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Engineering Economics I
Classifying Problems
One method of classifying problems is by degree of
complexity
Problems can be classified as:
simple, intermediate, or complex.
Recognize problem
Define the goal/objective
Assemble relevant data
Identify feasible alternatives
Select criterion to determine best alternative
Construct a model
Predict each alternatives outcomes/consequences
Choose the best alternative
Audit the result
Engineering Costs
An engineering economic analysis may involve many types
of costs
A fixed cost is constant, independent of the output or
activity level
The annual cost of property taxes for a production facility is a fixed
cost, independent of the production level and number of employees.
Cost
$6000
Variable
Cost
$200/unit
$4000
Fixed
Cost
$2000
$0
0
10
15
Volume
Electrical & Computer Engineering
Profit
Cost
$6000
$4000
Breakeven point
$2000
Loss
$0
0
10
15
Customers
Electrical & Computer Engineering
10