ECE 192 - Engineering Costs

define Fixed Cost

constant cost, not influenced from output/activity

ex.) salary, insurance costs

define Variable Cost

influenced from output/activity, more produced = more expensive

ex.) fuel, product supplies

define Total Cost

fixed + variable cost

define Marginal Cost

variable cost to produce one more unit output (slope)

define Average Cost

total cost divided by units produced

break even point =

cost = revenue

0 profit

sunk costs =

money spent from past decisions

does NOT affect decision in investing in a project

opportunity costs =

money/resources lost by not going for a specific option/decision

(ex. invest $1000 in stocks instead of a 5% bond, $50 on opportunity costs)

asset market value =

current price an asset fetches if sold in open, fair market

recurring cost =

known costs that occur in regular intervals

(ex. yearly maintenance fees)

non-recurring costs =

one of a kind, unknown costs

(ex. system upgrade, installing a new machine)

incremental costs =

difference in cost b/w two alternatives

(look at incremental when comparing)

cash costs =

requires a transaction (money leaving your hands)

book costs =

no transaction needed, represents asset value change

(ex. depreciation)

life cycle costs =

costs occurring over a product's life cycle

(ex. solar panel: development, installation, maintenance, disposal)

per unit model =

method of estimating cost for a single unit

segmenting model =

divide a task into segments, estimate each segment, and sum the costs

cost index =

estimate the present cost using consumer price indexes and past costs

C =C_o(ind/ind_o)

Power-sizing model =

estimate cost when scaling up or down

Cost(A)/Cost(B) = [(Size(A)/Size(B)]^y

y = 1, linear cost

y < 1, economies of scale (more = cheaper)

y > 1, diseconomies of scale (more = expensive)