This document provides an introduction to engineering economics and discusses key concepts like the law of supply and demand, process planning, sunk costs, factors that affect supply curves, technical and economic efficiency, marginal costing, opportunity costs, and break-even analysis. It also gives examples and definitions for economics, P/V ratio, and margin of safety. Several engineering economics concepts are explained in detail, including analyzing engineering projects using break-even charts and the various steps in process planning.
This document discusses depreciation and related concepts. It defines depreciation as the process of allocating the cost of tangible assets over their estimated useful lives. It lists various causes of depreciation as wear and tear, obsolescence, depletion, and lapse of time. The document describes different methods of calculating depreciation including straight-line, declining balance, sum-of-the-years digits, and sinking fund methods. It also discusses why depreciation is provided for fixed assets and how to evaluate public alternatives while adjusting for inflation.
- Value engineering aims to improve the value of existing or new products. It focuses on simplifying design, reducing costs, and increasing usefulness.
- The value engineering process involves defining a product's functions, brainstorming alternatives, evaluating alternatives, and implementing the best alternative.
- Make or buy decisions analyze whether to produce components internally or purchase them externally. Least cost is the goal based on factors like production costs, investment requirements, demand levels, and inventory carrying costs.
This document discusses various cash flow analysis methods including present worth, future worth, rate of return, and annual equivalent. It provides examples and formulas for revenue-dominated and cost-dominated cash flows. Key points include:
- Present worth discounts all cash flows to time zero using a discount rate to find the maximum or minimum value. Future worth grows all cash flows using a rate to find the maximum or minimum value.
- Annual equivalent converts net present worth to an equivalent annual revenue or cost using a capital recovery factor for comparison.
- Rate of return finds the discount rate that sets the net present worth equal to zero to determine the highest returning project.
- Examples apply the methods to alternatives with
The document discusses replacement and maintenance analysis. It defines economic life as the point where total cost of a machine is minimum. Preventive maintenance aims to detect potential failures to avoid major problems. There are two types of replacement problems - for assets that deteriorate over time and for assets that can fail suddenly. Individual replacement replaces items after failure, while group replacement replaces all items simultaneously at set intervals.
This document outlines the key concepts and formulas covered in the Engineering Economics and Cost Analysis course. It discusses topics like profit calculation, break-even analysis, time value of money formulas, capital investment evaluation methods, depreciation techniques, replacement analysis, and public project evaluation. The course aims to teach students methods to make economic decisions that minimize costs and maximize benefits for business organizations.
Engineering Economics and cost Analysis - conceptsgokulfea
This document provides an overview of important concepts and formulas in engineering economics and cost analysis. It defines key terms like economics, supply and demand, efficiency, cost elements, value engineering, replacement analysis, and cash flow. It also outlines different cost types such as fixed, variable, marginal and sunk costs. Finally, it lists formulas for calculating break even point, profit volume ratio, present and future worth, compound interest, sinking funds, and effective interest rates.
This document provides an introduction to economics. It defines economics as the study of how limited resources are used to satisfy unlimited human wants. The objectives of economics are outlined as a high level of employment, price stability, efficiency, an equitable distribution of income, and growth. The flow of goods, services, resources and money payments in a simple economy is described involving households, business firms, and the payments between them. The law of supply and demand and the factors influencing supply and demand are explained. Engineering economics is introduced as analyzing alternatives within a project to compare monetary returns. The concepts of cost, revenue, profit, break even analysis, and margin of safety are defined in the context of economics.
MG 6863- ENGG ECONOMICS UNIT II VALUE ENGINEERINGAsha A
This document discusses value engineering interest formulas and their applications. It begins by defining value analysis and its aims to critically analyze costs and design of components. Different types of values like cost, exchange and use values are explained. Interest formulas for single payment compound amount, present worth amount and uniform gradient series are provided along with examples. The key steps in value engineering procedure are outlined. Effective interest rate calculation is also demonstrated with an example.
This document discusses depreciation and related concepts. It defines depreciation as the process of allocating the cost of tangible assets over their estimated useful lives. It lists various causes of depreciation as wear and tear, obsolescence, depletion, and lapse of time. The document describes different methods of calculating depreciation including straight-line, declining balance, sum-of-the-years digits, and sinking fund methods. It also discusses why depreciation is provided for fixed assets and how to evaluate public alternatives while adjusting for inflation.
- Value engineering aims to improve the value of existing or new products. It focuses on simplifying design, reducing costs, and increasing usefulness.
- The value engineering process involves defining a product's functions, brainstorming alternatives, evaluating alternatives, and implementing the best alternative.
- Make or buy decisions analyze whether to produce components internally or purchase them externally. Least cost is the goal based on factors like production costs, investment requirements, demand levels, and inventory carrying costs.
This document discusses various cash flow analysis methods including present worth, future worth, rate of return, and annual equivalent. It provides examples and formulas for revenue-dominated and cost-dominated cash flows. Key points include:
- Present worth discounts all cash flows to time zero using a discount rate to find the maximum or minimum value. Future worth grows all cash flows using a rate to find the maximum or minimum value.
- Annual equivalent converts net present worth to an equivalent annual revenue or cost using a capital recovery factor for comparison.
- Rate of return finds the discount rate that sets the net present worth equal to zero to determine the highest returning project.
- Examples apply the methods to alternatives with
The document discusses replacement and maintenance analysis. It defines economic life as the point where total cost of a machine is minimum. Preventive maintenance aims to detect potential failures to avoid major problems. There are two types of replacement problems - for assets that deteriorate over time and for assets that can fail suddenly. Individual replacement replaces items after failure, while group replacement replaces all items simultaneously at set intervals.
This document outlines the key concepts and formulas covered in the Engineering Economics and Cost Analysis course. It discusses topics like profit calculation, break-even analysis, time value of money formulas, capital investment evaluation methods, depreciation techniques, replacement analysis, and public project evaluation. The course aims to teach students methods to make economic decisions that minimize costs and maximize benefits for business organizations.
Engineering Economics and cost Analysis - conceptsgokulfea
This document provides an overview of important concepts and formulas in engineering economics and cost analysis. It defines key terms like economics, supply and demand, efficiency, cost elements, value engineering, replacement analysis, and cash flow. It also outlines different cost types such as fixed, variable, marginal and sunk costs. Finally, it lists formulas for calculating break even point, profit volume ratio, present and future worth, compound interest, sinking funds, and effective interest rates.
