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Cost Analysis

A portable generator is needed at a remote construction site. Two alternatives are being considered. Their annual fixed costs and operating and maintenance costs per hour are shown in the table below. The contractor runs three 8-hour shifts per day for 250 working days per year

Generator 1

Fixed cost per year $4000
O&M Costs ($/hour) $7.00

Generator 2

Fixed Cost per year $8000
O&M Costs $5.50

a. How many hours per shift is a generator needed if the contractor is indifferent between the two generators?

b. If the site requires a generator for 2.5 hours per shift, which generator is preferred, and what is its estimated annual cost?

c. If the site requires a generator for 5.5 hours per shift, which generator is preferred, and what is its estimated annual cost?

Solution Preview

Please refer attached file for better clarity of formulas.

a.  How many hours per shift is a generator needed if the contractor is indifferent between the two generators?

Let x be the number of hours per shift be x.
Total cost in case of generator 1=4000+3*x*250*7=4000+5250x
Total cost in ...

Solution Summary

Solution chooses the economical generator in the given cases.

$2.19