Engineering Economy 1st PPT PDF

Manuel S. Enverga University Foundation, Lucena City College of Engineering An Autonomous University ECON123 – ENGINEERING ECONOMY ENGR. JERICO R. AMAGO, CIE, SO1, SO2 INST...

Manuel S. Enverga University Foundation, Lucena City College of Engineering An Autonomous University ECON123 – ENGINEERING ECONOMY ENGR. JERICO R. AMAGO, CIE, SO1, SO2 INSTRUCTOR College of Engineering  Manuel S. Enverga University Foundation, Lucena City College of Engineering An Autonomous University DEFINE “ENGINEERING” Is a profession in which the knowledge on mathematics and knowledge on natural sciences gained by the study, experience and practice is applied with judgement to develop ways to utilize economically the materials and forces of nature for the benefit of mankind.  Manuel S. Enverga University Foundation, Lucena City College of Engineering An Autonomous University ENGINEERING PROCESS A. Determination of Objectives B. Identification of Strategic Factors C. Determination of Means D. Evaluation of Engineering Proposals E. Assistance in Decision Making  Manuel S. Enverga University Foundation, Lucena City College of Engineering An Autonomous University ECONOMY / ECONOMICS The system of production, distribution, and consumption of goods and services within a society, often involving resource allocation and financial considerations.  Manuel S. Enverga University Foundation, Lucena City College of Engineering An Autonomous University ENGINEERING ECONOMY ▪ The science that deals with techniques of quantitative analysis useful for selecting a preferable alternative from several technically viables ones. ▪ It involves the systematic evaluation of the economic merits of proposed solutions to engineering problems.  Manuel S. Enverga University Foundation, Lucena City College of Engineering An Autonomous University ENGINEERING ECONOMY ▪ To be economically acceptable, solutions to engineering problems must demonstrate a positive balance of long-benefits over long term costs. ▪ They must also promote the well-being and survival of an organization. ▪ Embody creative and innovative technology and ideas.  Manuel S. Enverga University Foundation, Lucena City College of Engineering An Autonomous University ENGINEERING ECONOMY ▪ Permit identification and scrutiny of their estimated outcomes. ▪ An engineer who is unprepared to excel at engineering economy is not properly equipped for his or her job.  Manuel S. Enverga University Foundation, Lucena City College of Engineering An Autonomous University ENGINEERING ECONOMY Importance of this course….. Engineers seek solutions to problems, and the economic viability of each potential solution is normally considered along with technical engineering aspects.  Manuel S. Enverga University Foundation, Lucena City College of Engineering An Autonomous University PRINCIPLES OF ENGINEERING ECONOMY Know the Consider the problem and Review your risks and decisions produce uncertainties alternatives Don’t forget Compare each the other alternatives criteria Have a Use a specific point universal unit of view of measure Manuel S. Enverga University Foundation, Lucena City College of Engineering An Autonomous University ENGINEERING ECONOMY Manuel S. Enverga University Foundation, Lucena City College of Engineering An Autonomous University ENGINEERING ECONOMY  Manuel S. Enverga University Foundation, Lucena City College of Engineering An Autonomous University APPLICATION Alternative A Alternative B  Manuel S. Enverga University Foundation, Lucena City College of Engineering An Autonomous University APPLICATION  Manuel S. Enverga University Foundation, Lucena City College of Engineering An Autonomous University APPLICATION  Manuel S. Enverga University Foundation, Lucena City College of Engineering An Autonomous University COST CONCEPT FOR DECISION MAKING Cost - Amount or equivalent paid or charged for something.  Manuel S. Enverga University Foundation, Lucena City College of Engineering An Autonomous University COST CONCEPT FOR DECISION MAKING DEBT INSURANCE RENT SALARY Fixed Cost – cost that do not change no matter what the circumstance is.  Manuel S. Enverga University Foundation, Lucena City College of Engineering An Autonomous University COST CONCEPT FOR DECISION MAKING WATER ELECTRICITY Variable Cost – cost that changes in value depending on the circumstance.  Manuel S. Enverga University Foundation, Lucena City College of Engineering An Autonomous University COST CONCEPT FOR DECISION MAKING  Manuel S. Enverga University Foundation, Lucena City College of Engineering An Autonomous University COST CONCEPT FOR DECISION MAKING DEBT ELECTRICITY RENT INSURANCE WATER SALARY Incremental Cost – is the total change that a company experiences within its balance sheet due to one additional unit of production. Manuel S. Enverga University Foundation, Lucena City College of Engineering An Autonomous University  Manuel S. Enverga University Foundation, Lucena City College of Engineering An Autonomous University ENGINEERING ECONOMY TECHNIQUE The complete analysis of a proposed project involves three basic steps according to Bullinger, as follows: 1. The Economy Analysis 2. The Financial Analysis 3. The Intangible Analysis  Manuel S. Enverga University Foundation, Lucena City College of Engineering An Autonomous University ENGINEERING ECONOMY TECHNIQUE Economic Analysis: This step focuses on the societal cost and benefits of the project. It considers the project's impact on factors like: o Resource allocation: Does the project utilize resources efficiently? Does it avoid unnecessary consumption? o Environmental impact: Does the project cause any environmental damage or promote sustainability?  