Engineering Economics

Engineering economics is the application of economic techniques to the evaluation of design and engineering alternatives. The role of engineering economics is to assess the appropriateness of a given project, estimate its value, and justify it from an engineering standpoint.
Engineering economics deals with the concepts and techniques of analysis useful in evaluating the worth of systems, products, and services in relation to their costs. It is used to answer many different questions
– Which engineering projects are worthwhile?
• Has the mining or petroleum engineer shown that the mineral or oil deposits is worth developing?
– Which engineering projects should have a higher priority?
• Has the industrial engineer shown which factory improvement projects should be funded with the available dollars?
– How should the engineering project be designed?
• Has civil or mechanical engineer chosen the best thickness for insulation?
An engineering economy study involves technical considerations and it is a comparison between technical alternatives in which the differences between the alternatives are expressed so far as practicable in money terms.
Engineering Economy Study: the process of engineering economy study will include data gathering and data analysis.
Analysis requires analytical methods and Engineering Economy texts mainly concentrated on analytical techniques. The analytical techniques express the alternatives in comparable measures of money with respect to their cost, revenue or return on capital.
Data gathering will include some current estimates made by engineers by combining the technical information and costs/prices relevant to the materials and processes used to provide goods or services. The data gathering effort cannot be a one time effort and systems are to be put in place to record appropriate data as and when it first appears. For this purpose accounting sections or departments (financial, cost and management accounting) and technical departments have to jointly work out the need for future engineering economy studies and instal appropriate recording systems.

Writer: Economist Mss. Hermine

Note: has written to ibrahimpektas.com (Thanks)