Making Economic Decisions

Name: Giselle N Gregory

Chapter 1: Making Economic Decisions

[10 points] Two areas are under consideration for disposal sites: The first site (A) has a capacity of 20 million cubic meters. The regional EPA Board has mandated that the lower four million cubic meters can be filled with inert material only (concrete, brick, earth, etc.). The owners must buy the inert material and haul it to the area for the bottom fill before other refuse can be dumped there. The second site (B) has a capacity of 16 million cubic meters and no requirement for bottom fill; however the location would result in an average increase from the first site (A) in the travel distance (round-trip) of 6 miles for 50% of the region, an average decrease in the travel distance (round-trip) of 3 miles for 25% of the region, and no change for the remainder of the users.

Assume the following:

- Cost of inert material (material & transport) for the first site will be $7.35 per cubic meter

- Average speed of trucks to and from the disposal site is 20 mph

- The truck and crew will cost $150 per hour

- Truck capacity is five tons per load or 25 cubic meters

Which site would you recommend and why? Show your work.

Answer

Given information for site (A)

Total Site Capacity (㎥)

20,000,000

Required inert material (㎥)

4,000,000

Useable area

16,000,000

Truck Capacity (㎥)

25 (㎥) / load

16,000,000 (㎥) / 25 (㎥)

Total loads

640,000 loads

Inert material cost /(㎥)

$7.35 / (㎥)

Inert material cost

$7.35 x 4,000,000 (㎥)

Total cost of Inert material

$29,400,000

Truck and Crew cost

$150 / hour

1 trip

20 mph

Cost per mile

$150 / 20 = $7.50

Total Truck and crew