This document provides an introduction to economics. It defines economics as the study of how limited resources are used to satisfy unlimited human wants. The objectives of economics are outlined as a high level of employment, price stability, efficiency, an equitable distribution of income, and growth. The flow of goods, services, resources and money payments in a simple economy is described involving households, business firms, and the payments between them. The law of supply and demand and the factors influencing supply and demand are explained. Engineering economics is introduced as analyzing alternatives within a project to compare monetary returns. The concepts of cost, revenue, profit, break even analysis, and margin of safety are defined in the context of economics.
MG 6863- ENGG ECONOMICS UNIT II VALUE ENGINEERINGAsha A
This document discusses value engineering interest formulas and their applications. It begins by defining value analysis and its aims to critically analyze costs and design of components. Different types of values like cost, exchange and use values are explained. Interest formulas for single payment compound amount, present worth amount and uniform gradient series are provided along with examples. The key steps in value engineering procedure are outlined. Effective interest rate calculation is also demonstrated with an example.
Cost and cost concepts (Engineering Economics and Management)Shail Nakum
This document discusses cost concepts and break even analysis. It defines different types of costs such as fixed costs, variable costs, total costs, average costs and marginal costs. It then provides an example break even analysis of GM Motors, noting their total fixed costs, variable costs and average revenue. It summarizes GM's early history and founding, their current revenues, employee numbers and projected break even point. Finally, it outlines some of GM's marketing strategies used to target different customer segments.
This document provides an overview of engineering cost estimation. It defines various types of engineering cost estimates such as rough, semi-detailed, and detailed estimates. It discusses common difficulties in making cost estimates such as one-of-a-kind estimates and limitations of time and resources. The document also describes several common mathematical models used for cost estimating, including the per unit model, segmenting model, cost indexes, power-sizing model, and triangulation. It provides examples of how to use these models to estimate costs. Finally, it discusses the impact of learning curves on cost estimates over time.
1. Engineering economics involves analyzing alternatives and making decisions to obtain the best monetary return. It considers factors like costs, benefits, risks, and time value of money.
2. Cost components include fixed costs, variable costs, marginal costs, and opportunity costs. Break-even analysis determines the sales volume needed to recover total costs.
3. Material, design, and process selection are important economic decisions in manufacturing. The most cost-effective options are chosen while meeting requirements.
The price of the firm's output is not a determinant of the firm's cost functions. The cost functions are determined by factors of production like labor, capital, technology etc. and not by the price that the firm can charge for its output.
This document provides an introduction to value engineering interest formulas and their applications. It defines key terms like value, cost value, exchange value, use value, esteem value and different types of functions. It describes the value analysis/value engineering procedure and discusses when it should be used. Various interest formulas are explained including compound amount, present worth, uniform series and capital recovery. Examples are provided to demonstrate how to use the formulas to calculate future values, single payments, and equal installment amounts.
This document discusses cost analysis and various cost concepts. It begins by defining cost analysis and its importance in business decision making. It then outlines several types of costs including: opportunity cost, economic cost, accounting cost, private and social costs, incremental and sunk costs, direct and indirect costs, average, marginal and total costs. It also discusses cost-output relationships in the short-run and long-run, factors determining costs, and break-even analysis. The key purpose is to provide an overview of different cost concepts and cost-output relationships that are important for business analysis and decision making.
This document provides an overview of key concepts in cost revenue analysis, including the production process, fixed and variable inputs, short-run versus long-run costs, the production function, marginal product, the law of diminishing returns, economic versus accounting costs, cost curves, revenue analysis, break-even and shutdown points, and scales of production in the long run. It defines important terms and concepts and provides examples to illustrate them.
The document discusses key concepts related to production theory and cost analysis. It defines production as transforming inputs into outputs. Inputs can be fixed or variable, and production functions are classified as short-run or long-run depending on whether inputs are fixed or variable. The law of diminishing returns and returns to scale are explained. Cost concepts like total, average, fixed and variable costs are introduced. Break-even analysis is defined as a technique to understand the relationship between sales, costs and profits. Key assumptions and applications of break-even analysis are also outlined.
This document provides an overview of engineering economics and elementary economic analysis concepts. It discusses the definition and goals of economics, including the production and distribution of goods and services for human welfare. Key points covered include the law of supply and demand, factors that influence supply and demand, costs and revenues, break-even analysis, and the profit-volume ratio. Elementary economic analysis is introduced as a way to make economic decisions by considering factors like price, transportation costs, availability, and quality when evaluating alternatives. Examples are also provided to illustrate basic economic analysis concepts.
Theory of Production and Cost, Break-even AnalysisKumar Pawar
This document summarizes a presentation on management topics including production theory, costs, and break-even analysis. It was created by three students - Kumar Pawar, Rangat Mehta, and Jay Kheni. The presentation covers the meaning of production, production functions, factors of production, laws of variable proportions and returns to scale. It also defines fixed and variable costs, total and average costs, marginal and opportunity costs. Finally, it explains break-even analysis including the objective to find the production volume where a firm will make a profit.
This document discusses production functions and the relationship between production and costs. It defines short-run and long-run costs. In the short-run, some inputs are fixed while in the long-run all inputs are variable. The short-run cost curves are U-shaped and average total cost is minimized at the minimum point where marginal cost intersects average total cost. Changes in input prices can shift these cost curves. In the long-run, multiple short-run average cost curves make up the long-run average cost curve, which is minimized at minimum efficient scale. Economies and diseconomies of scale are also discussed.
Economic Presentation: Cost Theory and AnalysisBilal Mughal
The document discusses different types of costs including:
1. Accounting costs include expenses incurred during production adjusted for depreciation, while economic costs include explicit payments to factors of production as well as implicit opportunity costs.
2. In the short-run, costs are classified as fixed, variable, total, average fixed, average variable, and marginal based on their relationship to changing output levels.
3. In the long-run, all factors are variable and long-run total, average, and marginal cost curves are defined based on minimum cost production at different output scales.
The document provides information on elemental cost analysis, including:
1) It explains the purposes of elemental cost analysis and the principles of preparing an analysis.
2) It describes the forms used in an analysis, including Form 1 which contains project and building information.
3) It details the specific information required in Form 1, such as building description, areas, storey heights, and ratios. Providing accurate cost data in the defined structure allows for comparison across projects.
