To indicate how the most profitable production level optimum production can be achieved. There are various concepts of cost that a firm considers relevant under various circumstances. Here, costs include imputed value of the entrepreneurs own resources and services, as well as the salary of the ownermanager. Chapter 23 cost concepts and design economics mathematical. The utility that an object has for a person is the. Design economics and cost planning economics of design site density, wall floor ratio, storey heights, room sizes, letable nonletable sources of cost data bcis inhouse database other external sources inflation tender construction location factors, regional variations currency fluctuations estimating cost plans cost planning life cycle. Cost analysis is all about the study of the behavior of cost with respect to various production criteria like the scale of operations, prices of the factors of production, size of output, etc. Direct traceable costs and indirectuntraceable costs. The shadow price of a good measures the net impact on social welfare of a unit increase in the supply of that good by the public sector. Objectives chapter 2 2 1 describe some of the basic cost concepts. Opportunity cost is a key concept in economics, and has been described as expressing the basic. When an option is chosen from alternatives, the opportunity cost is the cost incurred by not. Costs for factory floor space stays the same regardless of the production. Using spreadsheets in engineering economic analysis.
In section a plant has a capacity of 4,100 hydraulic pumps per month. Chapter 2 cost concepts and design economics free download as powerpoint presentation. It is all about the financial aspects of production. Chapter 2 cost concepts and design economics demand.
To compare various product relationships complementary, competitive, etc. Many beneficial design decisions can be made during acquisition phase of the life cycle that will min the cost of operating and maintaining the product during use. Cost benefit analysis is the examination of a decision in terms of its consequences or costs and benefits. In the context of project evaluation a cost benefit test is a simple decision rule. Cost analysis is all about the study of the behavior of cost with respect to various production criteria like the scale of operations, size of output, etc. Chapter 3 basic economic concepts mit opencourseware. Cost concepts and design economics free download as powerpoint presentation. Pdf chapter 2 cost concepts and design economic khalil. Topic 1 farm management meaning definitions of farm management scope of farm management relationship with other science 2 economic principles applied to the organization of farm business principles of variable proportions determination of optimum input and optimum output 3 minimum loss principle. Chapter 2 cost concepts and design economics free download as pdf file.
Compare alternatives by calculating the capitalized costs i. Cost concepts and design economics breakeven analysis 1. Should be disregarded in our engineering economic analysis. Life cycle cost and economic analysis is an approach which should originate early. Cost and costing techniques in managerial economics informatics. Principles of production economics and cost concepts. Economic cost and economic profit is thus calculated as follows. In economics the term marginal additional thinking on the margin, or marginal analysis involves. Principles of production economics and cost concepts objectives to explain the production function, the law of diminishing returns and marginalism in simple language. What is the breakeven point in number of pumps per month. Chapter 23 cost concepts and design economics free download as pdf file. Cost concepts and design economics ppt video online.
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