# Cost Analysis and Estimating for Engineering and Management

, by Ostwald, Phillip F.; McLaren, Timothy S., Ph.D.**Note:**Supplemental materials are not guaranteed with Rental or Used book purchases.

- ISBN: 9780131421271 | 0131421271
- Cover: Paperback
- Copyright: 8/25/2003

This popular book supplies readers with the latest principles and techniques for the evaluation of engineering design. The emphasis is on analysis and estimating. Included in this new edition is a chapter that introduces principles that deal with bringing inventions to the marketplace. It analyzes labor, material, accounting, and forecasting; then the theme of estimating is developed, with a study of methods, operations, and products. A versatile and extremely usable book, it's the perfect resource for engineers, managers, and entrepreneurs.

Preface | p. xv |

Importance | p. 1 |

Engineering and Design | p. 1 |

Economic Evaluation | p. 7 |

Who Uses Economic Evaluation? | p. 8 |

Reasons for Economic Evaluation | p. 9 |

Strategies for the Enterprise | p. 10 |

Traditional Business | p. 13 |

High-Tech Business | p. 13 |

Information | p. 15 |

Domestic and International Business | p. 16 |

International System of Units | p. 19 |

A Look at the Book | p. 21 |

Summary | p. 23 |

Questions for Discussion | p. 24 |

Problems | p. 24 |

Challenge Problems | p. 26 |

Practical Application | p. 27 |

Case Study: Professor Jairo Munoz | p. 28 |

Labor Analysis | p. 29 |

Background | p. 29 |

The Mythical Man-Hour | p. 36 |

Time | p. 36 |

Ergonomics | p. 37 |

Fundamentals of Time Study | p. 37 |

Fundamentals of Work Sampling | p. 46 |

Labor-Hour Reports | p. 52 |

Other Methods for Determining Time | p. 54 |

Wage and Fringe Rates | p. 57 |

Wage-Only Method | p. 59 |

Gross Hourly Cost | p. 60 |

Joint Labor Cost (Optional) | p. 64 |

Learning | p. 66 |

Summary | p. 67 |

Questions for Discussion | p. 67 |

Problems | p. 68 |

Challenge Problems | p. 74 |

Practical Application | p. 75 |

Case Study: The Endicott Iron Foundry | p. 76 |

Material Analysis | p. 77 |

Background | p. 77 |

Material | p. 80 |

Shape | p. 83 |

Cost | p. 92 |

Material Cost Policies | p. 93 |

Specification | p. 93 |

Policies for Evaluating Commodity Materials | p. 96 |

Policies for Evaluating Contractual Materials | p. 96 |

Policies for Evaluating Material from Inventory | p. 97 |

Joint Material Cost (Optional) | p. 103 |

Summary | p. 108 |

Questions for Discussion | p. 109 |

Problems | p. 110 |

Challenge Problems | p. 116 |

Practical Application | p. 121 |

Case Study: Design for Runner System | p. 121 |

Accounting Analysis | p. 123 |

Business Transactions | p. 124 |

Conventions | p. 125 |

Chart of Accounts | p. 129 |

Structure of Accounts | p. 131 |

Understanding the Balance-Sheet Statement | p. 135 |

Understanding the Profit-and-Loss Statement | p. 136 |

Depreciation | p. 138 |

Background | p. 139 |

Purpose of Depreciation | p. 140 |

Property Classification for Depreciation Methods | p. 140 |

Methods of Calculating Annual Depreciation Amount | p. 141 |

Budgeting | p. 149 |

Types of Budgets and Relating Cost Accounts | p. 149 |

Budgets for Overhead Calculation | p. 151 |

Overhead | p. 154 |

Importance | p. 155 |

Traditional Methods | p. 155 |

Allocation Methods | p. 156 |

Methods of Direct Labor Hours and Dollars | p. 158 |

Productive Hour Cost Rate Principles | p. 160 |

Activity-Based Costing Principles | p. 163 |

Job and Process Accounting and Variance Procedures (Optional) | p. 164 |

Summary | p. 169 |

Questions for Discussion | p. 169 |

Problems | p. 170 |

Challenge Problems | p. 177 |

Practical Application | p. 180 |

Case Study: Machine Shop | p. 180 |

Forecasting | p. 185 |

Graphic Analysis of Facts | p. 185 |

Least-Squares and Regression (Optional) | p. 193 |

Least-Squares | p. 193 |

Confidence Limits for Average Values and Prediction Limits for Individual Values | p. 196 |

Curvilinear Regression and Transformation | p. 201 |

Correlation | p. 205 |

Multiple Linear Regression | p. 207 |

Time-Series Models (Optional) | p. 210 |

Cost Indexes | p. 215 |

Calculation, Interpretation, and Unintended Consequences | p. 221 |

Summary | p. 223 |

Questions for Discussion | p. 223 |

Problems | p. 224 |

Challenge Problems | p. 232 |

Practical Application | p. 235 |

Case Study: Forecasting Production Quantity and Budget Requirements for a Gas Engine | p. 235 |