The document discusses various cash flow analysis methods including present worth, future worth, annual equivalent, and rate of return. It provides the formulas and sign conventions for revenue-dominated and cost-dominated cash flow diagrams for each method. Examples are given to demonstrate how to use the present worth and future worth methods to evaluate projects and choose the best alternative.
This document provides an overview of key concepts related to costs, including opportunity costs, sunk costs, fixed costs, variable costs, marginal costs, average costs, and direct vs. indirect costs. It discusses cost-volume-profit analysis and the calculation of breakeven point. Examples are provided to illustrate opportunity cost decisions and the differences between various cost types. The document also summarizes accounting rules regarding product costs, period costs, and the treatment of expenses.
This document is a lecture on cost estimation that covers several topics:
1) It discusses capital costs including fixed capital and working capital.
2) It explains the breakdown of total product costs including manufacturing costs, general expenses, and their typical percentages.
3) It provides examples of cost estimation problems from referenced textbooks, showing calculations for direct costs, indirect costs, depreciation, taxes, net profit, and cash flow.
This document discusses different types of costs in engineering economics. It defines real costs, economic costs, and opportunity costs. Real costs include labor and capital sacrifices, but cannot be measured precisely. Economic costs refer to all expenses incurred in production, including explicit costs, implicit costs, and normal profit. Opportunity cost is the value of the next best alternative forgone when making a choice. The document also discusses short-run costs including fixed costs, variable costs, total fixed cost, and total variable cost. Total fixed costs remain constant while total variable costs increase with output.
Estimation of production and cost functions involves collecting data, assuming a mathematical form for the functions, and using estimation methods like regression analysis to determine parameter values. While data collection can be difficult due to issues like measuring capital usage, functions like the Cobb-Douglas and quadratic forms are commonly used in empirical work due to their flexibility and ability to capture concepts like diminishing returns. Long-run cost functions estimated via regression analysis or engineering methods are used for investment planning to determine optimal scale.
The document discusses key concepts in engineering economics including:
1. Economics deals with production, consumption, exchange and distribution of wealth for human welfare. Economic goals include employment, price stability, efficiency and equitable distribution.
2. Laws of supply and demand influence the flow of goods, services, resources and money in an economy. Supply increases with price and demand decreases with price.
3. Cost concepts like fixed costs, variable costs, and marginal costs are important for determining the break-even point and profit-volume ratio of a business. Process planning aims to determine the most economical sequence of operations to produce a component at lowest cost.
This document provides an introduction to production concepts and analysis. It defines key terms like production function, inputs, outputs, isoquants, and marginal rate of technical substitution.
The production function expresses the relationship between various inputs (like labor, capital, land) and the level of output. Isoquants show the different combinations of two inputs (like labor and capital) that can produce the same level of output. The marginal rate of technical substitution measures how much one input must be reduced to compensate for an increase in another input while maintaining the same output level.
The document also discusses measures of production like total, average, and marginal products and how they are used to analyze changes in output from changes in a
Cost and cost concepts (Engineering Economics and Management)Shail Nakum
This document discusses cost concepts and break even analysis. It defines different types of costs such as fixed costs, variable costs, total costs, average costs and marginal costs. It then provides an example break even analysis of GM Motors, noting their total fixed costs, variable costs and average revenue. It summarizes GM's early history and founding, their current revenues, employee numbers and projected break even point. Finally, it outlines some of GM's marketing strategies used to target different customer segments.
This document provides an overview of engineering cost estimation. It defines various types of engineering cost estimates such as rough, semi-detailed, and detailed estimates. It discusses common difficulties in making cost estimates such as one-of-a-kind estimates and limitations of time and resources. The document also describes several common mathematical models used for cost estimating, including the per unit model, segmenting model, cost indexes, power-sizing model, and triangulation. It provides examples of how to use these models to estimate costs. Finally, it discusses the impact of learning curves on cost estimates over time.
1. Engineering economics involves analyzing alternatives and making decisions to obtain the best monetary return. It considers factors like costs, benefits, risks, and time value of money.
2. Cost components include fixed costs, variable costs, marginal costs, and opportunity costs. Break-even analysis determines the sales volume needed to recover total costs.
3. Material, design, and process selection are important economic decisions in manufacturing. The most cost-effective options are chosen while meeting requirements.
The price of the firm's output is not a determinant of the firm's cost functions. The cost functions are determined by factors of production like labor, capital, technology etc. and not by the price that the firm can charge for its output.
This document provides an introduction to value engineering interest formulas and their applications. It defines key terms like value, cost value, exchange value, use value, esteem value and different types of functions. It describes the value analysis/value engineering procedure and discusses when it should be used. Various interest formulas are explained including compound amount, present worth, uniform series and capital recovery. Examples are provided to demonstrate how to use the formulas to calculate future values, single payments, and equal installment amounts.
This document discusses cost analysis and various cost concepts. It begins by defining cost analysis and its importance in business decision making. It then outlines several types of costs including: opportunity cost, economic cost, accounting cost, private and social costs, incremental and sunk costs, direct and indirect costs, average, marginal and total costs. It also discusses cost-output relationships in the short-run and long-run, factors determining costs, and break-even analysis. The key purpose is to provide an overview of different cost concepts and cost-output relationships that are important for business analysis and decision making.
This document provides an overview of key concepts in cost revenue analysis, including the production process, fixed and variable inputs, short-run versus long-run costs, the production function, marginal product, the law of diminishing returns, economic versus accounting costs, cost curves, revenue analysis, break-even and shutdown points, and scales of production in the long run. It defines important terms and concepts and provides examples to illustrate them.
The document discusses key concepts related to production theory and cost analysis. It defines production as transforming inputs into outputs. Inputs can be fixed or variable, and production functions are classified as short-run or long-run depending on whether inputs are fixed or variable. The law of diminishing returns and returns to scale are explained. Cost concepts like total, average, fixed and variable costs are introduced. Break-even analysis is defined as a technique to understand the relationship between sales, costs and profits. Key assumptions and applications of break-even analysis are also outlined.
This document provides an overview of engineering economics and elementary economic analysis concepts. It discusses the definition and goals of economics, including the production and distribution of goods and services for human welfare. Key points covered include the law of supply and demand, factors that influence supply and demand, costs and revenues, break-even analysis, and the profit-volume ratio. Elementary economic analysis is introduced as a way to make economic decisions by considering factors like price, transportation costs, availability, and quality when evaluating alternatives. Examples are also provided to illustrate basic economic analysis concepts.