Manuel S. Enverga University Foundation, Lucena City College of Engineering An Autonomous University ENGINEERING ECONOMY TECHNIQUE o Employment and income generation: Does the project create jobs or contribute to economic growth? o Social welfare: Does the project improve the quality of life for the community?  Manuel S. Enverga University Foundation, Lucena City College of Engineering An Autonomous University ENGINEERING ECONOMY TECHNIQUE Financial analysis: This step focuses on the financial feasibility of the project from the perspective of the investor or entity undertaking it. It considers factors like: o Initial investment: The cost of designing, building, and implementing the project. o Operating and maintenance costs: Ongoing expenses associated with running the project over its lifespan.  Manuel S. Enverga University Foundation, Lucena City College of Engineering An Autonomous University ENGINEERING ECONOMY TECHNIQUE o Revenue generation: Income streams generated by the project, if any. o Profitability: Whether the project generates sufficient returns to justify the investment.  Manuel S. Enverga University Foundation, Lucena City College of Engineering An Autonomous University ENGINEERING ECONOMY TECHNIQUE Intangible analysis: This step focuses on the qualitative aspects of the project that may not be easily quantifiable but still play a role in decision- making. It considers factors like: o Risk and uncertainty: The potential for unforeseen challenges, technological advancements, or market changes to impact the project's success. o Strategic fit: Does the project align with the overall goals and vision of the organization?  Manuel S. Enverga University Foundation, Lucena City College of Engineering An Autonomous University ENGINEERING ECONOMY TECHNIQUE o Stakeholder impact: How will the project affect different stakeholders (employees, customers, community)? o Ethical considerations: Does the project raise any ethical concerns or social responsibility issues?  Manuel S. Enverga University Foundation, Lucena City College of Engineering An Autonomous University TERMINOLOGIES Consumer goods/services: These are products and services bought for personal use by individuals and households. They directly satisfy the needs and wants of consumers.  Manuel S. Enverga University Foundation, Lucena City College of Engineering An Autonomous University TERMINOLOGIES Producer goods/services: These are products and services used by businesses to create other goods and services. They indirectly contribute to consumers' needs by supporting production processes.  Manuel S. Enverga University Foundation, Lucena City College of Engineering An Autonomous University TERMINOLOGIES Necessities: Goods and services essential for survival and basic well-being.  Manuel S. Enverga University Foundation, Lucena City College of Engineering An Autonomous University TERMINOLOGIES Luxuries: Goods and services desired but not essential, often associated with higher social status  Manuel S. Enverga University Foundation, Lucena City College of Engineering An Autonomous University TERMINOLOGIES Supply: The amount of a good or service producers are willing and able to sell at different prices. Demand: The amount of a good or service consumers are willing and able to buy at different prices.  Manuel S. Enverga University Foundation, Lucena City College of Engineering An Autonomous University TERMINOLOGIES LAW OF DEMAND  Manuel S. Enverga University Foundation, Lucena City College of Engineering An Autonomous University TERMINOLOGIES LAW OF SUPPLY  Manuel S. Enverga University Foundation, Lucena City College of Engineering An Autonomous University TERMINOLOGIES LAW OF SUPPLY AND DEMAND  Manuel S. Enverga University Foundation, Lucena City College of Engineering An Autonomous University TERMINOLOGIES A market is a place where buyers and sellers come together to exchange goods and services. Markets can be physical, like a store or farmers market, or virtual, like an online marketplace. They can be large or small, and they can specialize in certain goods or services or offer a wide variety.  Manuel S. Enverga University Foundation, Lucena City College of Engineering An Autonomous University CLASSIFICATION OF MARKET STRUCTURE PERFECT COMPETITION  Manuel S. Enverga University Foundation, Lucena City College of Engineering An Autonomous University CLASSIFICATION OF MARKET STRUCTURE MONOPOLY  Manuel S. Enverga University Foundation, Lucena City College of Engineering An Autonomous University CLASSIFICATION OF MARKET STRUCTURE MONOPSONY  Manuel S. Enverga University Foundation, Lucena City College of Engineering An Autonomous University CLASSIFICATION OF MARKET STRUCTURE OLIGOPOLY  Manuel S. Enverga University Foundation, Lucena City College of Engineering An Autonomous University CLASSIFICATION OF MARKET STRUCTURE OLIGOPSONY