The Role of Engineers in Business
8. Metode Depresiasi dan perhitungan pajak
10. Analisis Penggantian
Tugas-3: Menyusun suatu rencana bisnis/usaha beberapa tahun kedepan, dan dapat mengantisipasi segala kemungkinan agar rencana usaha tersebut layak secara ekonomis.
6. Evaluasi Investasi
5. Bunga Nominal. Efektif. MARR
4.Bunga majemuk dalam ekivalensi Tugas-1: Menyusun beberapa skema pinjaman dengan tingkat suku bunga tertentu
3. Konsep Nilai Uang terhadap Waktu
Tugas-2: Menganalisis rencana investasi dengan metode NPV; BCR; PBP;IRR.
SAP - EKTEK
9. After Tax Cash Flow
7. Analisis Sensitivitas
2. Konsep Biaya
1. Pengenalan Ekonomi Teknik
The Role of Engineers in Business
- Engineering Projects
- Production Methods • Engineering Safety • Environmental Impacts • Market Assessment
- Expected Proftability • Timing of Cash Flows • Degree of Financial Risk
- Impact on Financial Statements • Firm’s Market Value • Stock Price
3 Create & Design
Evaluate Why Engineering Economy is Important to Engineers
Designing involves economic decisions
Engineers design and create
Engineers must be able to incorporate
economic analysis into their creative eforts
Often engineers must select and implement from multiple alternatives Understanding and applying time value of
money, economic equivalence, and cost estimation are vital for engineers A proper economic analysis for selection and
execution is a fundamental task of engineering
estimating, and evaluating the economic outcomes of alternatives designed to accomplish a defned purpose. It is a tool to assist people in
Involves : Formulating,
Role of engineering economy in decision making ·
Observed value in the future will differ form the estimate made now
Time of occurrence
Assist people in making decisions
Best estimates of what is expected to occur
Time frame is the future
Performed during the engineering economic study to determine how the decision might change based on varying estimates
systematic evaluation of the economic merits of proposed solutions to engineering problems. To be economically acceptable
ENGINEERING ECONOMY involves the
(afordable), solutions to engineering problems must demotrate a positive
balance of long-term benefts over long-
term costs, and they must also promotethe well being and survival of an organisation.
and-cents side of the decisions that
engineers make or recommend a frmto be proftable in highly competitive marketplace Trade ofs among diferent types of
Engineering economy is the dollars-
costs and the performance provided by the proposed design or problem solution.
Engineering Economic Decisions Needed e.g. in the following (connected) areas:
Profit! Then continue at the next stage… Manufacturing
Investment planning and loan
Accounting vs. Engineering Economy
10 Present Future Past
Engineering Economy Accounting
Evaluating past performance Evaluating and predicting future events
What Makes Engineering Economic
Decisions Difficult? Predicting the Future
required investments Estimating product
manufacturing costs Forecasting the
demand for a brand new product Estimating a “good”
selling price Estimating product
life and the proftability of
Key Factors in Selecting Good Engineering Economic Decisions
Objectives, available resources, time and uncertainty are the key defning aspects of all engineering economic decisions
Types of Strategic Engineering EconomicDecisions in the Manufacturing Sector
Service Improvement *
Equipment and Process Selection *
Equipment Replacement *
New Product and Product Expansion
Cost Reduction *
Example : Healthcare Service Improvement
1 Traditional Plan : Patients visit the service providers
2 New Strategy : Service
1 providers visit the patients
Which one of the two plans is more economical? The answer typically depends on the type of patients and the services ofered. Examples? service providers patients
14 Service Improvement
How many more jeans would Levi need to sell to justify the cost of additional robotic tailors?
Example 2: Equipment and Process Selection How do you choose between using
alternative materials for an auto body panel? The choice of material will dictate
the manufacturing process and the associated manufacturing costs
16 Which Material to Choose?
Equipment Replacement Problem
When is the right time to replace an old machine or equipment
Equipment Replacement ProblemNow is the time to
replace the old machine? If not, when is the
right time to replace the old equipment?