Theory of Production and Cost, Break-even AnalysisKumar Pawar
This document summarizes a presentation on management topics including production theory, costs, and break-even analysis. It was created by three students - Kumar Pawar, Rangat Mehta, and Jay Kheni. The presentation covers the meaning of production, production functions, factors of production, laws of variable proportions and returns to scale. It also defines fixed and variable costs, total and average costs, marginal and opportunity costs. Finally, it explains break-even analysis including the objective to find the production volume where a firm will make a profit.
This document discusses production functions and the relationship between production and costs. It defines short-run and long-run costs. In the short-run, some inputs are fixed while in the long-run all inputs are variable. The short-run cost curves are U-shaped and average total cost is minimized at the minimum point where marginal cost intersects average total cost. Changes in input prices can shift these cost curves. In the long-run, multiple short-run average cost curves make up the long-run average cost curve, which is minimized at minimum efficient scale. Economies and diseconomies of scale are also discussed.
Economic Presentation: Cost Theory and AnalysisBilal Mughal
The document discusses different types of costs including:
1. Accounting costs include expenses incurred during production adjusted for depreciation, while economic costs include explicit payments to factors of production as well as implicit opportunity costs.
2. In the short-run, costs are classified as fixed, variable, total, average fixed, average variable, and marginal based on their relationship to changing output levels.
3. In the long-run, all factors are variable and long-run total, average, and marginal cost curves are defined based on minimum cost production at different output scales.
The document provides information on elemental cost analysis, including:
1) It explains the purposes of elemental cost analysis and the principles of preparing an analysis.
2) It describes the forms used in an analysis, including Form 1 which contains project and building information.
3) It details the specific information required in Form 1, such as building description, areas, storey heights, and ratios. Providing accurate cost data in the defined structure allows for comparison across projects.
The document discusses various cash flow analysis methods including present worth, future worth, annual equivalent, and rate of return. It provides the formulas and sign conventions for revenue-dominated and cost-dominated cash flow diagrams for each method. Examples are given to demonstrate how to use the present worth and future worth methods to evaluate projects and choose the best alternative.
This document provides an overview of key concepts related to costs, including opportunity costs, sunk costs, fixed costs, variable costs, marginal costs, average costs, and direct vs. indirect costs. It discusses cost-volume-profit analysis and the calculation of breakeven point. Examples are provided to illustrate opportunity cost decisions and the differences between various cost types. The document also summarizes accounting rules regarding product costs, period costs, and the treatment of expenses.
This document is a lecture on cost estimation that covers several topics:
1) It discusses capital costs including fixed capital and working capital.
2) It explains the breakdown of total product costs including manufacturing costs, general expenses, and their typical percentages.
3) It provides examples of cost estimation problems from referenced textbooks, showing calculations for direct costs, indirect costs, depreciation, taxes, net profit, and cash flow.
This document discusses different types of costs in engineering economics. It defines real costs, economic costs, and opportunity costs. Real costs include labor and capital sacrifices, but cannot be measured precisely. Economic costs refer to all expenses incurred in production, including explicit costs, implicit costs, and normal profit. Opportunity cost is the value of the next best alternative forgone when making a choice. The document also discusses short-run costs including fixed costs, variable costs, total fixed cost, and total variable cost. Total fixed costs remain constant while total variable costs increase with output.
Estimation of production and cost functions involves collecting data, assuming a mathematical form for the functions, and using estimation methods like regression analysis to determine parameter values. While data collection can be difficult due to issues like measuring capital usage, functions like the Cobb-Douglas and quadratic forms are commonly used in empirical work due to their flexibility and ability to capture concepts like diminishing returns. Long-run cost functions estimated via regression analysis or engineering methods are used for investment planning to determine optimal scale.
The document discusses key concepts in engineering economics including:
1. Economics deals with production, consumption, exchange and distribution of wealth for human welfare. Economic goals include employment, price stability, efficiency and equitable distribution.
2. Laws of supply and demand influence the flow of goods, services, resources and money in an economy. Supply increases with price and demand decreases with price.
3. Cost concepts like fixed costs, variable costs, and marginal costs are important for determining the break-even point and profit-volume ratio of a business. Process planning aims to determine the most economical sequence of operations to produce a component at lowest cost.
This document provides an introduction to production concepts and analysis. It defines key terms like production function, inputs, outputs, isoquants, and marginal rate of technical substitution.
The production function expresses the relationship between various inputs (like labor, capital, land) and the level of output. Isoquants show the different combinations of two inputs (like labor and capital) that can produce the same level of output. The marginal rate of technical substitution measures how much one input must be reduced to compensate for an increase in another input while maintaining the same output level.
The document also discusses measures of production like total, average, and marginal products and how they are used to analyze changes in output from changes in a
The document provides an overview of cost concepts that will be covered in Chapter 8. It defines different types of costs including accounting costs, opportunity costs, fixed costs, and variable costs. It explains the concepts of average cost, marginal cost, and their relationships. It discusses costs in the short run versus the long run and how all costs are variable in the long run. It also covers costs for multi-product firms and the allocation of common costs for joint products. Finally, it introduces the linkages between costs, revenue, and output through concepts like total revenue, average revenue, and marginal revenue.
Cost-Estimation-Techniques unit 2.pptxSudipBalLama
The document discusses various cost estimation techniques that can be used for engineering economic analyses and capital investments. It describes top-down and bottom-up approaches, with top-down using historical data and bottom-up breaking projects into smaller work elements. An integrated approach uses a work breakdown structure, cost/revenue structure, and estimating models. Specific techniques discussed include indexes, unit costs, factors, parametric models, and learning curves. Cost estimation is important for setting prices, determining profits, and justifying investments.
1. Cost is the expense incurred in producing a commodity and is determined by factor input prices. It is the most important factor governing a product's supply.
2. There are different types of costs including explicit costs like wages, implicit costs which do not appear in accounting records, actual costs involving financial expenditures, and opportunity costs which represent the next best alternative use of resources.
3. Cost analysis examines concepts like fixed and variable costs, average and marginal costs, and short-run versus long-run costs to help managers make optimal production decisions.
