Problem: 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
Question 1: How many hours per shift is a generator needed if the contractor is indifferent between the two generators?
Question 2: If the site requires a generator for 2.5 hours per shift, which generator is preferred, and what is its estimated annual cost?
Question 3: If the site requires a generator for 5.5 hours per shift, which generator is preferred, and what is its estimated annual cost?