Engineering Economy Exam 1 Terms (Ch 1 - 5)

Fixed costs

constant, unchanging regardless of the level of output or activity (ex. property taxes, license fees, rent)

variable costs

vary with output or activity level (ex. direct labor cost, direct materials)

marginal costs

variable cost for 1 more unit

average costs

total cost/#units

breakeven

total revenue = total cost

profit region

total revenue > total cost (gaining money)

loss region

total revenue < total costs (losing money)

sunk cost

money already spent due to past decision

opportunity costs

cost of the foregone opportunity

reccuring costs

repetitive to produce similar goods & services

non-recurring costs

not repetitive; one time

incremental costs

difference in costs between two alternatives

life-cycle costs

all costs over its entire life of a product, structure, system or service

life cycle costing

design products, projects & services recognizing all costs & benefits over the entire life cycle

internal costs

used to calculate product/service cost (ex. materials, labor, overhead)

external costs

not directly incurred by the firm (ex. wildlife, environment, air quality)