Ch 1-1 © 2004 Pearson Education, Inc. Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Cost Analysis and Estimating for Engineering and Management Chapter 1 Importance

Ch 1-2 © 2004 Pearson Education, Inc. Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Overview l The Design Process l Economic Evaluations  Users  Results  Reasons l Business Strategies l Information l International Business

Ch 1-3 © 2004 Pearson Education, Inc. Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Reasons for Study l The Goal of Business Is to Make Money l Desire to Know Outcome Before Making a Commitment l Need for Cost and Price Estimates

Ch 1-4 © 2004 Pearson Education, Inc. Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Design l Every Design Is a New Combination of Pre-Existing Knowledge that Satisfies an Economic Want  New Combination – Creativity  Economic Want – Driver

Ch 1-5 © 2004 Pearson Education, Inc. Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Elements of Design l Identification and Definition of Problem l Development of Concepts l Engineering Models l Evaluation l Design l Implementation

Ch 1-6 © 2004 Pearson Education, Inc. Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Engineering Design Process

Ch 1-7 © 2004 Pearson Education, Inc. Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Problem l Recognize a Need  Economic Want l Good Description = Good Solution l Detailed Specification of Requirements

Ch 1-8 © 2004 Pearson Education, Inc. Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Concept l New Combinations of Existing Knowledge l Need to Collect a Lot of Knowledge  Relative to the Problem l Unrestricted Generation of Concepts l Then Select and Refine

Ch 1-9 © 2004 Pearson Education, Inc. Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Engineering Models l Representation to Explain an Aspect l Prediction l Discover Pertinent Parameters l Flexibility l Simplistic

Ch 1-10 © 2004 Pearson Education, Inc. Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Evaluation l Compromise l Iterative Process with Modeling l Satisfies Requirements? l Cost l Profit l Fit with Capabilities

Ch 1-11 © 2004 Pearson Education, Inc. Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Sources of Cost l Largely Determined by Design l 50% Purchased Material / Parts l 30% Overhead l 15% Factory Labor

Ch 1-12 © 2004 Pearson Education, Inc. Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Design l Addresses All Requirements through  Computing  Drafting  Checking l Answers  What It Looks Like  How Shall It Be Built  How Will It Work

Ch 1-13 © 2004 Pearson Education, Inc. Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Implementation l Requires a Decision to Proceed l Must Be Assured:  It Satisfies All Requirements  It Will Yield a Profit l Needs an Economic Evaluation

Ch 1-14 © 2004 Pearson Education, Inc. Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Economic Evaluation l Market Defines “Economic Want” l Cost Needs to Satisfy l Cost Model Should Parallel the Design l Detail and Accuracy of Estimate  Depends on Amount of Info Available  Depends on the Time for the Estimate

Ch 1-15 © 2004 Pearson Education, Inc. Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Users l Economic Evaluation Produces:  Dollar Estimates  Labor Hour Estimates  Material Requirements l Used By:  Engineering–Manufacturing  Marketing–Materials Mgmt.  Accounting/Financial Planning

Ch 1-16 © 2004 Pearson Education, Inc. Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Results from Economic Evaluation l Requires Answers to 2 Questions  “What Does It Look Like?”  “How Many?” l Selects from Design Alternatives l Determines Manufacturing Methods l Decisions to Proceed

Ch 1-17 © 2004 Pearson Education, Inc. Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Other Reasons l Cost to Manufacture l Profit Prediction l Labor Requirements l Time (Scheduling) l Control of Operations l Improvement l Budgets l Equipment Justification

Ch 1-18 © 2004 Pearson Education, Inc. Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Strategies l Mass Production  Large Quantities / Little Variation l Batch Production  Smaller Quantities / Large Variation  Similar Processes l Projects  Very Small Quantities / Specialized

Ch 1-19 © 2004 Pearson Education, Inc. Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Strategies

Ch 1-20 © 2004 Pearson Education, Inc. Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management What Determines Cost and When

Ch 1-21 © 2004 Pearson Education, Inc. Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Modes of Competition l Design Uniqueness or Superiority l Price and Cost l Quality l Reliability l Innovation / First to Market l Customer Support l Custom Design / Manufacturing l Commodity Products

Ch 1-22 © 2004 Pearson Education, Inc. Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Business Classification l Traditional Established Products Slow Evolution Incremental Changes History of Costs l High-Tech Rapid Changes Short Cost Recovery Period Fast Time to Market Flexibility Concurrent Engineering Challenging Cost Analysis

Ch 1-23 © 2004 Pearson Education, Inc. Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Information l Available Information Varies  By Point in the Development  Amount of Uniqueness of Product l Historical Data (Accounting Records) l Measured Data l Policy Data

Ch 1-24 © 2004 Pearson Education, Inc. Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Sources of Information l Accounting l Personnel Department l Operating Departments l Purchasing l Sales/Marketing l Supervisors/Managers l Trade Associations / Media

Ch 1-25 © 2004 Pearson Education, Inc. Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management About the Estimate l Amount of Information Available l Time Allotted to Make the Estimate l Overall Size (Amount) of the Estimate l Intended Use for the Estimate l All Impact the Quality and Accuracy of the Estimate

Ch 1-26 © 2004 Pearson Education, Inc. Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management International Business l Global Economy  Competitors  Markets l Measurements in SI Units l Monetary Transactions in Multiple Currencies

Ch 1-27 © 2004 Pearson Education, Inc. Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Currency Exchange l Exchange Rates  Conversion Factors  Constantly Varying l Spot and Future Rates l Rates Obtained from:  Banks, Newspapers, Internet

Ch 1-28 © 2004 Pearson Education, Inc. Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Effects of Exchange Rates l Strong Dollar Import Goods Cost Less Export Goods Cost More – Lose to Foreign Competition Requires Price Cuts l Weak Dollar Expensive Imports Exports Are More Competitive Higher Trade and Budget Deficits Overall – Worse for the U.S. Economy

Ch 1-29 © 2004 Pearson Education, Inc. Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Significant Digits l Addition and Subtraction  Round to 1 Significant Digit to the Right of the Number with the Least Significant Digits l Multiplication and Division  No More Significant Digits than the Number with the Least Significant Digits

Ch 1-30 © 2004 Pearson Education, Inc. Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Layout of the Book

Ch 1-31 © 2004 Pearson Education, Inc. Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management The Book l Chapter 1 – Introduction l Chapter 2 – Labor Calculations l Chapter 3 – Material Calculations l Chapter 4 – Accounting Practice l Chapter 5 – Statistics and Indexing for Forecasting

Ch 1-32 © 2004 Pearson Education, Inc. Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management The Book l Chapter 6 – Estimating Methods l Chapter 7 – Operation Estimating l Chapter 8 – Product Estimating l Chapter 9 – Cost Analysis l Chapter 10 – Engineering Economy l Chapter 11 – Enterprise and Entrepreneurship

Ch 1-33 © 2004 Pearson Education, Inc. Pearson Prentice Hall, Pearson Education, Upper Saddle River, NJ Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management Summary l How the Design Process Works l Where Economic Analyses Fit l How Businesses Are Organized and Compete l The Role of Information l Global Aspects