engiecon

• Engineering Economy is a branch of economics that applies economic laws, investment theories, and business practices to engineering problems involving cost
• The study of economic problems aims to achieve maximum profit at the least cost
• Important applications of Engineering Economy include seeking new objectives, analyzing investments, comparing alternatives, and determining decision bases
• Green Engineering involves energy conservation, such as converting traffic lights from incandescent to LED lights to reduce wattage and lower costs
• Consumer goods and services are directly used by people to satisfy their wants, while producer goods and services are used to produce other goods
• Price of goods and services is the present amount of money given in exchange for them, demand is the quantity bought at a certain price, and supply is the quantity offered for sale
• Perfect competition involves a large number of vendors supplying a product, perfect monopoly exists when a single supplier controls the market, and oligopoly occurs with few suppliers
• Fixed costs are unaffected by changes in activity level, variable costs vary with output, and incremental cost is the additional cost from increasing output
• Recurring costs are repetitive, nonrecurring costs are not repetitive, direct costs can be allocated to specific outputs, and indirect costs are difficult to attribute
• Overhead costs include plant operating costs, standard costs are established per unit, cash costs involve cash payments, and non-cash costs do not involve cash payments
• Sunk costs are irrelevant to future estimates, opportunity costs are incurred due to limited resource use, and life-cycle cost includes all costs related to a product's life span
• Working capital is needed for current assets, operational and maintenance costs are recurring expenses, and disposal costs involve shutting down operations and asset disposal
• Economic life is from acquisition to abandonment, physical life is from acquisition to disposal, ownership life is from acquisition to disposal by a specific owner, and useful life is the productive service period of an asset
• Tangible factors can be expressed in monetary values, intangible factors are difficult to express monetarily, competition occurs with many vendors, and monopoly occurs with few suppliers
• Price regulates production, goods in high demand yield high profits, local markets sell goods in limited localities, national markets sell goods across the country, and world markets export goods
• The law of demand states that demand varies inversely with price, and elasticity of demand is when a small price decrease results in a large increase in sales
• Elastic demand - a decrease in selling price will cause a less than proportionate increase in sales
• Unitary elasticity of demand - the mathematical product of price and volume of sales remains constant regardless of any change in price (PV = C)
• Utility - the capacity of a commodity to satisfy human want
• Law of Diminishing Utility - an increase in the quantity of any good consumed will decrease the amount of satisfaction derived from that good
• Marginal utility - the utility of the last unit of the same commodity consumed or acquired
• Supply - the quantity of a certain commodity offered for sale at a certain price at a given place and time
• Law of Supply - the supply of a commodity varies directly as the price of the commodity, though not proportionately
• Law of Supply and Demand - the price of a product will be that value where supply is equal to demand
• Law of Diminishing Returns - increasing factors of production will result in a less than proportionate increase in input
• Marginal Revenue - the amount received from the sale of an additional unit of a product
• Marginal Cost - additional cost of producing one more unit
• Physical Efficiency = Input in Physical Units / Output in Physical Units
• Economic Efficiency = Output / Input
• Rate of Return = Capital Invested / Annual Net Profit
• Payout Period = Net Annual Cash Flow / Capital Invested
• perfection is a human ideal worth striving for, but compromise is usually the rule
• Present Economy - involves the analysis of problems for manufacturing products or rendering a service based on present or immediate cost
• Selection of materials - choosing materials that result in the most economical product and give the best results
• Selection of method - determining the most economical method among different options
• Selection of design - selecting the design best suited for the work with utmost economy
• Site Selection - considering factors like cost of land, construction cost, availability of skilled labor in choosing a factory site
• Comparison of Proficiency of Workers - paying efficient and diligent workers higher wages
• Economy of Tool and Equipment Maintenance - maintaining tools and equipment at optimum operating condition
• Economy in the Utilization of Personnel - assigning only a sufficient number of workers to minimize idleness