Estimating Methods | p. 239 |

Estimating for the Enterprise | p. 239 |

Universal Methods | p. 242 |

Opinion | p. 242 |

Conference | p. 242 |

Comparison | p. 243 |

Unit | p. 245 |

Operation Methods | p. 247 |

Cost- and Time-Estimating Relationships | p. 247 |

Performance Time Data Algorithm | p. 249 |

Product Methods | p. 256 |

Learning | p. 256 |

Project Methods | p. 262 |

Power-Law-and-Sizing CERs | p. 262 |

Other CERs (Optional) | p. 264 |

Factor Method | p. 266 |

Advanced Approaches (Optional) | p. 273 |

Expected Value | p. 273 |

Range | p. 276 |

Percentile | p. 279 |

Monte Carlo Simulation | p. 281 |

Single-Value or Probability-Distribution Comparisons? | p. 284 |

Summary | p. 285 |

Questions for Discussion | p. 286 |

Problems | p. 287 |

Challenge Problems | p. 293 |

Practical Application | p. 296 |

Case Study: Industrial Process Plant Project Cost | p. 296 |

Operation Estimating | p. 297 |

Background | p. 298 |

Manufacturing: What It Is, What It Does, and What It Is Not | p. 300 |

Classic Operations Analysis (Option 1) | p. 304 |

Contemporary Operations Analysis (Option 2) | p. 312 |

Pinion Operation 10 | p. 320 |

Length of Cut Calculation | p. 321 |

Pinion Operation 20 | p. 323 |

Pinion Operation 30 | p. 324 |

Pinion Operation 40 | p. 327 |

Tool Cost | p. 329 |

Operation Cost | p. 334 |

Batch Manufacturing | p. 334 |

Flow-Line Manufacturing (Optional) | p. 335 |

Summary | p. 340 |

Questions for Discussion | p. 340 |

Problems | p. 341 |

Challenge Problems | p. 345 |

Practical Application | p. 349 |

Case Study: Estimating a Stainless-Steel Part | p. 349 |

Product Estimating | p. 351 |

Background | p. 351 |

Estimating Engineering Costs | p. 356 |

Information Required for Product Estimating | p. 358 |

Bill of Material (BOM) | p. 359 |

The Product Estimate | p. 361 |

Productive Hour Cost Model | p. 362 |

Activity-Based Costing Model (Optional) | p. 365 |

Learning Model (Optional) | p. 368 |

Extensions for Learning Model (Optional) | p. 371 |

Follow-On Production | p. 371 |

Engineering Change Order | p. 374 |

Break-Even Analysis | p. 377 |

Pricing Principles | p. 378 |

Opinion, Conference, and Comparison | p. 380 |

Markup on Cost | p. 380 |

Contribution | p. 382 |

Price-Estimating Relationships | p. 382 |

Basic Contract Types (Optional) | p. 384 |

Fixed-Price Arrangements | p. 385 |

Cost-Reimbursable Arrangements | p. 386 |

Benchmarking and Competitive Analysis | p. 387 |

Trends in Product Cost Estimating (Optional) | p. 394 |

Designing, Estimating, and Producing in a Global Economy | p. 394 |

Summary | p. 395 |

Questions for Discussion | p. 396 |

Problems | p. 397 |

Challenge Problems | p. 402 |

Practical Application | p. 405 |

Case Study: Unijunction Electronic Metronome | p. 406 |

Cost Analysis | p. 409 |

First Principles for Tradeoff Studies | p. 409 |

Cash Flow | p. 413 |

Taxation Effects on Cash Flow | p. 414 |

Inflation or Deflation Effects on Cash Flow | p. 416 |

Break-Even Models | p. 420 |

Linear Cost Case | p. 422 |

Semifixed Cost Case (Optional) | p. 426 |

Nonlinear Cost Case | p. 428 |

Life Cycle Cost (Optional) | p. 438 |

Summary | p. 444 |

Questions for Discussion | p. 445 |

Problems | p. 445 |

Challenge Problems | p. 452 |

Practical Application | p. 454 |

Case Study: Optimal Injection-Molding Tool Cost | p. 454 |

Engineering Economy | p. 457 |

Importance | p. 457 |

Average Annual Rate-of-Return Methods | p. 459 |

Payback-Period Method | p. 460 |

Time-Value-of-Money Methods | p. 462 |

Net-Present-Worth Method | p. 464 |

Net-Future-Worth Method | p. 465 |

Net-Equivalent-Annual-Worth Method | p. 465 |

Rate-of-Return Method | p. 466 |

Comparison of Methods | p. 468 |

Standard Approaches to Engineering-Economy Methods | p. 469 |

Advanced Applications (Optional) | p. 471 |

Contexts of "Interest" in Engineering Economy | p. 471 |

Minimum Attractive Rate of Return | p. 474 |

Comparison of Alternatives | p. 474 |

Replacement | p. 479 |

Taxation Effects of Engineering Projects | p. 484 |

Summary | p. 489 |

Questions for Discussion | p. 490 |

Problems | p. 490 |

Challenge Problems | p. 499 |

Practical Application | p. 500 |

Case Study: Seasonal Production | p. 500 |

The Enterprise, Entrepreneurship, and Imaginamachina | p. 503 |

The Enterprise | p. 504 |

Entrepreneurship | p. 505 |

Inventors and Innovators | p. 506 |

Designing for Profit | p. 508 |

Designing for Manufacture | p. 511 |

Self-Manufacture or Purchase? | p. 513 |

Enterprise Planning | p. 516 |

Assessment and Due Diligence | p. 522 |

Financing and Enterprise Funding (Optional) | p. 523 |

Raising Money | p. 523 |

Stock | p. 524 |

