So far in class we’ve progressed through several phases of Engineering Design:

  1. Initial Client Interview/Scoping
  2. Design Specification
  3. Multiple Design Paradigm generation
  4. Detailed Design
  5. Lean Prototyping and Manufacturing

Now we move into the Engineering Economics phase of Engineering design. As you’ll find over the next several lectures, this phase of class is much more amenable to traditional “sage on the stage” lecture techniques. We’ll cover the following general topics:

  1. Costs associated with engineering projects.
  2. The time value of money.
  3. Economic analyses of engineering projects.
  4. Depreciation of equipment and materials.

The notes for lesson 1 on engineering costs are here: ME 415 Econ Lesson 1 notes. The next lectures will extensively utilize the Engineering Econ sections of the FE reference manual found here: Econ section of FE Reference Handbook.

There are several engineering costs you need to consider:

  • Sunk costs: costs you’ve already paid for a single use, view, or service, and have now way to recover any of those costs. (Shipping fee, electronic standard, etc.)
  • Fixed costs: constant regardless of output or activity. (Price of a component that can’t be bought in bulk. Fixed price to machine a particular part. etc.)
  • Variable costs: depend on the amount of activity. (Machine shop labor cost, fuel, etc.)
  • Incremental costs: Differences between 1 or more alternatives you are considering.
  • Average costs: average cost over the total # of units.
  • Marginal costs: cost to produce 1 more unit. (Varies by certain thresholds — bus can’t hold anymore and an entire new bus is needed, etc.)

For Monday each of the sub-groups needs to:

  1. Analyze the costs to build your workbench. List all of the costs (parts costs, shipping costs, estimated labor costs, tooling costs, etc.) and provide values for each of the types of costs above.
  2. Compile this in a word document that you will upload to your team’s slack channel.
  3. The reporters will then review these and sample from these to include this in the engineering economics portion of the project report.