Ch 1-1

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Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management

Cost Analysis and Estimating for Engineering and Management

Chapter 1

Importance

Ch 1-2

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Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management

Overview The Design Process

Economic Evaluations

Users

Results

Reasons

Business Strategies

Information

International Business

Ch 1-3

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Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management

Reasons for Study

The Goal of Business Is to Make

Money

Desire to Know Outcome Before

Making a Commitment

Need for Cost and Price Estimates

Ch 1-4

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Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management

Design

Every Design Is a New Combination of

Pre-Existing Knowledge that Satisfies

an Economic Want

New Combination – Creativity

Economic Want – Driver

Ch 1-5

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Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management

Elements of Design

Identification and Definition of Problem

Development of Concepts

Engineering Models

Evaluation

Design

Implementation

Ch 1-6

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Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management

Engineering

Design

Process

Ch 1-7

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Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management

Problem

Recognize a Need

Economic Want

Good Description = Good Solution

Detailed Specification of Requirements

Ch 1-8

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Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management

Concept

New Combinations of Existing

Knowledge

Need to Collect a Lot of Knowledge

Relative to the Problem

Unrestricted Generation of Concepts

Then Select and Refine

Ch 1-9

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Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management

Engineering Models

Representation to Explain an Aspect

Prediction

Discover Pertinent Parameters

Flexibility

Simplistic

Ch 1-10

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Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management

Evaluation

Compromise

Iterative Process with Modeling

Satisfies Requirements?

Cost

Profit

Fit with Capabilities

Ch 1-11

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Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management

Sources of Cost

Largely Determined by Design

50% Purchased Material / Parts

30% Overhead

15% Factory Labor

Ch 1-12

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Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management

Design

Addresses All Requirements through

Computing

Drafting

Checking

Answers

What It Looks Like

How Shall It Be Built

How Will It Work

Ch 1-13

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Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management

Implementation

Requires a Decision to Proceed

Must Be Assured:

It Satisfies All Requirements

It Will Yield a Profit

Needs an Economic Evaluation

Ch 1-14

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Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management

Economic Evaluation

Market Defines “Economic Want”

Cost Needs to Satisfy

Cost Model Should Parallel the Design

Detail and Accuracy of Estimate

Depends on Amount of Info Available

Depends on the Time for the Estimate

Ch 1-15

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Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management

Users

Economic Evaluation Produces:

Dollar Estimates

Labor Hour Estimates

Material Requirements

Used By:

Engineering –Manufacturing

Marketing –Materials Mgmt.

Accounting/Financial Planning

Ch 1-16

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Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management

Results from Economic Evaluation

Requires Answers to 2 Questions

“What Does It Look Like?”

“How Many?”

Selects from Design Alternatives

Determines Manufacturing Methods

Decisions to Proceed

Ch 1-17

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Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management

Other Reasons Cost to Manufacture

Profit Prediction

Labor Requirements

Time (Scheduling)

Control of Operations

Improvement

Budgets

Equipment Justification

Ch 1-18

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Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management

Strategies

Mass Production

Large Quantities / Little Variation

Batch Production

Smaller Quantities / Large Variation

Similar Processes

Projects

Very Small Quantities / Specialized

Ch 1-19

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Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management

Strategies

Ch 1-20

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Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management

What Determines Cost and When

Ch 1-21

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Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management

Modes of Competition Design Uniqueness or Superiority

Price and Cost

Quality

Reliability

Innovation / First to Market

Customer Support

Custom Design / Manufacturing

Commodity Products

Ch 1-22

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Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management

Business Classification

Traditional

Established Products

Slow Evolution

Incremental Changes

History of Costs

High-Tech

Rapid Changes

Short Cost Recovery

Period

Fast Time to Market

Flexibility

Concurrent Engineering

Challenging Cost Analysis

Ch 1-23

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Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management

Information

Available Information Varies

By Point in the Development

Amount of Uniqueness of Product

Historical Data (Accounting Records)

Measured Data

Policy Data

Ch 1-24

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Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management

Sources of Information

Accounting

Personnel Department

Operating Departments

Purchasing

Sales/Marketing

Supervisors/Managers

Trade Associations / Media

Ch 1-25

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Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management

About the Estimate

Amount of Information Available

Time Allotted to Make the Estimate

Overall Size (Amount) of the Estimate

Intended Use for the Estimate

All Impact the Quality and Accuracy of

the Estimate

Ch 1-26

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Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management

International Business

Global Economy

Competitors

Markets

Measurements in SI Units

Monetary Transactions in Multiple

Currencies

Ch 1-27

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Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management

Currency Exchange

Exchange Rates

Conversion Factors

Constantly Varying

Spot and Future Rates

Rates Obtained from:

Banks, Newspapers, Internet

Ch 1-28

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Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management

Effects of Exchange Rates

Strong Dollar

Import Goods Cost Less

Export Goods Cost More – Lose to Foreign Competition

Requires Price Cuts

Weak Dollar

Expensive Imports

Exports Are More Competitive

Higher Trade and Budget Deficits

Overall – Worse for the U.S. Economy

Ch 1-29

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Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management

Significant Digits

Addition and Subtraction

Round to 1 Significant Digit to the Right of

the Number with the Least Significant Digits

Multiplication and Division

No More Significant Digits than the

Number with the Least Significant Digits

Ch 1-30

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Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management

Layout of the Book

Ch 1-31

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Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management

The Book

Chapter 1 – Introduction

Chapter 2 – Labor Calculations

Chapter 3 – Material Calculations

Chapter 4 – Accounting Practice

Chapter 5 – Statistics and Indexing for

Forecasting

Ch 1-32

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Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management

The Book

Chapter 6 – Estimating Methods

Chapter 7 – Operation Estimating

Chapter 8 – Product Estimating

Chapter 9 – Cost Analysis

Chapter 10 – Engineering Economy

Chapter 11 – Enterprise and Entrepreneurship

Ch 1-33

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Ostwald and McLaren / Cost Analysis and Estimating for Engineering and Management

Summary

How the Design Process Works

Where Economic Analyses Fit

How Businesses Are Organized and

Compete

The Role of Information

Global Aspects