Answer to Question #187534 in Economics of Enterprise for Manzor

Question

Engineer Srinivasa Ramanuja took a Php. 354702 job to install a private compaction machine but failed to comply with the work on time. Provisions on the contract stated that the following:

-       For the first 13 days of delay, the contractor is obligated to pay a daily penalty equivalent to 0.02 of 1.5% per day.

-       For the second 13 days of delay, the contractor is obliged to pay a daily penalty equivalent to 0.47 of 1.5% per day.

-       For the consequent days, the contractor is obliged to pay 0.66 of 1.5% per day.

Answer 1

Fist 13 days;

Penalty per day will be,

$0.02\times0.015\times354,700=106.41$

One day is 106.41 for first 13 days, so total of 13 days will be:

$13\times106.41=PHP 1,383.33$

For next 13 days;

Penalty per day will be,

$0.47\times0.015\times354,700=2,500.635$

For next 13 days, penalty is PHP 2,500.635, so multiply to find total for 13 days.

$13\times2,500.635=PHP 32,508.255$

Thereafter;

Penalty per day will be,

$0.66\times0.015\times354,700=3,511.53$

One day thereafter is PHP 3,511.53, so if the total days exceed 26, multiply the additional days by PHP 3,511.53 and sum with the other to find total value of penalty.