11-CS-4 Engineering Law and Professional Liability · December 2017
Nivaar worked solution (AI-drafted; not reviewed by a licensed engineer)
National Exams — December 2017 — 11-CS-4 Engineering Management. Closed book; no calculators. Any five questions constitute a complete paper; all questions are of equal value (20 marks each). Seven questions are set; full worked answers to all seven (Questions 1–7) are given below.
Question text not reproduced: the examination questions are © Engineers and Geoscientists BC. Open the official past paper (linked at the top of this page) to read the question, then follow the worked solution below.
The balance sheet reports an organization's financial position at a single point in time and always obeys the accounting identity Assets = Liabilities + Owners' Equity. Its three components are defined as follows. Assets are the economic resources the firm owns or controls that are expected to yield future benefit; they divide into current assets—cash or items expected to become cash within one year, such as accounts receivable and inventory—and fixed (non-current) assets such as land, buildings, and equipment used over many years. Liabilities are obligations to outside parties: current liabilities like accounts payable and short-term debt due within a year, and long-term liabilities such as bonds and long-term loans. Owners' (shareholders') equity is the residual interest in the assets after deducting liabilities; it comprises contributed capital paid in by owners plus retained earnings accumulated from profits not distributed. Because equity is defined as the residual, the two sides of the statement necessarily balance.
To decide whether a project merits funding, engineers place costs and benefits occurring at different times on a common basis using the time value of money. Net Present Value (NPV) discounts every future cash flow to the present at the required rate of return and subtracts the initial investment; a positive NPV means the project earns more than that rate and adds value, so the rule is to accept projects with NPV greater than zero. Internal Rate of Return (IRR) is the discount rate at which NPV equals zero—the project's own compound return—and a project is accepted when its IRR exceeds the minimum acceptable rate of return (MARR). Benefit–cost ratio compares the present worth of benefits to that of costs, accepting when the ratio exceeds one. The payback period measures how quickly the investment is recovered, giving a rough liquidity screen but ignoring the time value of money and later cash flows. Annual worth converts all cash flows to an equivalent uniform annual amount, which is convenient for comparing alternatives with different lives. Applied together, these techniques give a rational, time-adjusted basis for approving or rejecting the requested funding.
(a) Just-in-Time (JIT) is a pull-based inventory philosophy in which materials and components arrive exactly when needed for production, so that inventory—regarded in lean thinking as waste that hides problems—is driven toward zero. JIT depends on level scheduling, reliable suppliers, short setup times, and high quality, since there is no buffer stock to absorb disruption. (b) Materials Requirements Planning (MRP) is a computerized, push-based technique that works backward from the master production schedule: using the bill of materials and current inventory records, it calculates what components are needed, in what quantity, and when to order or make them so that dependent-demand items are available for assembly. (c) Manufacturing Resource Planning (MRP II) extends MRP into an integrated company-wide planning system that adds capacity planning and links production plans to the business's financial, marketing, and engineering functions, so that material, labour, machine capacity, and money are planned together. MRP II is the direct precursor of modern Enterprise Resource Planning (ERP) systems.
A manufacturer evaluating a $500,000 automated cell that saves $140,000 per year for five years at a 12% MARR would discount those savings with the uniform-series factor (P/A, 12%, 5) = 3.6048, giving a present worth of about $504,700; subtracting the investment leaves an NPV of roughly +$4,700, and the IRR is about 12.4%. The project passes both tests and would be accepted, but only just: a 1% shortfall in the annual saving would turn the NPV negative, which is exactly why a sensitivity analysis should accompany the recommendation. On the operations side it might run MRP to schedule the component orders that feed the cell, adopt JIT delivery from a nearby supplier to cut raw-material inventory, and rely on the plant's MRP II system to confirm that machine capacity and cash flow support the new schedule.
