Cost benefit analysis on the installation of the robotic automatic washiing system on the hand car wash outlet

1. ENGINEERING ECONOMY
ORJECT: ROBOTIC ASSEMBLY LINE

2. Summary
• A hand car wash service station located in the suburb of
San Francisco has a decent reputation. The Car Wash
Service station employees 5 employees (Washers) and a
supervisor. The major expense of the service station is
related to the employee’s monthly salary. However, now
the owner is thinking of relocating its placing and pricing
strategy and thinking of applying a robotic and automatic
system to eliminate the major expense of the business
i.e. employee’s salaries. The installation of the robotic
and automatic cleaning assembly line would cost one
time and semi annually maintenance cost

3. Summary
• For this project, I shall be using the comparison method
of employees salaries with the one time buying cost of
the automatic robotic assembly line
• I shall be reviewing the Cost Benefit Analysis
• I shall be reviewing whether the installation would
increase the profitability ratio of the company or not.

4. Company’s summary
Employees Salary (monthly) Salary (annually)
Supervisor $2,917 $35,000
Employee 1` $1,500 $18,000
Employee 2 $1,500 $18,000
Employee 3 $1,500 $18,000
Employee 4 $1,500 $18,000
Employee 5 $1,500 $18,000
Total $10,417 $125,000

5. Company’s Structure
• The company has a straight forward hierarchical
structure, where the supervisor takes a leading role and
supervise all the activities at the hand wash car service
station. Whereas, all the employees utilizes their skills
and clean cars. The rough version shows that, in San
Francisco, the company is making annual $200,000 in
net profits
• Now we will analyze whether the installation of the
automatic machines would increase the profitability level
of the service station or not?

6. Robotic assembly line
• The supplier has guaranteed that the robotic assembly
line would work for at least 10 years if well maintained
• No need of a supervisor or employee to handle it
• The service station would act as an assembly line where
everything would be automatic
• No employee cost
• The machine has a potential to generate $300,000
annual net profits
• Loan interest rate would be 10% with an installation plan
of 10 years

7. Automatic robotic
Cleaning assembly line
• A fixed amount of $100,000 to be paid upfront for the
robotic assembly line purchase
• Installation cost of $25,000 to be paid up front
• Quarterly maintenance cost would be $5,000 and shall
be $20,000 annually
Description Costs
Robotic assembly line $100,000
Installation cost $25,000
Annual maintenance cost $20,000
Total cost incurred $145,000

8. ΔB/C Analysis
• 𝑃𝑊𝐸𝑚𝑝𝑙𝑜𝑦𝑒𝑒𝑠 𝑠𝑎𝑙𝑎𝑟𝑦 𝑎𝑛𝑑 𝑎𝑙𝑙 𝑐𝑜𝑠𝑡 = $125,000(P/A,10%,10)=
48,262
• 𝑃𝑊𝑅𝑜𝑏𝑜𝑡𝑖𝑐 𝐴𝑠𝑠𝑒𝑚𝑏𝑙𝑦 𝐿𝑖𝑛𝑒 = $145,000(P/A,10%,10)= 55.984
• PW of ΔB = 20682 – 10984.62 = 9698
• PW of ΔC = 55984 – 48262 = 7722
• ΔB/C= 9698/7722 = 1.26
• It is economically justifiable

9. Final Recommendation
• As you could see that the installation of the robotic
assembly line to the service station is economically
justifiable and would increase the profitability for the
business
• Installation of assembly line would decrease the
employee’s salary to zero and the installation of the
robotic line would incurred a major cost one time

10. Sources
• Rouwendal, J. (2012). Indirect Effects in Cost-Benefit
Analysis. Journal of Benefit-Cost Analysis, 3(1).
• White, D. and VanLandingham, G. (2015). Benefit-Cost
Analysis in the States: Status, Impact, and
Challenges. Journal of Benefit-Cost Analysis, 6(02),
pp.369-399.
• Muller, N. (2017). Environmental Benefit-Cost Analysis
and the National Accounts. Journal of Benefit-Cost
Analysis, pp.1-40.