Introduction to Engineering Economy PDF 2024-2025

CHAPTER 1: FUNDAMENTALS OF ENGINEERING ECONOMY BECC0403 LESSON 1: INTRODUCTION TO ENGINEERING ECONOMY FIRST SEMESTER | ACADEMIC YEAR 2024-2025 | ENGR. RANIER C. SANTOS ENGINEERING ECONOMY is the analysis...

CHAPTER 1: FUNDAMENTALS OF ENGINEERING ECONOMY BECC0403 LESSON 1: INTRODUCTION TO ENGINEERING ECONOMY FIRST SEMESTER | ACADEMIC YEAR 2024-2025 | ENGR. RANIER C. SANTOS ENGINEERING ECONOMY is the analysis and ENGINEERING ECONOMICS AND evaluation of the factors that will affect the DESIGN PROCESS economic success of engineering projects to the The study of Engineering Economy is accomplished end that a recommendation can be made which will using a structured procedure and mathematical insure the best use of capital. It involves a systematic modeling techniques. In having the Decision in a process of evaluating the economical merits of the situation that involves two or more alternatives it proposed solutions to an engineering problem. includes economic results and other engineering knowledge and input. The following are the Design PRINCIPLES OF ENGINEERING ECONOMY Processes followed in the analysis of an 1. Develop the alternatives. Alternatives are the list engineering economic problem: of solutions that can be applied to solve an engineering problem. It is important to develop and 1. Problem recognition, formulation, and define a comprehensive list of the alternatives; it evaluation. Identify what is the problem to be solved requires a subsequent analysis, creativity, and and state the expected and desired future outcome. innovation. This also includes the objectives and goals in solving 2. Focus on the differences. The differences that shall the problem. be observed are the differences in the outcomes of 2. Development of feasible alternatives. This each alternative. The outcomes that show requires the application of Principle 1 of Engineering commonality with other alternatives shall be Economy. Since the solution (decision) shall be disregarded in the process of comparison and selected from a comprehensive list of alternatives. decisions. Here are two approaches that have found wide 3. Use a consistent viewpoint. In most acceptance in industry for developing sound decision-making the viewpoint of the decision investment alternatives by removing some of the maker is used. The decision-maker shall identify the barriers to creative thinking: criteria that shall be used consistently in evaluating a. Classic Brainstorming – most well-known and every future outcome of an alternative. For example, in often-used technique for idea generation. It is designing the employee benefit package the based on the fundamental principles of deferment of perspective of the employees shall be used. judgment and that quantity breeds quality. There are 4. Use common unit of measure. It is important to four rules for successful brainstorming: use a common unit of measure in enumerating all Criticism is ruled out. the prospective outcomes that are possible, this will Freewheeling is welcomed. simplify the analysis of the alternatives. If the Quantity is wanted. outcomes are not possible to be quantified, a detailed Combination and improvement are sought. comparison of the alternatives in a specific aspect, b. Nominal Group Technique – involves a structured such as discussing the benefits and consequences, group meeting designed to incorporate individual may help the decision maker. judgments into a group consensus. The basic format of 5. Consider all relevant criteria. Developing criteria an NGT session is as follows: can help the decision maker in selecting the Individual silent generation of ideas preferred alternative. Relevant Criteria depends on Individual round-robin feedback and recording the preferences of the decision maker, on what quality of ideas. or quantity the decision maker is looking for. Group clarification of each idea 6. Make uncertainty explicit. Every alternative has Individual voting and ranking to prioritize risks and uncertainties that are inherent in ideas. estimating the future outcomes. The risks and Discussion of group consensus results. uncertainties shall also be recognized in the analysis 3. Development of the outcomes and cash flows and comparison of alternatives. for each alternative. Each identified alternatives 7. Revisit your decisions. The initial project gives possible outcomes. In enumerating the outcomes of the selected alternative shall be outcomes of each alternative apply Principle 2, 3 and compared to the actual result it has achieved to 4. evaluate the decision and improved the results. BECC0403: ENGINEERING ECONOMICS CHAPTER 1: FUNDAMENTALS OF ENGINEERING ECONOMY (LESSON 1: INTRODUCTION TO ENGINEERING ECONOMY 1  CHAPTER 1: FUNDAMENTALS OF ENGINEERING ECONOMY BECC0403 LESSON 1: INTRODUCTION TO ENGINEERING ECONOMY FIRST SEMESTER | ACADEMIC YEAR 2024-2025 | ENGR. RANIER C. SANTOS Focus on the Differences; state how c. Development of the outcomes and cash flows outcome of Alternative A differs with the for each alternative Applying Principle 3: You shall outcome of Alternative B. consider the perspective of you and your classmates. Use a consistent viewpoint; define the Applying Principle 2: Enumerate the difference possible outcomes of every alternative in a between alternatives. parallel perspective. Use a common unit of measure; create a cash flow using a common unit such as cost per unit of area. These may help the decision maker select the most economical choice. 4. Selection of criteria. Criteria will be the basis of selecting from the list of alternatives. It is important to Applying Principle 4: use a consistent point of view in making the criteria Unit: Peso per unit of volume (Principle 3). Apply Principle 5 which is Considering all Alternative 1: P359.00 + P100.00 = P459.00 relevant criteria such as cost, quality, quantity, Alternative 2: P399.00 + P100.00 = P499.00 performance, and other relevant criterion with the problem to be solved. d. Selection of criteria 5. Analysis and comparison of the alternatives. Applying Principle 5: Using the relevant criteria, the alternatives shall be 1. Cost per unit volume analyzed and compared to one another. 2. Variety 6. Selection of the preferred alternative. In 3. Delivery Charge selecting the preferred alternative, the possible risks (You can add other criteria depending on the shall be stated explicitly (Principle 6). The uncertainties viewpoint used) that are relevant to the decision shall be stated. 7. Performance monitoring and post-evaluation of e. Analysis and comparison of the alternatives results. Evaluate if the alternative chosen meets the objectives. (Principle 7) SAMPLE PROBLEMS SAMPLE PROBLEM 1: After your class in Engineering Economics, your friends John and Michael asked you to do your assignments in f. Selection of the preferred alternative your dormitory. Your friends got hungry while studying Based on the Analysis Alternative 2 is more so you decided to order a pizza. Shakey’s offers a economical than Alternative 1. However, you shall 30-inch Hawaiian square pizza with 1 and ¼ inch thick apply Principle 6, which is to list the uncertainties of crust for P359.00 and a delivery charge of P100.00, explicitly. The uncertainties are: while Greenwich offers a 30-inch in diameter Hawaiian 1. Actual Taste and Quality round pizza with 1 and ¾ inch thick with cost P399.00 2. Delivery Time and P100.00 delivery charge. Using the Design Process of Engineering Economics which pizza will you order. g. Performance monitoring and post-evaluation of results. a. Problem recognition, formulation, and Applying Principle 7, you can evaluate your decision as: evaluation The problem is that you and your friends 1. Does it taste good? got hungry, and you want to buy pizza. Your desired 2. Is the delivery on time? outcome is to satisfy your hunger with a pizza. b. Development of the feasible alternatives Alternative 1: Shakey’s Pizza Alternative 2: Greenwich Pizza BECC0403: ENGINEERING ECONOMICS CHAPTER 1: FUNDAMENTALS OF ENGINEERING ECONOMY (LESSON 1: INTRODUCTION TO ENGINEERING ECONOMY 2