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### MG2451 ENGINEERING ECONOMICS AND COST ANALYSIS | ANNA UNIVERSITY B TECH MECHANICAL ENGINEERING 8TH SEMESTER SYLLABUS REGULATION 2008

MG2451 ENGINEERING ECONOMICS AND COST ANALYSIS L T P C
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OBJECTIVES:
To learn about the basics of economics and cost analysis related to engineering so as to
take economically sound decisions.
UNIT I INTRODUCTION TO ECONOMICS 8
Introduction to Economics- Flow in an economy, Law of supply and demand, Concept of
Engineering Economics – Engineering efficiency, Economic efficiency, Scope of
engineering economics- Element of costs, Marginal cost, Marginal Revenue, Sunk cost,
Opportunity cost, Break-even analysis- V ratio, Elementary economic Analysis – Material
selection for product Design selection for a product, Process planning.
UNIT II VALUE ENGINEERING 10
Make or buy decision, Value engineering – Function, aims, Value engineering
procedure. Interest formulae and their applications –Time value of money, Single
payment compound amount factor, Single payment present worth factor, Equal payment
series sinking fund factor, Equal payment series payment Present worth factor- equal
payment series capital recovery factor-Uniform gradient series annual equivalent factor,
Effective interest rate, Examples in all the methods.
UNIT III CASH FLOW 9
Methods of comparison of alternatives – present worth method (Revenue dominated
cash flow diagram), Future worth method (Revenue dominated cash flow diagram, cost
dominated cash flow diagram), Annual equivalent method (Revenue dominated cash
flow diagram, cost dominated cash flow diagram), rate of return method, Examples in all
the methods.
UNIT IV REPLACEMENT AND MAINTENANCE ANALYSIS 9
Replacement and Maintenance analysis – Types of maintenance, types of replacement
problem, determination of economic life of an asset, Replacement of an asset with a new
asset – capital recovery with return and concept of challenger and defender, Simple
probabilistic model for items which fail completely.
UNIT V DEPRECIATION 9
Depreciation- Introduction, Straight line method of depreciation, declining balance
method of depreciation-Sum of the years digits method of depreciation, sinking fund
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method of depreciation/ Annuity method of depreciation, service output method of
depreciation-Evaluation of public alternatives- introduction, Examples, Inflation adjusted
decisions – procedure to adjust inflation, Examples on comparison of alternatives and
determination of economic life of asset.
TOTAL: 45 PERIODS
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.
6. Truett & Truett, “ Managerial economics- Analysis, problems & cases “ Wiley India 8th
edition 2004.
7. Luke M Froeb / Brian T Mccann, “ Managerail Economics – A problem solving
approach” Thomson learning 2007.
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