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Questions and Answers
What is the required semiannual deposit if P100,000 is to be provided at the end of each of the last five years of a 20-year period, with an interest rate of 8% compounded semiannually?
What is the required semiannual deposit if P100,000 is to be provided at the end of each of the last five years of a 20-year period, with an interest rate of 8% compounded semiannually?
- P6,500.00
- P5,690.50
- P7,000.00
- P6,193.39 (correct)
Which formula represents the relationship established for calculating the equivalent uniform annual cost for a proposed machine?
Which formula represents the relationship established for calculating the equivalent uniform annual cost for a proposed machine?
- A (P/A, 8%, 8) = P100,000 + P2,000 (P/A, 8%, 8)
- A = P100,000 (P/A, 8%, 8) + P2,000
- A (P/F, 8%, 8) = P100,000 + P2,000 (P/A, 8%, 8) (correct)
- A (P/F, 8%, 8) = P100,000 - P20,000 (P/F, 8%, 8)
In the context of the proposed machine, what is the estimated salvage value after 8 years?
In the context of the proposed machine, what is the estimated salvage value after 8 years?
- P10,000
- P20,000 (correct)
- P15,000
- P30,000
Which calculation would be necessary to find the total cost of periodic overhauls for the machine over its economic life?
Which calculation would be necessary to find the total cost of periodic overhauls for the machine over its economic life?
What does the term 'focal date' refer to in the context of the provided economic analysis?
What does the term 'focal date' refer to in the context of the provided economic analysis?
Which interest rate is used for withdrawals in the semiannual deposit calculation?
Which interest rate is used for withdrawals in the semiannual deposit calculation?
What is the total initial cost incurred by the man for the house and renovations in the first month?
What is the total initial cost incurred by the man for the house and renovations in the first month?
How is the annual maintenance cost treated in the cost analysis for the machine?
How is the annual maintenance cost treated in the cost analysis for the machine?
What type of cost is described as a capital requirement needed for acquisition activities?
What type of cost is described as a capital requirement needed for acquisition activities?
Which cost is defined as occurring in the past and irrelevant to future decision-making?
Which cost is defined as occurring in the past and irrelevant to future decision-making?
What do life-cycle costs encompass?
What do life-cycle costs encompass?
Which type of cost represents the use of limited resources leading to a missed opportunity?
Which type of cost represents the use of limited resources leading to a missed opportunity?
What category of costs do maintenance and operational expenses fall under during a product's life cycle?
What category of costs do maintenance and operational expenses fall under during a product's life cycle?
Which type of cost does not involve cash payment but relates to recovering past expenditures?
Which type of cost does not involve cash payment but relates to recovering past expenditures?
What does overhead cost typically include?
What does overhead cost typically include?
Which term describes the funds needed for current assets in operational activities?
Which term describes the funds needed for current assets in operational activities?
What does total revenue consist of?
What does total revenue consist of?
What characterizes perfect competition in a market?
What characterizes perfect competition in a market?
Which of the following is an example of fixed costs?
Which of the following is an example of fixed costs?
Incremental cost is defined as:
Incremental cost is defined as:
In financial decision-making, what is the significance of variable costs?
In financial decision-making, what is the significance of variable costs?
What distinguishes recurring costs from nonrecurring costs?
What distinguishes recurring costs from nonrecurring costs?
What is the primary goal of a profitability assessment?
What is the primary goal of a profitability assessment?
A perfect monopoly is described as a market characterized by:
A perfect monopoly is described as a market characterized by:
Flashcards
Indirect costs
Indirect costs
Costs that are hard to link to a specific product or activity.
Overhead costs
Overhead costs
Plant operating costs not related to direct labor or materials.
Standard costs
Standard costs
Predetermined costs per unit of output, set before production.
Sunk cost
Sunk cost
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Opportunity cost
Opportunity cost
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Life-cycle cost
Life-cycle cost
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Investment cost
Investment cost
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Working capital
Working capital
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Supply
Supply
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Perfect Competition
Perfect Competition
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Perfect Monopoly
Perfect Monopoly
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Oligopoly
Oligopoly
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Total Revenue
Total Revenue
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Fixed Costs
Fixed Costs
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Variable Costs
Variable Costs
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Incremental Cost
Incremental Cost
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Semiannual deposit
Semiannual deposit
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Future Value of an Annuity (F/A, i, n)
Future Value of an Annuity (F/A, i, n)
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Equivalent Uniform Annual Cost
Equivalent Uniform Annual Cost
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Present Worth Factor (P/F, i, n)
Present Worth Factor (P/F, i, n)
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Present Worth Factor of an Annuity (P/A, i, n)
Present Worth Factor of an Annuity (P/A, i, n)
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Capital Recovery
Capital Recovery
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Compound Interest
Compound Interest
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Economic Life
Economic Life
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Study Notes
The Basics of Engineering Economy
- Engineering is a profession that applies mathematical and natural science principles to develop economical methods of utilizing natural resources for the benefit of humankind.
- Engineering economy focuses on financial aspects of engineering design.
- Engineering decisions are crucial in product manufacturing, from the initial conceptual design to shipping, influencing the majority of the product cost.
- Engineers need to consider the efficient use of capital assets (buildings, machinery) to ensure economical product design and production.
General Economic Environment
- The economic factors affecting engineering projects are analyzed and evaluated to ensure optimal capital use.
- Consumer goods and services are products and services used directly by consumers.
- Producer goods and services are used in the production of consumer goods or other producer goods.
- Price of goods/services is the amount of money exchanged for them.
- Demand reflects the quantity of a commodity purchased at a given price and time.
- Supply is the quantity of a commodity offered for sale at a given price and time.
- Perfect competition is a market where numerous vendors provide identical products or services with no restrictions on new suppliers entering the market.
- Perfect monopoly exists when a single vendor provides a unique product/service and controls market entry.
- Oligopoly arises when a few vendors offer a product/service, where any action of one vendor impacts others in the market.
- Total revenue is the product of the selling price per unit and the total units sold.
- Total cost includes fixed and variable costs.
- Profit is total revenue minus total costs.
Cost Terminology
- Fixed costs are unaffected by production levels, including insurance, taxes, and interest on borrowed capital.
- Variable costs change proportionately with output, including direct labor/materials costs.
- Incremental cost represents the additional cost for adding another unit of product/service.
- Recurring costs are repetitive in nature; nonrecurring costs are those which are not repetitive.
- Direct costs are assignable to specific outputs, indirect costs are not.
- Overhead costs are related to operation and not directly associated with labor/materials.
- Standard costs represent pre-determined costs per unit.
- Cash costs involve cash outflow; noncash costs (book costs) represent the recovery of prior expenditures over a period of time (e.g., depreciation).
- Sunk costs have occurred previously and are not relevant to future decisions.
- Opportunity costs are the benefits foregone by not choosing an alternative course of action.
- Life-cycle costs include the sum of all costs associated with a product's life such as recurring and non-recurring.
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