This document discusses different types of costs involved in production, including:
- Explicit costs which are actual payments, versus implicit costs which are work done without monetary payment
- Private costs accrued by firms/individuals engaged in an activity, versus external/social costs passed to society
- Sunk costs which cannot be recovered and should be ignored in decisions
- Money costs which are payments to factors of production
- Opportunity cost as the next best alternative foregone in producing something
It also explains concepts like fixed costs, variable costs, total costs, average costs and marginal cost, and how they relate in the short-run and long-run, including economies and diseconomies of scale. Diagrams are used to depict
The document discusses the production function in economics. It begins by defining a production function as showing the relationship between inputs like capital, labor, and other factors and the outputs of goods and services. It then provides more details on:
- The factors included in a production function and how it represents the maximum output that can be produced from different input combinations.
- The difference between long-run and short-run production functions, with the long-run allowing variability in plant size and the short-run keeping plant size fixed.
- Ways to measure labor productivity, including total productivity, marginal productivity, and average productivity.
The document discusses theories of production, including:
1. It defines production function and outlines concepts like inputs, outputs, fixed vs variable inputs, and short vs long run.
2. It summarizes the law of variable proportions and returns to scale, and how they relate to costs via concepts like economies and diseconomies of scale.
3. It provides an overview of oligopoly market structure and models for price and output determination under conditions like collusion, price leadership, and kinked demand curves.
The document discusses production functions and costs. It defines a production function as the relationship between inputs like labor, capital, land, and entrepreneurship and the volume of output. It describes how productivity curves show different combinations of inputs that can produce certain outputs. It also discusses concepts like economies of scale, fixed vs variable costs, and how average and marginal costs change with different levels of output in the short run and long run.
The document discusses production functions and costs. It defines a production function as the relationship between inputs like labor, capital, land, and entrepreneurship and the volume of output. It describes how productivity curves show different combinations of inputs that can produce different levels of output. It also discusses concepts like economies of scale, total costs, average costs, marginal costs, and how these costs change in the short run and long run based on changes in fixed and variable inputs and output levels.
Farmers can produce crops using different combinations of capital and labor. In the US, crops are typically grown using capital-intensive technology, while in developing countries crops are grown using more labor-intensive production. Isoquants can show the different options for crop production using different amounts of capital and labor.
This document discusses production and production functions. It begins by defining production as the process of converting inputs into outputs. The key inputs or factors of production are land, labor, capital, and entrepreneurship. A production function expresses the relationship between a firm's inputs and its output. It then examines production functions with one variable input, two variable inputs, and all variable inputs. Specifically, it analyzes the concepts of total, average, and marginal physical product when varying levels of a single input while holding others fixed. The document also introduces economies of scale and scope.
This document is a project submission on microeconomics by Chanchal Saharma, a first year BBA student. It contains an introduction and contents section listing the main topics: cost, the relationship between total cost, variable cost and fixed cost, the relationship between average cost and marginal cost, and revenue. It then provides details on each topic in separate sections, defining key terms and concepts and illustrating relationships between costs and revenues with tables and graphs.
This document discusses various cost estimating models including the per-unit model, segmenting model, cost indexes, power-sizing model, and triangulation. The per-unit model derives the cost per unit from variable and fixed costs divided by units produced. The segmenting model partitions the total estimate into segments that are estimated individually and then combined. Cost indexes account for historical cost changes using indices. The power-sizing model accounts for economies of scale. Triangulation compares results from different data collection methods.
- A business firm employs factors of production like resources to produce goods and services that are sold to consumers, other firms, or the government.
- Firms arise when individuals can obtain benefits from working as a team, with managers directing employees and monitoring workers to reduce shirking.
- Exchanges take place inside the firm between individuals forming teams and workers choosing monitors, and outside the firm as the firm sells its products.
Unit - IV discusses production functions and the laws of production. It explains that a production function shows the relationship between inputs like labor, capital, land and the output produced. The laws of variable proportions and returns to scale are then covered. The law of variable proportions explains how output changes when one input is varied while others stay fixed. Returns to scale looks at what happens to output when all inputs change proportionately. Economies and diseconomies of scale are also discussed.
Solution manual for managerial accounting 18th edition by ray garrison eric n...rightmanforbloodline
Solution manual for managerial accounting 18th edition by ray garrison eric noreen and peter brewer_compressed
Solution manual for managerial accounting 18th edition by ray garrison eric noreen and peter brewer_compressed
Managerial Economics (Chapter 8 - Theory and Estimation of Cost)Nurul Shareena Misran
This document discusses the theory and estimation of cost in the short run for firms. It defines total, fixed, variable, average, and marginal costs. Total cost is the sum of fixed and variable costs. In the short run, as output increases, average fixed cost decreases while average variable and total costs initially decrease due to economies of scale but eventually increase due to diminishing returns. This results in U-shaped average total cost curves. Marginal cost intersects average costs at their minimum points. Technology improvements and input price changes can shift these cost curves. Cost functions are often modeled using cubic, quadratic, or linear equations.
An In-Depth Exploration of Natural Language Processing: Evolution, Applicatio...DharmaBanothu
Natural language processing (NLP) has
recently garnered significant interest for the
computational representation and analysis of human
language. Its applications span multiple domains such
as machine translation, email spam detection,
information extraction, summarization, healthcare,
and question answering. This paper first delineates
four phases by examining various levels of NLP and
components of Natural Language Generation,
followed by a review of the history and progression of
NLP. Subsequently, we delve into the current state of
the art by presenting diverse NLP applications,
contemporary trends, and challenges. Finally, we
discuss some available datasets, models, and
evaluation metrics in NLP.
This study Examines the Effectiveness of Talent Procurement through the Imple...DharmaBanothu
In the world with high technology and fast
forward mindset recruiters are walking/showing interest
towards E-Recruitment. Present most of the HRs of
many companies are choosing E-Recruitment as the best
choice for recruitment. E-Recruitment is being done
through many online platforms like Linkedin, Naukri,
Instagram , Facebook etc. Now with high technology E-
Recruitment has gone through next level by using
Artificial Intelligence too.
Key Words : Talent Management, Talent Acquisition , E-
Recruitment , Artificial Intelligence Introduction
Effectiveness of Talent Acquisition through E-
Recruitment in this topic we will discuss about 4important
and interlinked topics which are
We have designed & manufacture the Lubi Valves LBF series type of Butterfly Valves for General Utility Water applications as well as for HVAC applications.
