Engineering Economics & Cost Analysis

1 A Course Material onEngineering Economics & cost , OFMECHANICAL ENGINEERINGSASURIE COLLEGE OF ENGINEERINGVIJAYAMANGALAM 638056 QUALITY CERTIFICATEThis is to certify that the e-coursematerialSubject Code:MG 2451 Subject: Engineering Economics & cost AnalysisClass:IV YearMechBeingprepared by me and it meets the knowledge requirement of the university of the AuthorName:R. SIBY., :ASSISTANT PROFESSORThis is to certify that the coursematerial being prepared by , of adequate quality. Hehasreferred more than five booksamongthem minimum one is of SIVAKUMAR.

2 , NOTOPICSPAGE \ VALUE or buy Engineering and their value of payment compound amount payment present worth payment series sinking fund payment series paymentpresent worth payment series capital recovery gradient series annual equivalent interest rate31 CONTENTSUNIT III CASH FLOWSL NOTOPICSPAGE of comparison of worth method (Revenue dominated cash flow diagram), worth method (Revenue dominated cash flow diagram) worth method ( cost dominated cash flowdiagram) equivalent method (Revenue dominated cash flow diagram) equivalent method( cost dominated cash flow diagram)

3 Of return method36 UNIT IV REPLACEMENT AND and maintenance of of replacement of economic life of an of an asset with a new recovery with return andconcept of challenger and probabilistic model for items which fail completely55 UNIT V line method of method of of the years digits method of fund method of output method of of public adjusted to adjust of alternatives and determination of economic life of asset70* * * * *6 Tutorial problems and Worked out examples717 Question Bank848 Previous yearUniversity questions92 TEXT BOOKS:1.

4 Panneer Selvam, R, Engineering Economics , Prentice Hall of India Ltd, New Delhi, Engineering Economics AND cost ANALYSISL T P C3 0 0 3 OBJECTIVES:To learn about the basics of Economics and cost Analysis related to Engineering so as to take economically I INTRODUCTION TO ECONOMICS8 Introduction to Economics -Flow in an economy, Lawof supply and demand, Concept of Engineering Economics Engineering efficiency, Economic efficiency, Scope of Engineering Economics -Element of costs, Marginal cost ,Marginal Revenue, Sunk cost , Opportunity cost , Break-even Analysis -V ratio.

5 Elementary economic Analysis Material selection for product Design selection for a product, Process II VALUE ENGINEERING10 Make or buy decision, Value Engineering Function, aims, Valueengineering procedure. Interest formulaeand their applications Time value of money, Single payment compound amount factor, Single payment presentworth factor, Equal payment series sinking fund factor, Equal payment series payment Present worth factor-equal payment series capital recovery factor-Uniform gradient series annual equivalent factor, Effective interest rate,Examples in all the III CASH FLOW9 Methods ofcomparison of alternatives present worth method (Revenue dominated cash flow diagram)

6 , Futureworth method (Revenue dominated cash flow diagram, cost dominated cash flow diagram), Annual equivalentmethod (Revenue dominated cash flow diagram, cost dominated cash flow diagram), rate of return method,Examples in all the IV REPLACEMENT AND MAINTENANCEANALYSIS9 Replacement and Maintenance Analysis Types of maintenance, types of replacement problem, determination ofeconomic life of an asset, Replacement of an asset with a new asset capital recovery with return and concept ofchallenger and defender, Simple probabilistic model for items which fail V DEPRECIATION9 Depreciation-Introduction, Straight line method of depreciation.

7 Declining balance method of depreciation-Sumof the years digits method of depreciation, sinking fund method of depreciation/ Annuity method ofdepreciation, service output method of depreciation-Evaluation of public alternatives-introduction, Examples,Inflation adjusted decisions procedure to adjust inflation, Examples on comparison of alternatives anddetermination of economic life of : 45 PERIODSTEXT BOOKS:1. Panneer Selvam, R, Engineering Economics , Prentice Hall of India Ltd, New Delhi, Suma Damodaran, Managerial Economics , Oxford university press :1.

8 Chan , Contemporary Engineering Economics , Prentice Hall of India, Newman, , Engineering Economics and Analysis , Texas, 20023. Degarmo, , Sullivan, and Canada, , Engineering Economy , Macmillan,New York, 19844. , , and Leavenworth, , Principles of EngineeringEconomy , Ronald Press, New York, Smith, , Engineering Economy ,Lowa State Press, Iowa, Truett & Truett, Managerial Economics - Analysis , problems & cases Wiley India 8 Thedition Luke M Froeb / Brian T Mccann, Managerail Economics A problem solvingapproach Thomson learning Economics & cost ANALYSISSCE1 Department of Mechanical EngineeringUNIT I-INTRODUCTION TO functioning of anybusinessorganizationwouldenableittopr ovidegoods/services at a lower the process of managing organizations, the managers at different levels should takeappropriate economic decisions which will help in minimizing investment, operating andmaintenance expenditures besides increasing the revenue.

9 Savings and such other gains of can be achieved through Engineering Economics which deals with the methodsthat enable one to make economic decisions towards minimizing costs of engineeringeconomics. Later,elementsofcostandbreak-evenanalysi sare a study of economic problems of the people concerning production,consumption, exchange and distribution of is the science that deals with the production and consumption of goods andservices and the distribution and rendering of these for human following are the economic goals.

10 A high level of employment Price stability Efficiency An equitable distribution of income in economyThe flow of goods, services, resources and money payments in a simpleeconomyHouseholds and businesses are the two major entities in a simple economy. Business organizations use various economic resources like land, labour and capitalwhich are provided by households to produce consumer goods and services whichwill be used by them. Business organizations make payment of money to the households for receivingvarious Economics & cost ANALYSISSCE2 Department of Mechanical Engineering Thehouseholdsinturnmakepaymentofmoneytob usinessorganizationsforreceivingconsumer goodsandservices.