Lecture_02_Cost_Engineering

Lecture_02_Cost_Engineering - EGR 102 Introduction to...

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EGR 102 Lecture 02 1 EGR 102 Introduction to Engineering Modeling Cost Engineering EGR 102 Lecture 02 2 EGR 102 Before you take your seat, place your Lecture HW 01 in the appropriate envelope at the back of the room (printed name, lab section # and PID on top page & pages stapled)
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EGR 102 Lecture 02 3 Background ± A cost engineering study involves examining technical alternatives and expressing their differences in terms of money ± Cost is a general term that often includes investments such as time and other resources EGR 102 Lecture 02 4 Engineering Decisions General John T. Carty, Chief Engineer of New York Telephone Co., asked 3 questions to evaluate engineering proposals: ± 1. Why do this at all? ± 2. Why do it now? ± 3. Why do it this way? ± Basis for engineering measurement? ± Cost or $$$
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EGR 102 Lecture 02 5 Why do this at all? ± This question makes an inquiry regarding profit . The reason for doing something in business is that it is profitable to do so. ± Fundamental question to evaluate proposals: Will it pay? EGR 102 Lecture 02 6 Why do it now? ± This question asks whether the person(s) proposing the project examined the time alternative ± Is this the best time ? ± Can we do this later and make more profit ?
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EGR 102 Lecture 02 7 Why do it this way? ± Did we consider all other alternatives ? ± Is the solution proposed the most profitable ? ± What are the consequences of doing it this way? EGR 102 Lecture 02 8 An Example ± An engineering executive decides to keep a machine in service even if it experiences frequent breakdowns. ± What are the alternatives? ± What are the consequences? ± Remember that financial efficiency is not the same thing as engineering efficiency ± While evaluating alternatives, the time value of money must be taken into account
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EGR 102 Lecture 02 9 Cost Engineering Cost Engineering is defined as “ that area of engineering practice where engineering judgment and experience are utilized in the application of scientific principles and techniques to the problems of cost estimation, cost control, and profitability. American Association of Cost Engineers (AACE) EGR 102 Lecture 02
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Lecture_02_Cost_Engineering - EGR 102 Introduction to...

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