This is an overview of my current metallic design and engineering knowledge base built up over my professional career and two MSc degrees : - MSc in Advanced Manufacturing Technology University of Portsmouth graduated 1st May 1998, and MSc in Aircraft Engineering Cranfield University graduated 8th June 2007.
A high-Speed Communication System is based on the Design of a Bi-NoC Router, ...DharmaBanothu
The Network on Chip (NoC) has emerged as an effective
solution for intercommunication infrastructure within System on
Chip (SoC) designs, overcoming the limitations of traditional
methods that face significant bottlenecks. However, the complexity
of NoC design presents numerous challenges related to
performance metrics such as scalability, latency, power
consumption, and signal integrity. This project addresses the
issues within the router's memory unit and proposes an enhanced
memory structure. To achieve efficient data transfer, FIFO buffers
are implemented in distributed RAM and virtual channels for
FPGA-based NoC. The project introduces advanced FIFO-based
memory units within the NoC router, assessing their performance
in a Bi-directional NoC (Bi-NoC) configuration. The primary
objective is to reduce the router's workload while enhancing the
FIFO internal structure. To further improve data transfer speed,
a Bi-NoC with a self-configurable intercommunication channel is
suggested. Simulation and synthesis results demonstrate
guaranteed throughput, predictable latency, and equitable
network access, showing significant improvement over previous
designs
1. MG6863 Engineering Economics Unit – 1 Introduction to Economics
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UNIT I INTRODUCTION TO ECONOMICS
Part – A
1. What is law of supply and demand? (N/D ’17) (A/M ’17) (N/D ’15) (N/D ’14)
When there is a decrease in the price of a product, the demand for the product
increases and its supply decreases. Also, the product is more in demand and hence the
demand of the product increases. At the same time, lowering of the price of the
product makes the producers restrain from releasing more quantities of the product in
the market. Hence, the supply of the product is decreased. The point of intersection of
the supply curve and the demand curve is known as the equilibrium point.
2. What is process planning? (N/D ’17) (N/D ’16)
Process planning is defined as the determination of the processes and the
sequence of operations required making the product. It consists of devising, selecting
and specifying processes, machine tools and other equipment to transform the raw
material into finished product as per the specifications called for by the drawings.
3. What is meant by ‘sunk cost’? Give examples. (N/D ’17) (A/M ’17)
Sunk cost is known as the past cost of an equipment/asset. Let us assume that
an equipment has been purchased for Rs. 1,00,000 about three years back. If it is
considered for replacement, then its present value is not Rs. 1,00,000. Instead, its
present market value should be taken as the present value of the equipment for further
analysis. So, the purchase value of the equipment in the past is known as its sunk cost.
The sunk cost should not be considered for any analysis done from nowonwards
4. What are the factors that affect supply curve? (A/M ’16)
The shape of the supply curve is affected by the following factors:
Cost of the inputs
Technology
Weather
Prices of related goods
5. How will you define technical efficiency? (A/M ’16) (N/D ’13)
It is the ratio of the output to input of a physical system. The physical system
may be a diesel engine, a machine working in a shop floor, a furnace, etc.
Technical efficiency (%) =
The technical efficiency of a diesel engine is as follows:
Technical efficiency (%) =
In practice, technical efficiency can never be more than 100%. This is mainly
due to frictional loss and incomplete combustion of fuel, which are considered to be
unavoidable phenomena in the working of a diesel engine.
6. Define economics (N/D ’16) (A/M ’15)
Economics is the science that deals with the production and consumption of
goods and services and the distribution and rendering of these for human welfare.
7. Define marginal costing (A/M ’15)
Marginal cost of a product is the cost of producing an additional unit of that
product. Let the cost of producing 20 units of a product be Rs. 10,000, and the cost of
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2. MG6863 Engineering Economics Unit – 1 Introduction to Economics
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producing 21 units of the same product be Rs. 10,045. Then the marginal cost of
producing the 21st unit is Rs. 45.
8. What is economic effieciency? (N/D ’15) (N/D ’13)
Economic efficiency is the ratio of output to input of a business system.
( )
‘Worth’ is the annual revenue generated by way of operating the business and
‘cost’ is the total annual expenses incurred in carrying out the business. For the
survival and growth of any business, the economic efficiency should be more than
100%. Economic efficiency is also called ‘productivity’.
9. What is Margin of shafty? (N/D ’14)
The margin of safety (M.S.) is the sales over and above the break-even sales.
The formulae to compute these values are
Contribution = Sales – Variable costs
Contribution/Unit = Selling price/unit – variable cost/unit
Margin of Safety (M.S) = Actual sales – Break even sales
M.S =
M.S as a percent of sales = (M.S/Sales) X 100
10. Define opertunity cost? (A/M ’13) (A/M ’17)
In practice, if an alternative (X) is selected from a set of competing alternatives
(X,Y), then the corresponding investment in the selected alternative is not available for
any other purpose. If the same money is invested in some other alternative (Y), it may
fetch some return. Since the money is invested in the selected alternative (X), one has
to forego the return from the other alternative (Y). The amount that is foregone by not
investing in the other alternative (Y) is known as the opportunity cost of the selected
alternative (X). So the opportunity cost of an alternative is the return that will be
foregone by not investing the same money in another alternative.
11. Define P/V ratio. (A/M ’13)
P/V ratio =
12. Define break-even point. (N/D ’13)
The break-even point may be defined as the level of sales at which total
revenues and total costs are equal. It is a point at which the profit is zero.
13. What is break even analysis? (A/M ’16)
BEA also known as cost volume profit analysis is the study of inter-
relationships among a firms sales, costs and operating profit at various levels of
output.
Part – B
1. Describe the various concepts of engineering economics and analyze its
efficiency. (16 Marks) (N/D ’17)
Concept of engineering economics
Science is a field of study where the basic principles of different physical
systems are formulated and tested. Engineering is the application of science.
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It establishes varied application systems based on different scientific
principles. From the discussions in the previous section, it is clear that price has a
major role in deciding the demand and supply of a product. Hence, from the
organization’s point of view, efficient and effective functioning of the organization
would certainly help it to provide goods/services at a lower cost which in turn will
enable it to fix a lower price for its goods or services.
Types of efficiency
Efficiency of a system is generally defined as the ratio of its output to input.
The efficiency can be classified into technical efficiency and economic efficiency.