New Product and Product Expansion
acquire a new facility to meet the increased (increasing forecasted) demand? Is it worth spending
Shall we build or
money to market a new product?
Example 5: Cost Reduction Should a company buy
new equipment to perform an operation that is now done manually? Should we spend money
now, in order to save more money later? The answer obviously
depends on a number of factors.
22 Further Areas of Strategic
Engineering Economic Decisions inthe Service Sector
Hospitality and Entertainment
Financial Engineering and Banking
Electronic Markets and Auctions
Logistics and Distribution
Customer Service and Maintenance
PRINCIPLES OF ENGINEERING
1. Develop the Alternatives;
2. Focus on the Diferences;
3. Use a Consistent Viewpoint;
4. Use a Common Unit of Measure;
5. Consider All Relevant Criteria;
6. Make Uncertainty Explicit;
7. Revisit Your Decisions
DEVELOP THE ALTERNATIVES
The fnal choice (decision) is among alternatives. The alternatives need to be identifed and then defned for subsequent analysis.
FOCUS ON THE DIFFERENCES
Only the diferences in expected future outcomes among the
alternatives are relevant to theircomparison and should be considered in the decision.
Principle 2 Only the cost (resource) difference among alternatives counts Option Monthly Fuel Cost Monthly Maintenance Cash paid at signing (cash outlay ) Monthly payment Salvage Value at end of year 3 Buy $960 $550 $6,500 $350 $9,000 Lease $960 $550 $2,400 $550
26 The data shown in the green felds are irrelevant items for decision making, since their fnancial impact is identical in both cases
Principle 3USE A CONSISTENT VIEWPOINT
The prospective outcomes of the alternatives, economic and other, should be consistently developed from a defned viewpoint (perspective).
USE A COMMON UNIT OF MEASURE
Using a common unit of measurement to enumerate as many of the prospective outcomes as possible will make easier the analysis and comparison of alternatives.
CONSIDER ALL RELEVANT CRITERIA
Selection of a preferred alternative
(decision making) requires the use
of a criterion (or several criteria).The decision process should consider the outcomes enumerated in the monetary unit.
MAKE UNCERTAINTY EXPLICIT
Uncertainty is inherent in projecting (or estimating) the future outcomes of the alternatives
and should be recognized in theiranalysis and comparison.
REVISIT YOUR DECISIONS
Improved decision making results from an adaptive process; to the extent practicable, the initial projected outcomes of the selected alternative should be subsequently compared with actual results achieved.
The Others Principles of Engineering Economics 1.
An instant dollar is worth more than a distant dollar… $
2. Marginal revenue must exceed marginal cost, in order to carry out a proftable increase of operations
3. Additional risk is not taken without an expected additional return of suitable magnitude $
1 An instant dollar is worth more than a distant dollar…
6 months later
2Marginal (unit) revenue has to exceed marginal
cost, in order to increase production
Marginal cost 1 unit
Manufacturing cost Marginal revenue
Sales revenue 1 unit
3Additional risk is not taken without a
suitable expected additional return
Investment Class Potential Expected Risk Return
Savings account Lowest 1.5%
(cash) Bond (debt) Moderate
4.8% Stock (equity) Highest
11.5% A simple illustrative example. Note that all investments imply some risk: portfolio management is a key issue in fnance
35 ENGINEERING ECONOMIC ANALYSIS PROCEDURE
1. Problem recognition, formulation, and evaluation.
2. Development of the feasible alternatives.
3. Development of the cash fows for each alternative.
4. Selection of a criterion ( or criteria).
5. Analysis and comparison of the alternatives.
6. Selection of the preferred alternative.
7. Performance monitoring and post- evaluation results.
Steps in an Engineering Economy Study
Rational Decision-Making ProcessRecognize the decision
Collect all needed (relevant) information
Identify the set of feasible decision alternatives
Defne the key objectives and constraints
Select the best possible and implementable decision alternative
A Simple Illustrative Example: Car to Lease – Toyota or Honda?
