MG2451 ENGINEERING ECONOMICS AND COST ANALYSIS Syllabus

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(COMMON TO MECHANICAL, PRODUCTION, AUTOMOBILE, METALLURGY,

MECHATRONICS - VIII SEMESTER ELECTIVE)

OBJECTIVES:

To learn about the basics of economics and cost analysis related to engineering so as to

take economically sound decisions.

UNIT I INTRODUCTION TO ECONOMICS 8

Introduction to Economics- Flow in an economy, Law of supply and demand, Concept

of Engineering Economics – Engineering efficiency, Economic efficiency, Scope of

engineering economics- Element of costs, Marginal cost, Marginal Revenue, Sunk cost,

Opportunity cost, Break-even analysis- V ratio, Elementary economic Analysis – Material

selection for product Design selection for a product, Process planning.

UNIT II VALUE ENGINEERING 10

Make or buy decision, Value engineering – Function, aims, Value engineering

procedure. Interest formulae and their applications –Time value of money, Single

payment compound amount factor, Single payment present worth factor, Equal payment

series sinking fund factor, Equal payment series payment Present worth factor- equal

payment series capital recovery factor-Uniform gradient series annual equivalent factor,

Effective interest rate, Examples in all the methods.

UNIT III CASH FLOW 9

Methods of comparison of alternatives – present worth method (Revenue dominated

cash flow diagram), Future worth method (Revenue dominated cash flow diagram, cost

dominated cash flow diagram), Annual equivalent method (Revenue dominated cash

flow diagram, cost dominated cash flow diagram), rate of return method, Examples in all

the methods.

UNIT IV REPLACEMENT AND MAINTENANCE ANALYSIS 9

Replacement and Maintenance analysis – Types of maintenance, types of replacement

problem, determination of economic life of an asset, Replacement of an asset with a new

asset – capital recovery with return and concept of challenger and defender, Simple

probabilistic model for items which fail completely.

UNIT V DEPRECIATION 9

Depreciation- Introduction, Straight line method of depreciation, declining balance

method of depreciation-Sum of the years digits method of depreciation, sinking fund

method of depreciation/ Annuity method of depreciation, service output method of

depreciation-Evaluation of public alternatives- introduction, Examples, Inflation adjusted

decisions – procedure to adjust inflation, Examples on comparison of alternatives and

determination of economic life of asset.

TOTAL: 45 PERIODS

TEXT BOOKS:

1. Panneer Selvam, R, “Engineering Economics”, Prentice Hall of India Ltd, New Delhi,

2001.

2. Suma Damodaran, “ Managerial economics”, Oxford university press 2006.

REFERENCES:

1. Chan S.Park, “Contemporary Engineering Economics”, Prentice Hall of India, 2002.

2. Donald.G. Newman, Jerome.P.Lavelle, “Engineering Economics and analysis” Engg.

Press, Texas, 2002

3. Degarmo, E.P., Sullivan, W.G and Canada, J.R, “Engineering Economy”, Macmillan,

New York, 1984

4. Grant.E.L., Ireson.W.G., and Leavenworth, R.S, “Principles of Engineering

Economy”, Ronald Press, New York,1976.

5. Smith, G.W., “Engineering Economy”, Lowa State Press, Iowa, 1973.

6. Truett & Truett, “ Managerial economics- Analysis, problems & cases “ Wiley India 8th

edition 2004.

7. Luke M Froeb / Brian T Mccann, “ Managerail Economics – A problem solving

approach” Thomson learning 2007.