Technical efficiency
It is the ratio of the output to input of a physical system. The physical system
may be a diesel engine, a machine working in a shop floor, a furnace, etc.
Technical efficiency (%) =
The technical efficiency of a diesel engine is as follows:
Technical efficiency (%) =
In practice, technical efficiency can never be more than 100%. This is mainly
due to frictional loss and incomplete combustion of fuel, which are considered to be
unavoidable phenomena in the working of a diesel engine.
Economic efficiency
Economic efficiency is the ratio of output to input of a business system.
( )
‘Worth’ is the annual revenue generated by way of operating the business and
‘cost’ is the total annual expenses incurred in carrying out the business. For the
survival and growth of any business, the economic efficiency should be more than
100%. Economic efficiency is also called ‘productivity’.
Economic efficiency is also called ‘productivity’. There are several ways of
improving productivity.
Increased output for the same input
Decreased input for the same output
By a proportionate increase in the output which is more than the proportionate
increase in the input
By a proportionate decrease in the input which is more than the proportionate
decrease in the output
Through simultaneous increase in the output with decrease in the input.
2. Write in detail economics analysis for any engineering project or process and
write the process of material selection for product design. (16 Marks)(N/D ’17)
Economics analysis for any engineering project or process
Two different types of processes can be used for the same job. The processes
can be compared and optimum process selected with the help of break-even charts.
Break-even charts: Break-even charts give the production engineer a powerful tool
by which feasible alternative processes can be compared and the process which gives
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4. MG6863 Engineering Economics Unit – 1 Introduction to Economics
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minimum cost can be selected. The fixed and variable costs for two alternative
processes are plotted on a graph to a suitable scale as shown in Fig.
F1 = Fixed costs for process (1)
F2 = Fixed costs for process (2)
V1 = Variable costs for process (1)
V2 = Variable costs for process (2)
QE = Break-even quantity at quantity QA
TE = Total costs of manufacture at quantity QE
For each process generally the variable cost is a linear function of the quantity
manufactured. Therefore, once the fixed costs have been plotted, only one value for
the variable costs is required at some value QA and the total cost lines can be drawn.
Where these lines intersect is known as the break-even point, i.e., the point where the
total cost of manufacture of quantity QE is same for both process (1) and process (2).
The break-even chart tells us to :
Use process (1) if the quantity to be manufactured ≤ QE
Use process (2) if the quantity to be manufactured ≥ QE
The value of QE can be scaled directly from the chart with sufficient accuracy,
although it can also easily be calculated.
Material Selection parameters
(i) Functional requirements:
The primary function of the part for which the material is selected is the
foremost consideration. A good knowledge of the product application is important.
The properties of materials which have a direct bearing on the functional requirement
of the part are: fatigue characteristics, strength, hardness, electrical and thermal
properties.
(ii)Reliability:
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5. MG6863 Engineering Economics Unit – 1 Introduction to Economics
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Reliability of the materials refers to the consistency with which the material
will meet all the products requirement throughout its service life. This is important for
trouble-free maintenance of the product during its life time.
(iii)Service life durability:
The length of service (years or hours of operation of the product) over which
material is able to perform its function satisfactorily.
(iv)Aesthetics and appearance:
Factors like colour, texture, lusture, smoothness and finish play an important
role in the aesthetics or appearance of the final product.
(v)Environmental Factors:
Environmental factors such as temperature, humidity, corrosive atmosphere
affects the product and its performance. Hence proper materials which can with stand
such environmental effects should be selected and they should be given suitable
protective coatings.
(vi)Compatibility with other materials during service:
When one type of material is used in combination with another type of
material in a product or in an assembly the properties of both types of materials
should be compatible and should suit each other. Otherwise deterioration in the
performance of the product or assembly such as excessive wear & tear, and corrosion
of parts in fitment are likely to take place.
(vii)Producibility or manufacturability:
The extent to which the material can be processed effectively and easily using
a particular machine tool or process should also be considered in the selection of the
material. Machinability of materials for machined components is an important factor.
(viii)Cost:
The cost of material is a significant factor in many situations. The availability
of the material is equally important. Appropriate material for the product or
component is to be selected taking into consideration all the above factors.
3. What is process planning? What are its objectives? Explain the various steps in
process planning.(16 Marks) (N/D ’17) (A/M ’17)
Process Planning
Process planning is defined as the determination of the processes and the
sequence of operations required making the product. It consists of devising, selecting
and specifying processes, machine tools and other equipment to transform the raw
material into finished product as per the specifications called for by the drawings.
Purpose of Process Planning
The purpose of process planning is to determine and describe the best process
for each job so that,
1. Specific requirements are established for which machines, tools and others
equipment can be designed or selected.
2. The efforts of all engaged in manufacturing the product are coordinated.
3. A guide is furnished to show the best way to use the existing or the
providing facilities.
Process planning is an intermediate stage between designing the product and
manufacturing it.
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6. MG6863 Engineering Economics Unit – 1 Introduction to Economics
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Where the product design ends, the process planning begins. However, the
basic process planning must begin during the product design stages where the
selection of materials and initial forms, such as casting, forging and die casting take
place. The accepted end point for production design is manifested by the drawing
release, which summarizes the exact specifications of what is to be made.
Process planning takes over from this point and develops the broad plan of
manufacture for the part of product. Process planning takes as its inputs the drawings
or other specifications which indicate what is to be made and how many are to be
made.
The drawings are then analysed to determine the overall scope of the project.
If it is a complex assembled product, considerable effort may go into exploding the
product into its components and subassemblies.
Preliminary decisions about subassembly groupings to determine which parts
to make and which to buy, as well as to determine the general level of tooling
expenditure, may be made at this point.
Then, for each part, a detailed routing is developed. Here technical knowledge
of processes, machines, and their capabilities is required, but of almost equal
importance is knowledge of production economics.
In brief, the engineering drawing of the component is interpreted in terms of
the manufacturing process to be used. This step is referred to as process planning and
it is concerned with the preparation of a route sheet.
The route sheet is a listing of the sequence of operations which must be
performed on the component. It is called a route sheet because it also lists the
machines through which the part must be routed in order to accomplish the sequence
of operations.
Steps in process planning
(i) Required operations must be determined by examining the design data and
employing basic machining data such as :
(a) Holes can be made conveniently on drilling machines.
(b) Flat surfaces can be machined easily on milling machines.