Need to lease a car
Recognize the decision problem
Gather technical and
Collect all needed fnancial data
Select cars to consider
Identify the set of
Wanted: small cash outlay, feasible decision safety, good performance, alternatives aesthetics,…
Defne the key Choice between Toyota
and Honda (or others) objectives
Select a car (i.e., Honda, and constraints
Toyota or another brand)
Select the best possible and
39 Conclusion An engineering economy study is
accomplished using a structuredprocedure and mathematical modeling techniques. The economic results are then used in
a decision situation that involvestwo or more alternatives and normally includes other engineering knowledge and input.
refers to any investment or other decision related to an engineering project The fve main types of engineering economic
The term engineering economic decision
decisions are (1) service improvement, (2) equipment and process selection, (3) equipment replacement, (4) new product and product expansion, and (5) cost reduction
The factors of time, resource limitations and
uncertainty are key defning aspects of anyinvestment project
41 Mumu natapriatnaInstructor : Mumu Natapriatna Mobile phone No.: 0812 Time : Wed,Thu, 08:30 2023600 to 12:30 pm
Telp. No. : 022 7311908 Ofce hours: Ofce location: C3
IEG2H2-Engineering Economy Even Semester, 2015 Syllabus Course Description:
The purpose for this course is to introduce the economic justifcation and decision making of engineering projects, programs, and organizational asset management. This course provide an introduction to discounted cash-fow analysis and its application to practical problems using spreadsheets, an understanding of how to structure practical decision problems and how to model them analytically as well as the role of, and the necessity for, engineering management of private and public organizations.
Required Text ：
William G. Sullivan, Elin M. Wicks, & James T. Luxhoj, “Engineering Economy,” 12th Ed., Pearson,
- 2003, ISBN 0-13-039555-2
Newnan, Donald G., “Engineering Economic Analysis”, Engineering Press,Inc., 1992, California, USA
- Other References
： Grant, Ireson, Levenworth, ” Dasar-Dasar Ekonomi Teknik”, PT Rineka Cipta, 2001, Jakarta
- Thuesen, G.J. & Fabrycky, W.J., ” Engineering Economy”, 9th Edition, Prentice Hall, Inc., 2001, New • Jersey, USA
- New Jersey, USA
DeGarmo, Sullivan, Bontadelli, Wicks, ”Engineering Economy”, Tenth Edition, Prentice Hall, Inc., 1997,
Steiner, H.M., ”Engineering Economy Principles”, Mc. Graw Hills International, 1996, Singapore
- Grant, Ireson, Leavenworth, “Principles of Engineering Economy”, John Wiley&Sons, 1990, Singapore •
An ability to set up and manipulate simple spreadsheets in Excel is expected. The use of the HP-12C or T I fnancial calculator may be recommended.
- Homework/Quiz 20% , Midterm examination 25%,
- Final examination 35%,
- Project 20%, >Participation %,
70 – 84,99 : B
55 – 69,99 : C
40 – 54,99 : D
< 40 : E
- Homework will be assigned about every week in the form of a problem set. For each problem set, 50% of the points will be awarded for completeness (i.e., a serious attempt at all problems), 50% will be allocated to accuracy in the selected problems. Homework is due at the beginning of the class in Room .... on its due date. Will be collected in class, graded, and returned. Late homework receives 1/2 credit. The basis for grading is efort – full credit for most incorrect answers.
- There will be a midterm exam in the 8 week in class. The fnal exam will be given after the 16th week. Mid- term and Final exam will be open book and notes in class exam. You are expected to take the midterm and fnal exam on the dates given. There are no makeup exams! If you have a justifed scheduling confict, you will have to make an arrangement with me one weeks before the exam. Any requests made after that day (other than documented emergencies) may or may not be granted.
