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Introduction

EGN 3615 — Spring 12 ENGINEERING ECONOMICS WITH SOCIAL AND GLOBAL IMPLICATIONS. Introduction. 2. Chapter 1 Making Economic Decisions. Chapter Outline. Types of Problems Role of Engineering Economic Analysis Problem-Solving / Decision-Making Process

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Introduction

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  1. EGN 3615 — Spring 12 ENGINEERING ECONOMICS WITH SOCIAL AND GLOBAL IMPLICATIONS Introduction

  2. 2

  3. Chapter 1Making Economic Decisions

  4. Chapter Outline • Types of Problems • Role of Engineering Economic Analysis • Problem-Solving / Decision-Making Process • Ethical Dimensions in Engineering Decision-Making

  5. Learning Objectives Distinguish between simple and complex problems Understand the role and purpose of engineering economic analysis Apply problem-solving /decision making process Solve simple problems associated with engineering decision-making process Understand ethical dimension of decision-making 5

  6. Making Economic Decisions This course develops the tools to properly analyze and solve the economic problems that are commonly faced by engineers.

  7. People are Surrounded by Problems • Which career to pursue? • What level of preparation is required for the career chosen? • Where may the preparation be obtained? • How to get up and get to class? The problems are often not isolated from each other.

  8. Organizations Have Opportunities Do we make part A or B today? Should we use a drilling or boring machine? Should we purchase a boring machine? When must we replace the drilling machine? Would a mechanized or computerized drilling machine be the preferred alternative? Where do we locate machinery in the plant? Decisions concerning these opportunities may be arrived at with the help of economic analysis.

  9. Problem Difficult Levels • Simple • Intermediate • Complex

  10. A Sea of Problems - I Simple Problems Can often be solved in one’s head without extensive analysis. Examples: Should I pay cash or use my credit card? Do I buy a semester parking pass or use the parking meters? Shall we replace a burned-out motor? 10

  11. A Sea of Problems - II Intermediate Problems Must be organized and analyzed Have significant economic aspects Are primarily economic Are the principal subject of this course Are generally adequately solved with single-criteria decision making Examples: Should I buy or lease a new apartment? Which type of equipment should the company purchase? Shall I buy or lease my next car? Which equipment should be selected for a new assembly line? 11

  12. Complex Problems Such problems represent a mixture of 3 elements: economic, political and humanistic Complex problems are beyond the scope of this course from a decision-making criteria point of view, but the economic aspects of complex problems will be discussed Examples: Feasibility study of a new automobile plant Planning for new highways Such problems represent a mixture of 3 elements: economic, political and humanistic A Sea of Problems - III 12

  13. Engineering Economic Analysis Key Questions: • Which engineering projects are worthwhile? • Which projects should have higher priority? • How the project should be designed? • How to achieve long-term financial goals? • How to compare different ways to finance purchases? • How to make short and long-term financial decisions? 13

  14. Examples of Engineering Economic Analysis A company plans to design a building Construction cost occurs in the near future Benefits to users begin when construction is finished Economic analysis of cost, benefits and revenues occurring over time is an engineering economic analysis 14

  15. 9-Step Decision-Making Process Overall Mission / Objectives 2. Define the Goal or Objective 3. Assemble Relevant Data 5. Select the Criterion 4. Identify Feasible Alts 6. Construct a Model 7. Predict Each Alt’s Outcomes 9. Audit the Result 8. Choose the Best Alternative 1. Recognize Problem

  16. 9. Audit the Results • Compare the results of changes to the predictions to assure that the chosen alternative was implement as planned and the results are as expected. • Fix deviations from planned changes. • Make sure prediction errors are not repeated. • Identify added opportunities. • Audits promote realistic economic analysis and implementation.

  17. 9. Audit the Results • Reality vs. prediction • Learn from mistakes • Replacement analysis

  18. Work a Problem Example: Moving to a new apartment. 1. Recognize the problem My contract is about to end, I have to make a decision to move or renew the contract for the next year. 2. Define the goal or objective Find a place to stay during the next year while studying at USF 18

  19. 3. Assemble relevant data Am I alone or with family Selection of Roommates Rent price, move in fee Amenities or Services Pet friendly Distance from school Distance from the mall, principal stores, etc Work a Problem Example: Moving to a new apartment. 19

  20. 4. Identify Feasible Alternatives Do not move Move to a cheaper apartment but far from school (need a car, buy a parking permit, near to the mall, I can save time) Move to a expensive apartment but near USF campus (can walk, bike, use USF Bull Runner but need to adjust my schedule to the bus schedule) Work a Problem Example: Moving to a new apartment. 20

  21. 5. Select the criterion to Determine the best alternative Minimize the expenditure of money Minimize the time to go to school Work a Problem Example: Moving to a new apartment. 21

  22. 6. Construct the model 7. Predict the outcomes for each alternative Compare alternatives in equivalent units (e.g., money) 8. Choose the best alternative “Apartment C looks cheapest, but I don’t like the neighborhood. If I pay $50 more per month for Apartment B I get a nicer neighborhood, and a 15-minute drive to USF. Maybe I’ll choose Apartment B.” Work a Problem Example: Moving to a new apartment. 22

  23. Work a Problem Example: Moving to a new apartment. • 9. Audit the Results • “Did I make a good choice” • “After living in Apartment B for six months, I am very happy with my choice!” • But this certainly isn’t the case every time!! 23

  24. Ethics in Engineering Economic Analysis • The concept of distinguishing between right and wrong in decision-making. • Ethics includes: • Establishing systems of beliefs and moral obligations • Defining values and fairness • Determining duty and guidelines for conduct

  25. Ethics in Engineering Economic Analysis • Focused on how well and how honestly the decision-making process is conducted – the data, method of analysis, recommendations, and follow-up • Recognize ethical issues exist and make them an explicit part of decision-making process

  26. Code of EthicsNational Soc. of Professional Eng. Engineers, in the fulfillment of their professional duties, shall: Hold paramount the safety, health, and welfare of the public. Perform services only in areas of their competence. Issue public statements only in an objective and truthful manner. Act for each employer or client as faithful agents or trustees. Avoid deceptive acts. Conduct themselves honorably, responsibly, ethically, and lawfully so as to enhance the honor, reputation, and usefulness of the profession. (http://www.nspe.org/ethics/eh1-code.asp)

  27. Ethical Dimensions in Engineering Decision-Making

  28. Ethical Dimensions in Engineering Decision-Making

  29. Recap Distinguish between simple and complex problems Understand the role and purpose of engineering economic analysis Apply problem-solving / decision making process Solve simple problems associated with engineering decision-making process Understand ethical dimension of decision- making 29

  30. Assignment: Read Chapters 1 and 2End of Chapter 1 30

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