In section a plant has a capacity of 4,100 hydraulic pumps per month. 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. Life cycle cost and economic analysis is an approach which should originate early. Chapter 3 basic economic concepts mit opencourseware. 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. 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. Cost concepts and design economics free download as powerpoint presentation. Cost and costing techniques in managerial economics informatics. Objectives chapter 2 2 1 describe some of the basic cost concepts.
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. It is all about the financial aspects of production. Pdf chapter 2 cost concepts and design economic khalil. There are various concepts of cost that a firm considers relevant under various circumstances. In order to understand the cost function well, in this article, we will look at various cost concepts. Chapter 2 cost concepts and design economics free download as powerpoint presentation. Cost concepts and design economics breakeven analysis 1. 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. Using spreadsheets in engineering economic analysis. Here, costs include imputed value of the entrepreneurs own resources and services, as well as the salary of the ownermanager. Compare alternatives by calculating the capitalized costs i. Economic cost and economic profit is thus calculated as follows. Cost benefit analysis is the examination of a decision in terms of its consequences or costs and benefits.
In economics the term marginal additional thinking on the margin, or marginal analysis involves. The utility that an object has for a person is the. What is the breakeven point in number of pumps per month. In the context of project evaluation a cost benefit test is a simple decision rule. Principles of production economics and cost concepts. 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. Chapter 2 cost concepts and design economics free download as pdf file. Principles of production economics and cost concepts objectives to explain the production function, the law of diminishing returns and marginalism in simple language.
To compare various product relationships complementary, competitive, etc. 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. Chapter 23 cost concepts and design economics free download as pdf file. Chapter 23 cost concepts and design economics mathematical.
To indicate how the most profitable production level optimum production can be achieved. Costs for factory floor space stays the same regardless of the production. Should be disregarded in our engineering economic analysis. Chapter 2 cost concepts and design economics demand. Cost concepts and design economics ppt video online. Direct traceable costs and indirectuntraceable costs.