- Your presence and participation in class are essential for gaining mastery of the material. At frst sight it might seem to you that the concepts in this course are easy and might be quickly “crammed” before an exam. Experience shows that this frst impression is more often than not incorrect, and in this course we therefore require your attendance and participation. From time to time there may be a mini-quiz in class. The results will enter into your class participation grade. Cellar phone is not allowed during the class. Please turn of your cellar phone before you enter the classroom. We will do 360 degree evaluation in each class.
- At least three students will be grouped as a project team. Two to three teams will be organized in the frst class. Each team needs to fnd out a subject for your team project related to the course issues taught in the class and to develop a project by the team members together. A fve-page written project report with double space & font size 12 point is required to submit before your fnal project presentation. Each team needs to present your projects in the 13th week of the semester. For the project, 60% of the points will be awarded for completeness of project based on the project report, 20% will be allocated to the team work, and 20% will be counted on the team presentation. Your team needs to submit Microsoft Power Point fle as the team work, and 20% will be counted on the team presentation. Your team needs to submit Microsoft Power Point fle as well as the fnal report before one week of the project presentation. No late report will be accepted and there is no makeup report! The 360 degree evaluation from each team will be used as a reference to assign a grade for each team.
- Money-time relationship (Time Value Of Money)
Week Date Content Reading Assignment
10 Sensitivity Analysis Newnan. Ch.9
16 Final Examination Schedule
15 Project Presentation (2); Review
14 Project Presentation (1)
13 Replacement Analysis; Quiz WGS,Ch.9; Newnan, Ch.12
12 After Tax Cash fow Newnan,Ch.10,1
11 Depreciation and Income Taxes; Quiz WGS, Ch.6
9 PP and other analysis WGS, Ch.4,5
1 Introduction to Engineering Economy WGS, Ch.12 •Cost concept
8 Midterm Examination
7 BCR Analysis; Quiz WGS,Ch.11
6 RoR Analysis WGS, Ch.4,5
5 Annual Worth analysis; Quiz WGS, Ch. 4, 5
4 Present Worth Method/analysis WGS, Ch. 4, 5
3 Economic Equivalence WGS, Ch. 3
Case #1: Buy, Rent or Repair?• You wreck your car! And you absolutely need one to get around.
• A wholesaler offers $2,000 for the wrecked car, and $4,500 if it isrepaired. The car’s standing mileage is 58,000 miles.
- Your insurance company offers $1,000 to cover the cost of the accident.
- To repair the car costs $2,000.
- A newer second–hand car costs $10,000 with a standing mileage of 28,000 miles.
• A part–time technician can repair the car for $1,100, but it takes amonth. In the meantime, you need to rent a car, which costs $400 per month.
- Question: What should you do?
• Apply the engineering economic analysisprocedure.
Case #2 Six college students are making plans for spring break. They are
considering traveling 1200 miles to Florida by bus, train, plane, rentalcars, or rental van. Due to bus and train schedules, they limited their options to plane, two rental cars, or a rental van.
The final data used in their analysis of transportation options are as
follows: round-trip airfare per person ($300); daily rental rate for eachcar, all charges except fuel ($50); rental car gas mileage (20 miles/gallon); drop charge for each car ($150); daily rental rate for a van, all charges except fuel ($80); rental van gas mileage (12
miles/gallon); drop charge for the van ($225); cost to travel to or fromthe airport at the spring break destination ($50 per cab, two cabs required); and average price of gasoline ($4.25/gallon). If they keep the rental vehicle, the charges will be for 7 days; if they drop the rental vehicle, the charges will be for 2 days.
- A firm is considering three investment proposals (A,B, & C). A requires $1M investment, B requires $2.5M, and C requires $3M. The firm has $4.5M to invest. C is contingent on A; B and C are mutually exclusive. The “do nothing” alternative is not
feasible. Form the set of mutually exclusiveinvestment alternatives that exists.