What is an engineering economy?

Economics of engineering is the use of economic principles and calculations for engineering projects. This is important for all areas of engineering, because no matter how technically the engineering project sounds, fails if it is not economically feasible. Engineering economic analysis is often applied to various possible proposals for the engineering project to select the optimal design, taking into account both technical and economic feasibility. The time value of money is one such principle with wide usability. This principle is used to calculate the future value of something due to the current value or the current value due to the future value for the given interest rate. For example, the time value of money can be used to calculate how much the project will cost once it is actually completed; Annual investment or withdrawals can also be calculated. The cash flow scheme is often used to help calculate the time value of money. Present or Future Worth Analysis converts all costs nand the project for equivalent present or future value. The time period of the analysis must be the same so that all options for this method are valid.

The annual cost analysis calculates the annual return rate for project or projects. The value called the minimum active return rate is also calculated. In general, the project must meet or exceed the minimum active return rate to be considered feasible. If two or more projects meet this rate, other criteria are also considered.

For government engineering projects, a method called benefits/cost analysis is often used. This method transfers all advantages and project costs into monetary values ​​and then distributes the overall benefits of total costs. In general, the project is considered acceptable if this ratio is more than one.

In manufacturing engineering, a method called Break-Event is often used. This is used toDetermination of percentage capacity for production operations at which costs are equal to income. The company could use this method to determine the minimum amount it has to create in a month to make a profit.

engineers can also use the economy to calculate the depreciation of value. For example, they could calculate the value of the tool that the company is considering. Methods for calculating depreciation include accounting value, depreciation with direct line and accelerated cost recovery system.

All engineering fields use engineering technology. Most university and university engineering departments require an engineering economy course or includes economic analysis of other engineering courses. The economy of engineering is the required part of the foundations of the engineering exam, which is required for engineers who want to achieve a professional license.