download Cost Estimation for New Manufacturing Facility and Box Culvert Construction and more Assignments Civil Engineering in PDF only on Docsity! THE CHARLES E. VIA JR. DEPARTMENT OF CIVIL AND ENVIRONMENTAL ENGINEERING Vecellio Construction Engineering and Management Program CEE 4014 – Estimating, Production and Cost Engineering Assignment A2 The Base Radio and Boxit, Inc. Cases 1. The Base Radio Case The Base Radio Company has recently developed a new Ultra Curve Wave radio that is taking the market by storm. Market studies indicate that the company will need to expand manufacturing capacity two years from now by building a new 24,000 unit per day manufacturing facility at its Nashburg site. Land to expand the site so that the new assembly plant can be built has been purchased at a cost of $1,675,000. The chairman wishes to know approximately what the facility will cost and has asked you to prepare a screening or order of magnitude estimate. You know that the company has previously built a manufacturing facility essentially similar to the one now being planned. This prior facility had a capacity of 16,000 units per day and was built in Aweville nine years ago. You search the company’s records and find the actual costs of the prior facility given in Table 1. Table 1: Activity Cost Item Cost Land $5,250,000 Site development $2,895,000 Manufacturing facility $9,150,000 Water supply $560,000 Electrical reticulation $965,000 Water treatment plant $680,000 Total $19,500,000 You believe that costs for the manufacturing facility itself do not vary linearly with monthly production, as there is an increasing return to the scale of the operation. You therefore believe that the relationship between the manufacturing facility cost and monthly production can be approximated by the exponential rule y = a · xb with b = 0.7, x being production in units/day, y being cost in $, and a being a constant. You believe that the cost of installing the water supply system and the electrical reticulation is linearly proportional to the monthly production of the facility, as each unit requires a given amount of water and electricity. Water treatment is a different matter as the latest regulations in Nashburg are much more stringent than the old regulations were in Aweville. Your environmental department tells you that 1 the unit cost of treating water in Nashburg today is 2.6 times the unit cost of treating water in Aweville nine years ago. You are very worried about the cost of site development, as it is unique to the characteristics of the site. You therefore call a friend who works for a contractor in Nashburg and ask him to give you an estimate of what he thinks the site development will cost. He emails you a reply that reads as follows: “I estimate that the site development will cost $1,960,000 at today’s prices. You need to add an inflation allowance of 7% per year to this estimate if construction is to take place later than this year.” You know that inflation is an issue and suspect that differences in the general level of construction costs between Aweville and Nashburg would also have to be allowed for in preparing the estimate. You therefore contact your economic advisor who gives you Table 2 of construction cost indices. Table 2: Construction Cost Indices Year Aweville Nashburg Nine Years Ago 1.00 1.13 Today 1.70 1.91 Your economic advisor also states that: “The best estimate we can provide for increases in construction cost between now and two years from now is 7% per year.” You believe you have all the information you need and sit down to prepare the estimate. “Now, how do I do this…?” Assignment 1. Analyze the data given and produce a conceptual level estimate for the new facility in Nashburg. 2. Present your work under cover of a professional memo that highlights the main features of the work done by your team and an assessment of the accuracy and reliability of the estimate you have produced. Complete the assignment set out in points 1 – 2 above by working in a team of 2 to 3 students. Each team is to submit a single response. Submittals from teams of less than 2 or more than 3 will not be graded. 2
