CASE STUDY RESEARCH PAPER- REPORT ( 48 Hours - A+ Score Required)

Construction Engineering 330 Case Study

Ammar Batta #14

Professor Hemati

Spring 2019

Table Of Contents

1. Cover________________________________________________1

2. Table of Contents ______________________________________2

3. Background___________________________________________3-5

4. Analysis/ Calculations__________________________________5/6

5. Risk Factors___________________________________________8

6. My Recommendation____________________________________9

7. Refrences_____________________________________________10

Background

The Family Movers is a company located in San Diego, California. Known for their original company of helping people pack their items and move they have expanded and offer trucks as a part of their services. They offer different types trucks to assist customers’ needs and wants. The company has multiple offices located in southern California; each branch is managed by a separate manger. Pricing on each truck depends on the acting manager at each branch. The way the company is set up makes it that each branch is having a mixture of trucks (diesel and gasoline powered) in the truck stations. To better utilize resources, the company has been repositioning trucks to avoid unnecessary purchases and wasting resources. This has been far from a success, as the receiving locations are not prepared to maintain the trucks if they differ from those it currently has. Maintenance and cost seem to cause problems for all company as well consumer.. Each location tends to only have one type of engine or fuel type truck. This causes managers to have problems with the incoming trucks. With all types of different types of trucks coming in, all branch offices need both diesel and gasoline stations. Which means they will have to spend more money on these new facilities. This makes it hard for the business to have a professional image due to all these different rates, and mixture of trucks at the wrong stations. The Family Movers have decided to prioritize the selection of trucks as well as select a universal type and fuel method. The task of finding the total amount of trucks has been assigned to a team consisting of the CEO and three local branch managers. A vote among all the branch managers shows five out of ten branch managers like the gasoline option due to its higher speed, while two out of ten are 50/50 to the choice of power unit. The company who makes the truck has given us the info of the truck’s engine and more. They also told us the info that the only difference is the engine in the two trucks.

Since trucks are used in the streets for short periods of times, the higher speed of the gasoline engine is valued at 50$/day. When not in use the gasoline trucks are turned off while the diesel units just sit and lose fuel at the rate of 1 gallon per hour. Looking at maintenance costs the diesel truck requires 9000$ in annual maintenance, where as gasoline has an annual cost of $6,000. Diesel also has estimates of 57$ for oil change (every 100 miles), $2.95 per gallon. Oil trucks details are 25$ for oil change (every 100 miles), and 3.15$ per gallon. We are told that the fueling facility we fill the trucks at, are owned by another business unit of parent company. When trucks are done for the day, we leave them at the parent company facility. Where maintenance crew cleans and services the trucks. Nightly refueling stops cost $15 but if refueling is done in the day it costs $55. Units cover 200 miles during day, operators are switched every 6 hours. Company will typically work 12 hours per day, 7 days a week. Diesel units would be kept in service for 4 years before being sold at 50,000$ each. Gasoline will be sold after 3 years for $40,000. The MARR in this case is given at 18%.

Chart above shows that Gas is cheaper so far in our analysis.

Analysis of Data

We will first start off our analysis of this data with our present worth calculation.

P=F(P/F, I ,n)

Diesel= $100,000(.5158) = $51, 580- $9,130= $42,450

Gas= $80,000(.6086) = $48, 688- $6,100= $42,588

Based on this calculation we can see that as of now the present worth of gasoline is greater by just a bit. This makes the gas choice a little bit more enticing for our company. We used the interest rate of 18% which was mentioned earlier in our data. As of now, gas is our front runner.

In our next calculation we will be using EUAC to see the cost of the two options.

EUAC= P(A/P,I,n)-S(A/F,I,n)

Disiel= $100,000(.3717)- $50,000(.1917) = $27, 585

Gas= $80,000(.4599)- $40,000(.2799) = $25, 596

We always want to minimize cost and maximize benefits as the company. So here we see that Gas truck is the better option if we are looking at it from this view.

My last method of analysis was deprecation. I used 3 different methods. The methods are straight line, Sum of the Year Digits, and Double Declining Balance. To me it looks like Diesel fairs off better, than the gasoline.

Risk

Mathematically we can see that diesel is a better option than the gasoline on money stand point. But as a company we need to portray ourselves in a positive light to attract more people to our clean business. Looking at recent studies newer diesel cars tend to have lower carbon emissions than a gasoline car. This study was subjected to small sedans so one can’t conclude if trucks follow same data. We try to pick an alternative that will benefit money wise as well as how people perceive us. As a world that is moving forward and trying to leave a little carbon footprint and we must do our part to help.

Recommendation

After taking all this info in and making charts we have to come to an option as the person in charge of this case study. At first one would think a gasoline truck would be better due to maintenance cost was greater on the diesel. Then we went and calculated all those different methods and we saw what came out. The gasoline did have a lower EUAC, but after calculating the depreciation. I saw the difference of deprecation was bigger margin than that of EUAC added up with maintenance for the gasoline car. But after contemplating the choice I believe the gasoline type is better. Due to the half the managers really wanting it due to the speed. As a company we must satisfy our employees so they can do better work which in turn helps us look better in the eye of the customer. Plus, the public is more used to filling up with gas stations, if we have diesel cars it might throw off the regular customer who won’t choose us. Especially in California due to new laws we should take the pick that is easier manage over time with ever changing guidelines. As, stated earlier my recommendation would be to choose the Gasoline trucks.

References

Engineering Economic Analysis 13th edition by Donald G. Newnan, Ted G. Eschenbach

, Jerome P. Lavelle,

Nieuwenhuis, P., & McNabola, A. (2019, February 02). Fact Check: Are diesel cars really more polluting than petrol cars? Retrieved from https://theconversation.com/fact-check-are-diesel-cars-really-more-polluting-than-petrol-cars-76241