604-ch1.ppt - MSE 604 CHAPTER ONE FOUNDATIONS OF...

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1 MSE 604 CHAPTER ONE FOUNDATIONS OF ENGINEERING ECONOMY
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2 Learning Objectives Importance of engineering economy in engineering practice Origins of engineering economy Principles of engineering economy Engineering economy and the design process Accounting and engineering economy studies
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3 Why Engineering Economy Utilization of scientific and engineering knowledge Achieved through the design we use Achievements do not occur without a price Purpose of this course Develop and illustrate the principles required to answer the basic economic question “Do its benefits exceed its costs?”
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4 Engineering Economy Definition Involves systematic evaluation of economic merits of proposed solutions to engineering problems Solutions to engineering problems Must demonstrate a positive balance of long- term benefits over long-term costs Must promote the well-being and survival of an organization Involves technical analysis with emphasis on economic aspects
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5 Origins of Engineering Economy Development of engineering economy is relatively recent Arthur Wellington addressed the role of economic analysis in engineering projects Emphasis was primarily on financial and statistical mathematics Eugene Grant published the first edition of engineering economy Milestone in the development of engineering economy as we practice it today
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6 Engineering Economy and the Design Process Engineering Economic Analysis (Steps) 1. Problem recognition 2. Development of the feasible alternatives 3. Development of the outcomes and cash flows 4. Selection of a criterion 5. Analysis and comparison of alternatives 6. Selection of the preferred alternative 7. Performance monitoring Engineering Design Process (Activities) 1. Problem definition 2. Problem formulation and evaluation 3. Synthesis of possible solutions 4. Analysis, optimization, and evaluation 5. Specification of preferred alternative 6. Communication
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