Ch2 - Objectives Review various cost concepts Draw Cash...

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source: Economics textbook 1 Ch 2 Engineering Costs and Cost Estimating (cost estimating will be covered later in the Management part) source: Economics textbook 2 Objectives • Review various cost concepts • Draw Cash Flow Diagrams source: Economics textbook 3 Engineering Costs Fundamental cost concepts: • Fixed and variable costs • Marginal and average costs • Sunk and opportunity costs • Recurring and non-recurring costs • Incremental costs, cash costs and book costs source: Economics textbook 4 Engineering Costs Fixed and variable costs • Fixed costs are constant regardless of level of output or activity – E.g. factory floor space and equipment • Variable costs depend on level of output or activity – E.g. labour costs (depend on number of employees), production costs (depend on number of items produced)
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source: Economics textbook 5 Engineering Costs Marginal and average costs • Marginal cost is the cost of one more unit – E.g. renting a hotel room and having to pay extra if the number of people exceeds say 2 • Average costs = Total cost / Number of units (Total cost = Total fixed cost + Total
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This note was uploaded on 12/07/2011 for the course ENGR 301 taught by Professor Gg during the Fall '11 term at Concordia Canada.

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Ch2 - Objectives Review various cost concepts Draw Cash...

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