Solutions Manual for Fundamentals of
Engineering Economics, Latest edition,
by Chan S. Park | All Chapters with
Complete Solutions | LATEST EDITION
Three types of economic problems - ANSWER-1. simple problems
2. intermediate problems
3. complex problems
simple problems - ANSWER--do no require much time or effort
-Ex: cash or credit card? semester parking pass or use parking meters?
intermediate problems - ANSWER--primarily economic
-Ex: buy or lease? which equipment should be purchased?
complex problems - ANSWER--mix of economic, political, and humanistic elements
-Ex: feasible study of a new automobile plant, planning of new highways
When is engineering economic analysis needed? - ANSWER--if the problem is
important enough to justify giving it serious thought and effort
-requires organized analysis (can't be worked in one's head)
-has economic aspects which are important in reaching a decision
What types of questions should engineering economic analysis answer in general? -
ANSWER--Which engineering projects are worthwhile?
-Which engineering projects should have higher priority?
-How should the engineering project be designed?
What do engineers do? - ANSWER-Apply science and math to SOLVE PROBLEMS
(which requires us to make decisions)
What types of questions should engineering economic analysis answer about personal
decisions? - ANSWER--How do I achieve my long-term financial goals?
-How do I compare different ways to finance purchases?
-How do I make short- and long-term investment decisions?
What is the decision-making process? - ANSWER-1. recognize problem
2. define the goal or objective
3. assemble relevant data
4. identify feasible alternatives
,5. select the criterion to determine the best alternative
6. construct a model
7. predict the outcomes of each alternative
8. choosing the best alternative
9. audit the result
1. recognize the problem - ANSWER--decision making starts with identifying the
problem
-once we know problem, we can solve it at best
2. define the goal or objective - ANSWER--goal or objective can be general or specific
3. assemble relevant data - ANSWER--assembling relevant data is important for a good
decision
-data can be published and unpublished
-published data is available easily
-unpublished data may include data from knowledgeable person or from survey
4. identify feasible alternatives - ANSWER--include as many alternatives as possible
-however, it is of little or no use to consider impractical alternative
5. select the criterion to determine the best alternative - ANSWER--the most desirable
alternative can be selected on the basis of different criterion
-the most common criterion = maximize profit
What economic criterion goes with fixed input? - ANSWER-max benefits or other
outputs
What economic criterion goes with fixed output? - ANSWER-min costs or other inputs
What economic criterion goes with neither input nor output fixed? - ANSWER-max
profits (value of outputs - cost of inputs)
6. construct models - ANSWER--there are various elements that go into decision
making such as objective, relevant data, feasible alternatives, and selection criterion
-constructing the interrelationships between the decision-making elements is called
model building or constructing the model
7. predict the outcomes of each alternative - ANSWER--alternatives are comparable
-the consequences of alternatives are stated in the form of cost and benefits
8. choosing best alternative - ANSWER--best alternative is chosen based on selected
criterion
-intangible consequence (valued by judgement) must be considered in this process
9. audit the results - ANSWER--did actual outcome match prediction?
,-results of analysis agree with projections?
-if audit will occur -> projections likely to be more accurate
In which of the following problems do you need engineering economics?
A. to compare a 4-year and 5-year car loan
B. to decide whether a new or used car is cheaper
C. to decide whether to pay your car insurance quarterly or annually
D. all of the above
E. none of the above - ANSWER-D. all of the above
Ethics - ANSWER-distinguishing between right & wrong in decision making
Includes:
-establishing systems of beliefs, moral obligations
-defining values and fairness
-determining duty and guidelines for conduct
What does the National Society of Professional Engineers (NSPE) Code of Ethics say?
