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Mechanical Engineering Design

This document discusses cost evaluation and analysis methods for engineering design projects. It defines key costing terms like fixed, variable, and non-recurring costs. It also explains methods for evaluating costs like the industrial engineering approach, analogy method, and statistical approach. Additionally, it covers topics like cost reduction, cost classification, product pricing determination using break-even charts, and the differences between make and buy decisions. The overall aim is to understand fundamentals of cost analysis that can be applied to engineering design projects.

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Farid Asyraf
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34 views

Mechanical Engineering Design

This document discusses cost evaluation and analysis methods for engineering design projects. It defines key costing terms like fixed, variable, and non-recurring costs. It also explains methods for evaluating costs like the industrial engineering approach, analogy method, and statistical approach. Additionally, it covers topics like cost reduction, cost classification, product pricing determination using break-even charts, and the differences between make and buy decisions. The overall aim is to understand fundamentals of cost analysis that can be applied to engineering design projects.

Uploaded by

Farid Asyraf
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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LOGO

MECHANICAL
ENGINEERING DESIGN
(MEC332)
Chapter
Chapter 6:
6:
Cost
Cost Evaluation
Evaluation &
& Analysis
Analysis

By:
Firdaus bin Sukarman
Fakulti Kejuruteraan Mekanikal
UiTM Johor, Kampus Pasir Gudang
Lesson Outcome

 At the end of this session, students should be


able to:
 Understand and identify the aspect and
fundamentals of costing analysis
 Understand and utilize the costing approach and
methods in dealing with engineering design
project
Contents

1 Fundamentals of costing evaluation

2 Fundamentals of costing method


Costing Evaluation

WHAT IS COST:
•Definition: Monetary valuation in dealing
with the aspect of material, goods/
services, risk issues, resources and etc.

WHAT IS COSTING EVALUATION:


•Process of determining how resources are
been utilized based on cost allocation and
THE
benefits.
IMPORTANCE
OF COSTING
WHY NEED COSTING EVALUATION
(THE IMPORTANCE):
•Basis for identification for product selling
price
•Basis for identification for product’s profit
projection
Costing Evaluation

WHAT IS COST REDUCTION:


•A process involving finding, and removing
unwarranted expenses without
discriminates the product’s quality and
increase in product’s profit
COST
WHY (THE IMPORTANCE) NEED COST
REDUCTION
REDUCTION:
•To fully utilize all production capabilities
•Improve methods and reduce unwanted
work in progress and inventory of product
Costing Evaluation

CLASSIFICATIONS/CATEGORIES OF COST:
•Nonrecurring cost:
Capital cost i.e. manufacturing
cost
•Recurring cost:
Direct functions involving
manufacturing operation cost
•Fixed cost:
COST Unchanged cost of production of
CLASSIFICATION goods rate involving;
Investment cost i.e. insurance,
property taxes
Overhead cost i.e. rental, water,
electrical bills
•Variable cost:
Dependent cost with the change of
production of goods rate involving materials,
direct labor, maintenance cost, packaging
cost, etc.
Costing Evaluation Method

PARAMETERS OF COSTING EVALUATION:


•Finished components purchased from vendor (category: buy
item)
•In house components production and manufacture liaise with
COSTING vendor (category: buy item)
EVALUATION •In house components production and manufacture without
vendor involvement (category: make item)
METHOD
DIFFERENCE OF MAKE-BUY DECISION:
•Make:
-Cheaper
-Experience gained
-Compatible towards production line

•Buy:
-Higher value of reliability and quality assurance
-Ready availability of suppliers
-Inexperience of making/manufacture parts/components
Costing Evaluation Method

COST EVALUATION METHODS:


•INDUSTRIAL ENGINEERING APPROACH
COSTING -Separation of cost for identical elements of work and
EVALUATION summed into cost per part
METHOD
•ANALOGY
-Design project future cost relies on the past similar
project cost in referred to cost escalation and project
size difference

•STATISTICAL APPROACH
-Regression analysis involving system cost initial
parameter (weight, speed, etc.) establishment
Costing Evaluation Method

•WHAT IS PRODUCT PRICING:


-Product selling price that simultaneously and positively
affects the customer interest and greatest profit generation.
PRODUCT
•METHOD TO IDENTIFY PRICE OF PRODUCT/SERVICE:
PRICING -Implementation of break-even chart; shows and portrays
the profit and loss on the selling price of product/price and
manufacturing cost of product
-Manufacturing cost parameters involving;
i) variable cost: Labor, purchased parts,
material
ii) fixed cost: tooling, overhead cost
Costing Evaluation Method

•DETAILS ON BREAK-EVEN CHART:


-How to design a break-even chart;

BREAK-EVEN
CHART
Costing Evaluation Method

•EXAMPLE OF BREAK-EVEN CHART (FOR


REFERENCE/GUIDELINE):

BREAK-EVEN
CHART

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