ISYE 3025 Module 3 - Engineering Costs & Estimating

Covered some of week 1 but all in week 2.

Fixed Costs

Constant, unchanging cost.

Ex) Rent

Variable cost

A cost that depends on activity level/volume

Ex) Food cost depends on the number of occupants at the party

Total Cost

Fixed costs + Total Variable cost.

Breakdown:

(variable cost * number of units) + (total fixed cost)

Notice how the variable cost must be multiplied by the number of units

Marginal Cost

The variable cost for the next iteration.

Ex) If it costs 3 dollars to produce rainbow lollipops, the next lollipop we produce will cost 3 dollars as well. So the marginal cost is 3 dollars.

Average Cost

Total cost / number of units

Breakeven

Total revenue = total costs (just getting by lol)

Profit region

TOtal revenue > total costs (putting money in the bank)

Loss region

Total revenue < total costs (going into debt)