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Introduction To Engineering Economy

Engineering economy involves systematically evaluating the economic merits of solutions to engineering problems. It considers alternatives, focuses on differences between them, uses consistent viewpoints and common units of measure, takes all relevant criteria and uncertainty into account, and revisits decisions. An example problem compares two pizza delivery options - a square thin crust pizza from "Pick-Up-Sticks" that costs $15 plus tax and $1.50 delivery, versus a round deep-dish pizza from "Fred's" that costs $17.25 plus tax with free delivery. Students must apply the engineering economic analysis procedure and principles to select the preferred alternative pizza.

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Ariane Joyce Villafranca Gara
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217 views

Introduction To Engineering Economy

Engineering economy involves systematically evaluating the economic merits of solutions to engineering problems. It considers alternatives, focuses on differences between them, uses consistent viewpoints and common units of measure, takes all relevant criteria and uncertainty into account, and revisits decisions. An example problem compares two pizza delivery options - a square thin crust pizza from "Pick-Up-Sticks" that costs $15 plus tax and $1.50 delivery, versus a round deep-dish pizza from "Fred's" that costs $17.25 plus tax with free delivery. Students must apply the engineering economic analysis procedure and principles to select the preferred alternative pizza.

Uploaded by

Ariane Joyce Villafranca Gara
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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Introduction to

Engineering Economy

Steps in Virtual Classroom Registration:


Sign up for a STUDENT account at www.edmodo.com
Enter the group code for our subject: ag3mtq
Upload a decent profile picture in your Edmodo student account.
Virtual Classroom Details:
Group Name:

3EE_GE301_1S16

Group Public URL: https://edmodo.com/public/3ee_ge301_1s16/group_id/20984363

All announcements, PowerPoint presentation and online activities will be submitted and uploaded
here.

Engineering economy
involves the systematic evaluation of the
economic merits of proposed solutions to
engineering problems.

Solutions to engineering problems must


promote the well-being and survival of an organization,

embody creative and innovative technology and ideas,


permit identification and scrutiny of their estimated outcomes, and
translate profitability to the bottom line through a valid and
acceptable measure of merit.

An engineer who is unprepared to excel at


engineering economy is not properly equipped for his
or her job.

Engineering economic analysis can play a


role in many types of situations.
Choosing the best design for a high-efficiency gas furnace.
Selecting the most suitable robot for a welding operation on an automotive assembly line.
Making a recommendation about whether jet airplanes for an overnight delivery service should
be purchased or leased.
Determining the optimal staffing plan for a computer help desk.

Fundamental Principles of Engineering


Economy
1.

Develop the alternatives

2.

Focus on the differences

3.

Use a consistent viewpoint

4.

Use a common unit of measure

5.

Consider all relevant criteria

6.

Make uncertainty explicit

7.

Revisit your decisions

We define the foundation of engineering


economy to be a set of principles that
provide a comprehensive doctrine for
developing the methodology. Once a
problem or need has been clearly defined,
the foundation of the discipline can be
discussed in terms of seven principles.

Fundamental Principles of Engineering


Economy
1.

Develop the alternatives

2.

Focus on the differences

3.

Use a consistent viewpoint

4.

Use a common unit of measure

5.

Consider all relevant criteria

6.

Make uncertainty explicit

7.

Revisit your decisions

The choice (decision) is among alternatives. The


alternatives need to be identified and then
defined for subsequent analysis.

Fundamental Principles of Engineering


Economy
1.

Develop the alternatives

2.

Focus on the differences

3.

Use a consistent viewpoint

4.

Use a common unit of measure

5.

Consider all relevant criteria

6.

Make uncertainty explicit

7.

Revisit your decisions

Only the differences in expected future


outcomes among the alternatives are
relevant to their comparison and should be
considered in the decision.

Fundamental Principles of Engineering


Economy
1.

Develop the alternatives

2.

Focus on the differences

3.

Use a consistent viewpoint

4.

Use a common unit of measure

5.

Consider all relevant criteria

6.

Make uncertainty explicit

7.

Revisit your decisions

The prospective outcomes of the


alternatives, economic and other, should be
consistently developed from a defined
viewpoint (perspective).

Fundamental Principles of Engineering


Economy
1.

Develop the alternatives

2.

Focus on the differences

3.

Use a consistent viewpoint

4.

Use a common unit of measure

5.

Consider all relevant criteria

6.

Make uncertainty explicit

7.

Revisit your decisions

Using a common unit of measurement to


enumerate as many of the prospective
outcomes as possible will simplify the
analysis of the alternatives.

Fundamental Principles of Engineering


Economy
1.

Develop the alternatives

2.

Focus on the differences

3.

Use a consistent viewpoint

4.

Use a common unit of measure

5.

Consider all relevant criteria

6.

Make uncertainty explicit

7.

Revisit your decisions

Selection of a preferred alternative (decision


making) requires the use of a criterion (or
several criteria). The decision process should
consider both the outcomes enumerated in
the monetary unit and those expressed in
some other unit of measurement or made
explicit in a descriptive manner.

Fundamental Principles of Engineering


Economy
1.

Develop the alternatives

2.

Focus on the differences

3.

Use a consistent viewpoint

4.

Use a common unit of measure

5.

Consider all relevant criteria

6.

Make uncertainty explicit

7.

Revisit your decisions

Risk and uncertainty are inherent in


estimating the future outcomes of the
alternatives and should be recognized in
their analysis and comparison.

Fundamental Principles of Engineering


Economy
1.

Develop the alternatives

2.

Focus on the differences

3.

Use a consistent viewpoint

4.

Use a common unit of measure

5.

Consider all relevant criteria

6.

Make uncertainty explicit

7.

Revisit your decisions

Improved decision making results from an


adaptive process; to the extent practicable,
the initial projected outcomes of the
selected alternative should be subsequently
compared with actual results achieved.

Engineering Economy
and the Design Process
AN ENGINEERING ECONOMY STUDY IS ACCOMPLISHED USING A
STRUCTURED PROCEDURE AND MATHEMATICAL MODELING TECHNIQUES.
THE ECONOMIC RESULTS ARE THEN USED IN A DECISION SITUATION THAT
NORMALLY INCLUDES OTHER ENGINEERING KNOWLEDGE AND INPUT.

Engineering Economic Analysis


Procedure
1.

Problem definition

2.

Development of alternatives

3.

Development of prospective outcomes

4.

Selection of a decision criterion

5.

Analysis and comparison of alternatives.

6.

Selection of the preferred alternative.

7.

Performance monitoring and post evaluation of results.

Engineering Design Process

Problem Exercise
While studying for the engineering economy final exam, you and two friends find yourselves
craving a fresh pizza. You cant spare the time to pick up the pizza and must have it delivered.
Pick-Up-Sticks offers a 1-1/4-inch-thick (including toppings), 20-inch square pizza with your
choice of two toppings for $15 plus 5% sales tax and a $1.50 delivery charge (no sales tax on
delivery charge). Freds offers the round, deep-dish Sasquatch, which is 20 inches in diameter.
It is 1-3/4 inches thick, includes two toppings, and costs $17.25 plus 5% sales tax and free
delivery.
Apply the engineering economic analysis procedure. Make sure that you take into
consideration the seven fundamental principles of engineering economy.
Your output will be presented next meeting, July 1. Youll be given 10 minutes to present your
work.

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