CLO3. Deal with risk and uncertainty in project outcomes by applying the basic economic decision-making concepts.
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Engineering is the profession in which knowledge of the mathematical and natural sciences gained by study experience and practice is applied with judgment to develop ways to utilize economically the material and forces of nature for the benefit of mankind.
Engineering Economics is a subject of vital importance to Engineers. This subject helps one understand the need for the knowledge of Economics for being an effective manager and decision-maker.
This subject is composed of different topics as shown below:
CLO3. Deal with risk and uncertainty in project outcomes by applying the basic economic decision-making concepts.
MODULE 6: Decisions Admitting Uncertainty
MODULE 6: Decisions Admitting Uncertainty
In this module, we are talking about the topics regarding fixed, increment, and sunk cost, as well as breakeven analysis.
For the first topic, fixed, increment, and sunk cost. As in the topic itself, we are pinpointing the concepts of these. To differentiate, I learned that:
Fixed cost refers to a cost that does not change with an increase or decrease in the number of goods or services produced or sold.
The incremental cost is the total cost incurred due to an additional unit of the product being produced. The Incremental cost is calculated by analyzing the additional expenses involved in the production process, such as raw materials, for one additional unit of production.
Lastly, sunk cost, in economics and finance, a cost that has already been incurred and that cannot be recovered. In economic decision-making, sunk costs are treated as bygone and are not taken into consideration when deciding whether to continue an investment project.
Since there's only one problem in this topic that was tasked for us to answer, this problem highlights the learning practice as I can easily solve for the final answer by simply putting table of values to incorporate the step-to-step procedure.
It is evident in this topic that I deal with risk and uncertainty in project outcomes by applying the basic economic decision-making concepts which can be shown in this question that is answered thoroughly.
Break-even Analysis.
Another topic is break-even analysis.
I learned that break-even analysis entails calculating and examining the margin of safety for an entity based on the revenues collected and associated costs. In other words, the analysis shows how many sales it takes to pay for the cost of doing business.
In addition, Break-even analysis tells you how many units of a product must be sold to cover the fixed and variable costs of production.
One problem that was stuck in my mind in this activity would be item #4 which pertains to the local factory assembling calculators producing 400 units per month and a lot of info that support the idea. In this problem it is the break-even point is to be determined. It can be determined by simply equating income to the expenses that is why we get the final answer of 31.25 that can be rounded up to 32 units.
Overall, growing uncertainty reflects a changing environment that will influence our choices. Recognizing and explaining these changes can improve decision-making efficiency.
It is evident in this topic that I deal with risk and uncertainty in project outcomes by applying the basic economic decision-making concepts which can be shown in different questions that are answered thoroughly.
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