Building Material selection and solved problem
Building Material Selection
The sourcing of raw materials will have a significant effect on the cost of any product. Hence, it is assumed that the price of raw material is location dependent. While sourcing a raw material, the cost of transportation is to be considered in addition with the price of the raw material.
Solved problem on building material selection
In the design of buildings to be constructed in Alpha State, the designer is considering the type of window frame to specify. Either steel or aluminium window frames will satisfy the design criteria. Because of the remote location of the building site and lack of building materials in Alpha State, the window frames will be purchased in Beta State and transported for a distance of 2,500 km to the site. The price of window frames of the type required is Rs. 1,000 each for steel frames and Rs. 1,500 each for aluminium frames. The weight of steel window frames is 75 kg each and that of aluminium window frame is 28 kg each. The shipping rate is Re 1 per kg per 100 km. Which design should be specified and what is the economic advantage of the selection?
Given Data
Total distance between Alpha State and Beta State = 2,500 km
Transportation cost for 100km = Rs 1/kg/100 km
Transportation cost for 2500km = Rs 1 * (2500/100) = Rs. 25/kg
Price of steel window frame per unit = Rs 1,000
Weight of steel window frame per unit = 75 kg
Price of aluminium window frame per unit = Rs. 1,500
Weight of aluminium window frame per unit = 28 kg
Solution
(a) Steel window frame
Transportation cost of steel window frame per unit = Total weight * Transportation cost for 2500km
= 1 * 75 * 25
= Rs. 1875
Total cost of steel window frame per unit = Price of steel window frame per unit + Transportation cost of steel window frame per unit
= 1,000 + 1875 = Rs. 2,875
(b) Aluminium window frame
Transportation cost of aluminium window frame per unit = Total weight * Transportation cost for 2500km
= 1 * 28 * 25
= Rs. 700
Total cost of aluminium window frame per unit = Price of aluminium window frame per unit + Transportation cost of aluminium window frame per unit
= 1,500 + 700 = Rs. 2,200
Decision
The total cost per unit of the aluminium window frame is less than that of steel window frame. Hence, aluminium window frame is recommended.
The economic advantage/unit of the aluminium window frame = Total cost of aluminium window frame - Total cost of the steel window frame
= Rs. 2,875 - 2,200 = Rs. 675
