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Engineering Economics - MIT OpenCourseWare

Engineering Economic Analysis: Slide 1 Econ & Enviro Issues In Materials Selection Randolph KirchainMassachusetts Institute of Technology Department of Materials Science & Engineering Massachusetts Institute of TechnologyDepartment of Materials Science & EngineeringEngineering Economics : Comparing Financial Characteristics of Design Options Engineering Economic Analysis: Slide 2 Econ & Enviro Issues In Materials Selection Randolph KirchainMassachusetts Institute of Technology Department of Materials Science & Engineering Massachusetts Institute of TechnologyDepartment of Materials Science & EngineeringEngineering Econ Example: Comparing Alternatives BIG DIG $$$$ $$ $$Where Should You Build?

Cost Concepts: Nomenclature • Capital – Wealth (money or property) that can be used to produce more wealth • Sunk cost – Expense which has happened in the past. No relevance to alternatives being considered. • Opportunity cost – Cost / value of the best rejected alternative • Fixed cost – Magnitude does NOT vary with changes in level of activity (output) -

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