Midterm cheat sheet

Midterm cheat sheet - Engineering110 Midterm cheatsheet...

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Engineering 110 Midterm – cheat sheet Chapter 1 - Decision making framework 1. Recognize the problem 2. Define the goal or objective 3. Assemble relevant data 4. Identify feasible alternatives 5. Select criterion for alternatives 6. Construct the model 7. Predict outcomes of each alternative 8. Choose best alternative 9. Audit results - Ethical issues Chapter 2 - Cost Categories o Fixed Costs : constant, independent of the output or activity level o i.e. property taxes, rent or lease o Variable Costs : proportional to the output or activity level o Direct materials, direct labor o Marginal costs : the variable cost for one more unit of output o Basis for last-minute pricing o Average costs : total cost divided by the total number of units produced
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o Basis for normal pricing o Sunk Costs : cost that has occurred in the past and has no relevance to   estimates of future costs and revenues related to an alternative o Current decisions cannot change the past; this money has already been   spent o Opportunity costs : cost of the foregone opportunity and is hidden or implied o Firm chooses to use a resource in one way and therefore cannot use the   same resource on another opportunity  o Recurring costs : repetitive and occur when a firm produces similar goods and   services on a continuing basis o Office space rental o Non-recurring costs : not repetitive, even though the total expenditure may be   cumulative over a period of time o Typically involve developing or establishing a capability or capacity to   operate o Construction costs of the plant o Incremental costs : difference in costs between 2 alternatives o Cash costs
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