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Cost Analysis

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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?

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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