ENS191 QUIZ 2 Flashcards
It refers to wealth in the form of money or property that can be used to produce more wealth.
Capital
It has a time value.
Money
These are those unaffected by changes of inactivity level over a feasible range of operations for the capacity or capability available.
Fixed Costs
It does not change with an increase or decrease in the amount of goods and services.
Fixed Costs
Example of Fixed Costs
rent for buildings or spaces, salaries for management and administrative employees, property taxes, insurance
What are the four types of cost?
- Fixed Costs
- Variable Costs
- Direct Costs
- Indirect Costs
These are those associated with an operation that varies in total with the quantity of output or other measures of activity level.
Variable Costs
This is the corporate expense that changes in proportion to production volume.
Variable Costs
Examples of Variable Costs
cost of raw materials and packaging, sales commission, utility costs (electricity, water, etc.), direct labor costs (regular working hours, overtime)
These are costs that can be reasonably measured and allocated to a specific output or work activity.
Direct Costs
The labor and material costs directly associated with a product, service, or construction activity are _____.
Direct Costs
Examples of Direct Costs
raw materials cost, wages for production staff, manufacturing supplies
These are costs that are difficult to allocate to a specific output or work activity.
Indirect Costs
Normally, they are costs allocated through a selected formula (such as proportional to direct labor hours, direct labor dollars, or direct material dollars) to the outputs or work activities.
Indirect Costs
It can also be called overhead costs.
Indirect Costs
Examples of Indirect Costs
salary for administrative employees, general repairs, taxes and fees
It is an integral part in any engineering economic analysis being performed which requires the participation from engineering designers, marketing, manufacturing, finance and top management.
Cost Estimation
You review the overall scope of your project, identify the major elements of the work and make general estimations.
Top-Down Approach
Key Characteristics:
* frequently used for creating rough order of magnitude (ball-park)
* used at the early stage of the project when data is limited (to be further used for data validation)
* generally takes less time and effort to produce
* uses historical data from similar projects to estimate costs, revenues, energy consumption, etc.
* generally produces larger estimates
Top-Down Approach
You generate a detailed breakdown of the requirements down to the lowest possible level to generate your estimates. This approach covers the project scope based on the task defined.
Bottom-Up Approach
Key Characteristics:
* frequently referred to as detailed estimating or as an engineering build-up
* usually works best when the detail concerning the desired output (a product or a service) has been defined and clarified
* generates more tangible estimates than top-down approach
* higher risk of excluding allowance for additional work needed
Bottom-Up Approach
It is an indispensable tool for clarifying and visualizing a series of cash flows.
Cash Flow Diagram
It is a graphical representation of cash flows drawn on a time scale.
Cash Flow Diagram
Total interest earned or charged is linearly proportional to the initial amount loaned (principal).
Simple Interest
It is calculated using the principal only, ignoring any interest accrued in preceding interest periods.
Simple Interest
It is infrequently used in modern practice.
Simple Interest
It is computed on the basis of 12 months of 30 days each or 360 days a year; 1 interest period = 360 days
Ordinary Simple Interest
It is computed based on the exact number of days in a year, 365 days for an ordinary year and 366 days for a leap year.
Exact Simple Interest
It reflects both the remaining principal and any accumulated interest.
Compound Interest
It is commonly used in personal and professional financial transactions.
Compound Interest
It is a rate of interest that specifies the rate of interest and a number of interest periods.
Nominal rate of interest
It is rates of interest that specifies the actual or exact rate of interest on the principal.
Effective rate of interest
Interest is compounded at the end of each finite length period, such as a month, a quarter or a year.
Discrete Compounding
It is assumed that cash payments occur once per year, but the compounding is continuous throughout the year.
Continuous Compounding
The difference between the present worth (the amount received for the paper in cash) and the worth of the paper at sometime in the future (the face value of the paper or principal).
Discount
The increase in the prices for goods and services from one year to another, thus decreasing the purchasing power of money.
Inflation
It measures the value of a currency in terms of the quantity and quality of goods or services that one unit of money will purchase.
Purchasing power of money.