- ANSWER-Engineers, in the fulfillment of their professional duties, shall:
-hold paramount the safety, health, welfare of the public
-perform services only in areas of competence
-issue public statements in an objective and truthful manner
-act for each employer as faithful agents or trustees
-avoid deceptive acts
-conduct themselves honorably, responsibly, ethically, lawfully so as to enhance the
honor, reputation, and usefulness of the profession
fixed costs - ANSWER--constant or unchanging regardless of level of output or activity
-Ex: property taxes, insurance, management and administrative salaries, license fees,
rent
variable costs - ANSWER--depend on level of output or activity
-Ex: direct labor cost, direct materials
Total cost equation - ANSWER-total fixed cost + total variable cost
marginal costs - ANSWER--variable cost for one more unit
-Ex: capacity planning: cost or excess capacity, basis for last-minute pricing
average costs - ANSWER--depends on # of units
-total cost divided by # of units
-Ex: basis for normal pricing
breakeven point - ANSWER-total costs = total revenue
-level of activity at which total costs is equal to the revenue (or savings) generated
, profit region - ANSWER--total revenue > total costs
-where the total revenue is greater than the total cost
-putting money in the bank
loss region - ANSWER--total revenue < total costs
-where the total revenue is less than the total cost
-losing money
Types of Engineering Costs - ANSWER--Fixed costs and variable costs
-Marginal costs and average costs
-Sunk costs and opportunity costs
-Recurring and non-recurring costs
-Incremental costs
-Cash costs and book costs
-Life-cycle costs
Sunk costs - ANSWER--money already spent due to past decision
-Ex: purchase price paid for a car 2 years ago
Opportunity costs - ANSWER--Costs associated with using a resource in one activity
instead of another
-Ex: existing equipment in replacement analysis, income not received from the job you
turn down, paying the mortgage instead of going out for dinner
Recurring costs - ANSWER--expense that is known and anticipated, and occurs at
regular intervals
-Ex: office space rental, material cost for a product
Nonrecurring costs - ANSWER--one-of-a-kind expenses that occur at irregular intervals
(sometimes difficult to plan for)
-Ex: purchase cost for real estate, construction costs of the plant
Incremental costs - ANSWER--differences in cost between two alternatives
-Ex: suppose that A and B are mutually exclusive, A has an initial cost of $10,000, B
has an initial cost of $14,000, Incremental initial cost of (B-A) = $4000
Cash costs - ANSWER--actual transaction of funds from one owner to another
-Ex: this month's loan payment
Book costs - ANSWER--cost effects that are recorded "in the books" Ex: depreciation
-Transaction cost as recorded in an accounting book
-Ex: depreciating cost calculated this year for an existing asset, per accounting
department
Engineering Economics, Latest edition,
by Chan S. Park | All Chapters with
Complete Solutions | LATEST EDITION
Three types of economic problems - ANSWER-1. simple problems
2. intermediate problems
3. complex problems
simple problems - ANSWER--do no require much time or effort
-Ex: cash or credit card? semester parking pass or use parking meters?
intermediate problems - ANSWER--primarily economic
-Ex: buy or lease? which equipment should be purchased?
complex problems - ANSWER--mix of economic, political, and humanistic elements
-Ex: feasible study of a new automobile plant, planning of new highways
When is engineering economic analysis needed? - ANSWER--if the problem is
important enough to justify giving it serious thought and effort
-requires organized analysis (can't be worked in one's head)
-has economic aspects which are important in reaching a decision
What types of questions should engineering economic analysis answer in general? -
ANSWER--Which engineering projects are worthwhile?
-Which engineering projects should have higher priority?
-How should the engineering project be designed?
What do engineers do? - ANSWER-Apply science and math to SOLVE PROBLEMS
(which requires us to make decisions)
What types of questions should engineering economic analysis answer about personal
decisions? - ANSWER--How do I achieve my long-term financial goals?
-How do I compare different ways to finance purchases?
-How do I make short- and long-term investment decisions?
