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1 Running Head: IndM 5240 Assignment II Praneeth Reddy Muppidi University of Centra Missouri IndM5240 ! "ngineering "#onomy

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Assignment II Praneeth Reddy MuppidiUniversity of Central Missouri

1Running Head: IndM 5240

3IndM 5240IndM5240 - Engineering Economy

Part one: Definition and role of Engineering Economy in Decision Making

Engineering Economy:Engineering economy can be defined as application of economic techniques to the evaluation of design and engineering alternatives. The use of engineering economy is to know the appropriateness of the given project, estimate its value and justify it. It is very essential for the engineers to practice financial project analysis for engineering projects and make decisions. And also this analysis can be applied to various designs in a project to choose an optimum design by considering both technical and economic factors into consideration. It also estimates economic outcomes which can be deterministic or stochastic in nature (Grant & Ireson, 2005).It also includes the study of accounting practices for manufacturing issues. The unique features for manufacturing concerns include Process costing Batch costing and Cost allocationPrinciples of engineering economy: Develop the alternative Focus on the difference Use a consistent viewpoint Consider all relevant criteria Use a common unit of measure Make uncertainty explicit Revisit your decisions (Grant & Ireson, 2005).Role of engineering economy in decision making:Engineering economy is very essential in decision making because it helps to Understand the problem Collect all data and information regarding the project Define the possible alternatives Evaluating each and every alternative Selecting the best alternative and Implementing it.Importance of engineering economy:There are lots of factors that are considered in making decisions. These factors are combinations of economic and noneconomic ones. Engineers play a major role in investment by making decisions based on economic analysis and design considerations. Thus, decisions often reflect the engineers choice of how to best invest funds by choosing the proper alternative out of a set of alternatives (Blank & Tarquin, 2005).

ReferencesGrant, E. L & Ireson, W. G. (2005). Principles of Engineering Economy, 5th ed. (New York: Ronald Press, 1970).Blank L T.; Tarquin AJ. (2007) Basics of Engineering Economy, New York, McGraw-Hill.


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