A Southern Georgia school district is considering ordering 48 propane-fueled sch
ID: 343883 • Letter: A
Question
A Southern Georgia school district is considering ordering 48 propane-fueled school buses. "Theyre healthier, theyre cleaner burning, and they're much quieter than the diesel option," said a school administrator. Propane-powered buses also reduce greenhouse gasses by 20% compared to gasoline-powered buses and 796 compared to diesel ones. But they come at a premium-$95,000 for a propane model, $11,000 more than the diesel equivalent The propane bus operating cost (above and beyond fuel cost) is 33 cents/mile, compared to 43 cents for the diesel. Diesel fuel costs about $2/gallon in Georgia, about $1 more than propane. Bus mileage is 9 mpg for the propane model vs. 6 mpg for diesel. The life of a school bus in the district averages 12 years, and each bus travels an average of 34,000 miles per year because the district is so large and rural. Which bus is the better choice based on a life-cycle analysis? The total cost of using one propane-fueled bus during its life cycle is S(Round your response to the nearest dollar)Explanation / Answer
Given values:
Fixed cost of a propane bus = $95,000
Fixed cost of a diesel bus = $84,000
Operating cost of propane bus = 33 cents/mile = 0.33 dollars/mile
Operating cost of diesel bus = 43 cents/mile = 0.43 dollars/mile
Propane fuel costs = $1/gallon
Diesel fuel costs = $2/gallon
Propane bus mileage = 9 miles per gallon (mpg)
Diesel bus mileage = 6 miles per gallon (mpg)
Total life of a school bus = 12 years
Distance travelled by a bus in 1 year = 34,000 miles per year
Solution:
(a) Life-cycle analysis of a propane bus:
Life-cycle costs = Fixed costs + Total operating cost + Total fuel cost
Fixed costs = $95,000
Total operating cost = Operating cost per mile x Total bus life x Average distance per year
Total operating cost = 0.33 x 12 x 34000
Total operating cost = $134,640
Total fuel cost = (Total distance travelled / Bus mileage) x Per gallon fuel cost
Total fuel cost = [(34000 x 12) / 9)] x 1
Total fuel cost = $45,333.33
Life-cycle costs of a propane bus = $95,000 + $134,640 + $45,333.33
The total life-cycle costs of using a propane bus is $274,973.33
(b) Life-cycle analysis of a diesel bus:
Life-cycle costs = Fixed costs + Total operating cost + Total fuel cost
Fixed costs = $84,000
Total operating cost = Operating cost per mile x Total bus life x Average distance per year
Total operating cost = 0.43 x 12 x 34000
Total operating cost = $175,440
Total fuel cost = (Total distance travelled / Bus mileage) x Per gallon fuel cost
Total fuel cost = [(34000 x 12) / 6)] x 2
Total fuel cost = $136,000
Life-cycle costs of a diesel bus = $84,000 + $175,440 + $136,000
The total life-cycle costs of using a diesel bus is $395,440
The total life-cycle cost of using a diesel bus is $395,440 - $274,973.33 = $120,466.67 higher than the total life-cycle cost of using a propane bus. This is inspite of the fact that fixed cost of the propane bus is higher than the fixed cost of a diesel bus. But, the life-cycle cost of a propane bus is lower than a diesel fueled bus. This is because the operating cost of a propane bus is much lower than the operating cost of a diesel bus. Also, the propane-fueled bus gives a better mileage of 9 miles per gallon (mpg) against the diesel-fueled bus’ mileage of 6 miles per gallon (mpg). The fuel cost of propane is also $1 less than the fuel cost of diesel.
Answer:
(a) Based on the life-cycle analysis, a propane-fueled bus is a better choice than a diesel-fueled bus.
(b) The total cost of using one propane-fueled bus during its life cylce is $274,973
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