EASWARI ENGINEERING COLLEGE, CHENNAI-600 089

DEPARTMENT OF MECHANICAL ENGINEERING

LESSON PLAN
SUBJECT CODE

: MG2451

SUBJECT TITLE

: ENGINEERING ECONOMICS AND COST ANALYSIS

COURSE/ BRANCH

: B.E. (MECHANICAL ENGINEERING)

SEMESTER

: VIII

ACADEMIC YEAR

: 2013 - 2014

FACULTY NAME

: S. VIJAYAKUMAR

NUMBER OF HOURS

: Theory - 45

Tutorial - 0

Total - 45

Course Objective:
To give input about the economy, money value, market, Industry growth national
income, banking section, new economic environment accounting section.
1. Engineering economics is a science which deals with the application of economic
theory in engineering practices. It is the study of allocation of resources available to a
firm among its activities.
2. It aims at a systematic identification and elimination of unessential unnecessary
costs. With the improvements in the quality of life, the demand for better quality
product and service has also increased.
3. The primary objective of the traditional income statement and balance sheet is to
report to the interested parties the operational performance and economic position of
an enterprise.
4. It give an idea about Plant maintenance, to achieve less breakdown and to keep the
plant in good working condition at the lowest cost.
5. The concept of depreciation is related to the fixed assets. It gives an idea of it
becomes uneconomical to be used further and needs to be replaced by another unit.
Efficiency of these fixed assets also goes on reducing and at one time
Pre-requisite:
Students should have the basic knowledge about money value economics policies in the
country

UNIT

TOPIC
No.

TOPIC AND ITS DESCRIPTION

PERIOD

INTRODUCTION TO ECONOMICS
Engineering economics is a science which deals with the application
of economic theory in engineering practices.
Introduction to Economics- Flow in an economy,
1
1
Law of supply and demand, Concept of
Engineering Economics
Engineering efficiency, Economic efficiency,
2
1
Scope of engineering economics
Element of costs, Marginal cost, Marginal
3
1
Revenue, Sunk cost, Opportunity cost
4
2
Break-even analysis- P-V ratio
1
Elementary economic Analysis
Material selection for product Design selection for
6
2
a product, Process planning
VALUE ENGINEERING
It aims at a systematic identification and elimination of unessential
unnecessary costs.
1
1
Make or buy decision
Value engineering Function, aims Value
2
2
engineering procedure
Interest formulae and their applications Time
3
1
value of money
Single payment compound amount factor, Single
4
2
payment present worth factor
Equal payment series sinking fund factor, Equal
5
2
payment series payment Present worth factor
equal payment series capital recovery factor,
6
2
Uniform gradient series annual equivalent factor,
Effective interest rate
CASH FLOW
The Operational performance and Economic position of an
enterprise.
1
1
Methods of comparison of alternatives
present worth method (Revenue dominated cash
2
2
flow diagram, cost dominated cash flow diagram)
3
2
Future worth method (Revenue dominated cash
flow diagram, cost dominated cash flow diagram)

BOOKS
REFERRED

R5, & T1

II

III

R5, T1

R3,R1,T1

Annual equivalent method (Revenue dominated

4
3
cash flow diagram, cost dominated cash flow
diagram)
5
1
Rate of return method
REPLACEMENT AND MAINTENANCE ANALYSIS
To achieve less breakdown and to keep the plant in good working
condition at the lowest cost

IV

Replacement and maintenance analysis- Types of

maintenance, types of replacement problems.

Determination of economic life of an asset

Replacement of an asset with a new asset

4
5

Capital recovery with return, concept of challenger

and defender
Simple probabilistic model for items which completely
fail

R2,R4,T1

3
1

DEPRECIATION
It gives an idea of it becomes uneconomical to be used further and
needs to be replaced by another unit
V

Depreciation- Introduction, Straight line method of

depreciation

Declining balance method of depreciation

3
4
5

Sum of years of digit method- sinking fund method of

depreciation
Annuity method of depreciation , service output
method of depreciation
Evaluation of public alternatives- Examples

R5,T1

2
2
2

ASSIGNMENT TOPICS
SL.NO:
1
2

ASSIGNMENT TOPICS
Problems in Break Even Analysis
Problems in Replacement Analysis

SUBMISSION DUE
29-01-2014
26-02-2014

CONTENT BEYOND SYLLABUS

SL.NO
1

ADDITIONAL TOPICS
Analytical Estimating

Methods of Calculating Depreciation

Text Books:
1. Panneer Selvam, R, Engineering Economics, Prentice Hall of India Ltd, New
Delhi, 2001.
2. Suma Damodaran, Managerial Economics, Oxford University Press 2006.
References:
1. Chan S.Park, Contemporary Engineering Economics, Prentice Hall of India,
2002.
2. Donald.G. Newman, Jerome.P.Lavelle, Engineering Economics and analysis
Engg. Press, Texas, 2002
3. Degarmo, E.P., Sullivan, W.G and Canada, J.R, Engineering Economy,
Macmillan, New York, 1984
4. Grant.E.L., Ireson.W.G., and Leavenworth, R.S, Principles of Engineering
Economy, Ronald Press, New York,1976.
5. Smith, G.W., Engineering Economy, Lowa State Press, Iowa, 1973.Company,

FACULTY
(S. VIJAYAKUMAR)

HOD/ MECH