Debt | p. 527 |

Bonds | p. 528 |

Alliances | p. 532 |

Offering | p. 533 |

Legal Reminders (Optional) | p. 534 |

Ethics and Engineering | p. 535 |

Summary | p. 536 |

Questions for Discussion | p. 536 |

Problems | p. 537 |

Challenge Problems | p. 541 |

Practical Application | p. 545 |

Case Study: Round Plate Inc. | p. 545 |

Values of the Standard Normal Distribution Function | p. 549 |

Values of the Student t Distribution | p. 550 |

10% Interest Factors for Annual Compounding Interest | p. 551 |

20% Interest Factors for Annual Compounding Interest | p. 552 |

Values of Learning Theory | p. 553 |

Selected Answers | p. 555 |

Bibliography | p. 561 |

Index | p. 563 |

Table of Contents provided by Ingram. All Rights Reserved. |

This first edition ofCost Analysis and Estimating for Engineering and Managementprovides the latest principles and techniques for the evaluation of engineering design. The theme for the book begins with four chapters devoted to an analysis of labor, material, accounting, and forecasting. In the next four chapters estimating is developed, and methods, operations, and product chapters are given. With those chapters understood, attention moves to Chapters 9 and 10, "Cost Analysis and Engineering Economy." Chapter 11, "The Enterprise, Entrepreneurship, and Imaginamachina," concludes the book, and it introduces principles that deal with bringing inventions to the marketplace. Wise and calculated risk taking for the entrepreneur (read engineer and manager) are important to the broader understanding of engineering for students. The organization of this book develops these principles in a systematic way. With increasing importance of design over rote skills in contemporary engineering courses, this book can be used for a variety of teaching situations: for lecture only, for lecture with a laboratory menu, or for professional mentoring with business, and developed field trips. Courses that connect to on-line live or delayed video instruction can use this book, as the authors have personal experience with these delivery modes. Furthermore, lifelong learning programs for the professional in either formal or informal settings can use the book. Academic requirements for this book/course may vary, and we believe that the book is suitable for a number of teaching approaches. The book has been written to appeal to engineering/management/technology settings. The student needs a mathematical maturity of algebra and introductory calculus. Typically, this book is used in the later college periods, and sometimes it coincides with the capstone course or other summary courses that occur in the final semesters. It is also suitable for graduate level courses in engineering/technology and management. The instructor will notice Internet requirements that search for information and apply it in practical context. We provide Internet addresses for numerous assignments. (Regrettably, these addresses may change from time to time. Fortunately, many students are adept at finding their own way around the Internet.) In the interactive environment of teaching, this book is a part of modern courseware. Word processing and spreadsheet skills are assumed, and some CAD ability is always helpful. The student must have access to a computer, and system requirements would be typical of more advanced personal or college Pentium computers. Various academic levels, either undergraduate or graduate, and backgrounds are appropriate and the instructor will find that this book is fitting for a variety of teaching styles. The authors have attempted to involve the instructor in the leadership of many exercises, calling on you, the instructor, to localize the assignments to your needs. The book has more material than can be covered in one semester or quarter, and thus chapters can be chosen to meet the objectives of each class. Chapter order can be adjusted. For example, if the students already have an understanding of statistics, then Chapter 5 material can be excluded. Other sections can be dropped depending on student preparation and course objectives. Now and then the term "optional" is used with sectional material, and the instructor can either appropriately overlook that section or include it for enriching purposes. The instructor will find that the book is versatile. This book has a range of difficulty for Questions for Discussion, Problems, Challenge Problems, Practical Applications, and Case Studies. Throughout the book, the authors have attempted to give the instructor the opportunity for outcomes-evaluation of student work with these many exercises. There are 128 Questions for Discussion in the 11 chapters. They are qu