What is the decision-making process? - ANSWER-1. recognize problem
2. define the goal or objective
3. assemble relevant data
4. identify feasible alternatives
,5. select the criterion to determine the best alternative
6. construct a model
7. predict the outcomes of each alternative
8. choosing the best alternative
9. audit the result
1. recognize the problem - ANSWER--decision making starts with identifying the
problem
-once we know problem, we can solve it at best
2. define the goal or objective - ANSWER--goal or objective can be general or specific
3. assemble relevant data - ANSWER--assembling relevant data is important for a good
decision
-data can be published and unpublished
-published data is available easily
-unpublished data may include data from knowledgeable person or from survey
4. identify feasible alternatives - ANSWER--include as many alternatives as possible
-however, it is of little or no use to consider impractical alternative
5. select the criterion to determine the best alternative - ANSWER--the most desirable
alternative can be selected on the basis of different criterion
-the most common criterion = maximize profit
What economic criterion goes with fixed input? - ANSWER-max benefits or other
outputs
What economic criterion goes with fixed output? - ANSWER-min costs or other inputs
What economic criterion goes with neither input nor output fixed? - ANSWER-max
profits (value of outputs - cost of inputs)
6. construct models - ANSWER--there are various elements that go into decision
making such as objective, relevant data, feasible alternatives, and selection criterion
-constructing the interrelationships between the decision-making elements is called
model building or constructing the model
7. predict the outcomes of each alternative - ANSWER--alternatives are comparable
-the consequences of alternatives are stated in the form of cost and benefits
8. choosing best alternative - ANSWER--best alternative is chosen based on selected
criterion
-intangible consequence (valued by judgement) must be considered in this process
9. audit the results - ANSWER--did actual outcome match prediction?
,-results of analysis agree with projections?
-if audit will occur -> projections likely to be more accurate
In which of the following problems do you need engineering economics?
A. to compare a 4-year and 5-year car loan
B. to decide whether a new or used car is cheaper
C. to decide whether to pay your car insurance quarterly or annually
D. all of the above
E. none of the above - ANSWER-D. all of the above
Ethics - ANSWER-distinguishing between right & wrong in decision making
Includes:
-establishing systems of beliefs, moral obligations
-defining values and fairness
-determining duty and guidelines for conduct
What does the National Society of Professional Engineers (NSPE) Code of Ethics say?
- ANSWER-Engineers, in the fulfillment of their professional duties, shall:
-hold paramount the safety, health, welfare of the public
-perform services only in areas of competence
-issue public statements in an objective and truthful manner
-act for each employer as faithful agents or trustees
-avoid deceptive acts
-conduct themselves honorably, responsibly, ethically, lawfully so as to enhance the
honor, reputation, and usefulness of the profession
fixed costs - ANSWER--constant or unchanging regardless of level of output or activity
-Ex: property taxes, insurance, management and administrative salaries, license fees,
rent
variable costs - ANSWER--depend on level of output or activity
-Ex: direct labor cost, direct materials
Total cost equation - ANSWER-total fixed cost + total variable cost
marginal costs - ANSWER--variable cost for one more unit
-Ex: capacity planning: cost or excess capacity, basis for last-minute pricing
average costs - ANSWER--depends on # of units
-total cost divided by # of units
-Ex: basis for normal pricing
breakeven point - ANSWER-total costs = total revenue
-level of activity at which total costs is equal to the revenue (or savings) generated
, profit region - ANSWER--total revenue > total costs
-where the total revenue is greater than the total cost
-putting money in the bank
loss region - ANSWER--total revenue < total costs
-where the total revenue is less than the total cost
-losing money
Types of Engineering Costs - ANSWER--Fixed costs and variable costs
-Marginal costs and average costs
-Sunk costs and opportunity costs
-Recurring and non-recurring costs
-Incremental costs
-Cash costs and book costs
-Life-cycle costs
Sunk costs - ANSWER--money already spent due to past decision
-Ex: purchase price paid for a car 2 years ago
Opportunity costs - ANSWER--Costs associated with using a resource in one activity
instead of another
-Ex: existing equipment in replacement analysis, income not received from the job you
turn down, paying the mortgage instead of going out for dinner
Recurring costs - ANSWER--expense that is known and anticipated, and occurs at
regular intervals
-Ex: office space rental, material cost for a product
Nonrecurring costs - ANSWER--one-of-a-kind expenses that occur at irregular intervals
(sometimes difficult to plan for)
-Ex: purchase cost for real estate, construction costs of the plant
Incremental costs - ANSWER--differences in cost between two alternatives
-Ex: suppose that A and B are mutually exclusive, A has an initial cost of $10,000, B
has an initial cost of $14,000, Incremental initial cost of (B-A) = $4000
Cash costs - ANSWER--actual transaction of funds from one owner to another
-Ex: this month's loan payment
Book costs - ANSWER--cost effects that are recorded "in the books" Ex: depreciation
-Transaction cost as recorded in an accounting book
-Ex: depreciating cost calculated this year for an existing asset, per accounting
department