(c) Cylindrical parts can be made using lathe. Design data can be obtained
from the part-drawing or from the finished part design file from the CAD
system.
(ii) The machines required for each operation must be determined. This selection
depends on knowledge of machine factors, such as availability of the machine,
specifications of machine tools available in the shop, accuracy grade of the
m/c, table size, spindle size, speed and feed ranges available, torque, power,
machining rate and other size limitations.
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7. MG6863 Engineering Economics Unit – 1 Introduction to Economics
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(iii) The required tools for each identified machine or process must be determined.
For selection of specialized tools knowledge and prior experience of process
planner will be useful.
(iv) The optimum cutting parameters for each selected tool must be determined.
These parameters include cutting speed, feed rate, depth of cut, and type of
coolant/lubricant to be used. This determination depends on design data, such
as work material, tool material, surface finish specifications and behaviour of
cutting tool. Again expertise knowledge and prior experience of process
planner and methods engineer will be useful in this regard. Machining data
handbooks can also be referred.
(v) Finally an optimum combination of these machining processes must be
determined. The best process plan is the one which minimizes manufacturing
time and cost. This provides a detailed plan for the economical manufacturing
of the part.
The results of each of these five basic steps can be seen in the final form of the
process plan
4. Explain the concept and scope of engineering economics. (16 Marks) (A/M ’17)
(N/D ’16)
Concept of engineering economics
Science is a field of study where the basic principles of different physical
systems are formulated and tested. Engineering is the application of science.
It establishes varied application systems based on different scientific
principles. From the discussions in the previous section, it is clear that price has a
major role in deciding the demand and supply of a product. Hence, from the
organization’s point of view, efficient and effective functioning of the organization
would certainly help it to provide goods/services at a lower cost which in turn will
enable it to fix a lower price for its goods or services.
Definition
Engineering economics deals with the methods that enable one to take
economic decisions towards minimizing costs and/or maximizing benefits to business
organizations.
Scope
The issues that are covered in this book are elementary economic analysis,
interest formulae, bases for comparing alternatives, present worth method, future
worth method, annual equivalent method, rate of return method, replacement analysis,
depreciation, evaluation of public alternatives, inflation adjusted investment
decisions, make or buy decisions, inventory control, project management, value
engineering, and linear programming.
5. Differentiate law of supply and demand (8 marks) (A/M ’16)
Law of Supply and Demand
An interesting aspect of the economy is that the demand and supply of a
product are interdependent and they are sensitive with respect to the price of that
product. The interrelationships between them are shown in Fig.
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8. MG6863 Engineering Economics Unit – 1 Introduction to Economics
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From Fig. it is clear that when there is a decrease in the price of a product, the
demand for the product increases and its supply decreases. Also, the product is more
in demand and hence the demand of the product increases. At the same time, lowering
of the price of the product makes the producers restrain from releasing more
quantities of the product in the market. Hence, the supply of the product is decreased.
The point of intersection of the supply curve and the demand curve is known as the
equilibrium point. At the price corresponding to this point, the quantity of supply is
equal to the quantity of demand. Hence, this point is called the equilibrium point.
Factors influencing demand
The shape of the demand curve is influenced by the following factors:
Income of the people
Prices of related goods
Tastes of consumers
If the income level of the people increases significantly, then their purchasing
power will naturally improve. This would definitely shift the demand curve to the
north-east direction of Fig. 1.2. A converse situation will shift the demand curve to
the south-west direction.
If, for instance, the price of television sets is lowered drastically its demand
would naturally go up. As a result, the demand for its associated product, namely
VCDs would also increase. Hence, the prices of related goods influences the demand
of a product.
Over a period of time, the preference of the people for a particular product
may increase, which in turn, will affect its demand. For instance, diabetic people
prefer to have sugar-free products. If the incidence of diabetes rises naturally there
will be increased demand for sugar-free products.
Factors influencing supply
The shape of the supply curve is affected by the following factors:
Cost of the inputs
Technology
Weather
Prices of related goods
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9. MG6863 Engineering Economics Unit – 1 Introduction to Economics
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If the cost of inputs increases, then naturally, the cost of the product will go
up. In such a situation, at the prevailing price of the product the profit margin per unit
will be less. The producers will then reduce the production quantity, which in turn
will affect the supply of the product. For instance, if the prices of fertilizers and cost
of labour are increased significantly, in agriculture, the profit margin per bag of paddy
will be reduced. So, the farmers will reduce the area of cultivation, and hence the
quantity of supply of paddy will be reduced at the prevailing prices of the paddy.
If there is an advancement in technology used in the manufacture of the
product in the long run, there will be a reduction in the production cost per unit. This
will enable the manufacturer to have a greater profit margin per unit at the prevailing
price of the product. Hence, the producer will be tempted to supply more quantity to
the market.
Weather also has a direct bearing on the supply of products. For example,
demand for woollen products will increase during winter. This means the prices of
woollen goods will be incresed in winter. So, naturally, manufacturers will supply
more volume of woollen goods during winter. Again, take the case of television sets.
If the price of TV sets is lowered significantly, then its demand would naturally go up.
As a result, the demand for associated products like VCDs would also go up. Over a
period of time, this will lead to an increase in the price of VCDs, which would result
in more supply of VCDs.
6. Alpha Associates has the following details:
Fixed cost = Rs. 20,00,000
Variable cost per unit = Rs. 100
Selling price per unit = Rs. 200
Find
(a) The break-even sales quantity,
(b) The break-even sales
(c) If the actual production quantity is 60,000, find (i) contribution; and
(ii) margin of safety by all methods. (12 marks) (A/M ’16)
Solution
Fixed cost (FC) = Rs. 20,00,000
Variable cost per unit (v) = Rs. 100
Selling price per unit (s) = Rs. 200
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10. MG6863 Engineering Economics Unit – 1 Introduction to Economics
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7. Explain in detail about flow in an economy. ?(8 marks) (N/D ’16)
The flow of goods, services, resources and money payments in a simple
economy are shown in Fig. Households and businesses are the two major entities in a
simple economy. Business organizations use various economic resources like land,
labour and capital which are provided by households to produce consumer goods and
services which will be used by them.
Business organizations make payment of money to the households for
receiving various resources. The households in turn make payment of money to
business organizations for receiving consumer goods and services. This cycle shows
the interdependence between the two major entities in a simple economy.
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