10 TERMINOLOGIES IN ENGINEERING ECONOMY

1. Minimum Cost Analysis

Breakeven, is a cost and make/buy analysis techniques apply
to situations where cost increase relative to a key variable
(output quantity).
Minimum cost analysis techniques apply to situations where
some costs increase and some costs decrease relative to a
key variable (typically output quantity).
Instead of balancing two methods with different fixed and
variable costs, the aim is to bring the sum of two costs to a
minimum.
Concept of minimum cost occurs frequently when designing
and manufacturing products.
It is not enough to design a technically good product; it
must be economical as well.
Basis for understanding and applying techniques such as:

Economic purchase quantity analysis.

Economic production quantity analysis.
Justintime purchasing.
Justintime scheduling.
Inventory reduction.
Capacity maximization.
Cost minimization as related to quality, maintenance and
design.

2. Principles of Accounting
This was often the title of the introductory course in
accounting.
In this context, principles of accounting refers to the broad
underlying concepts which guide accountants when
preparing financial statements.

 Principles of accounting can also refer to the basic or

fundamental accounting principles: cost principles, matching
principles, matching principles, full disclosure principles,
materiality principles, going concern principles, economic
entity principles, and so on.
3. Capital Recovery
Capital recovery is the earning back of the initial funds put into an
investment. Capital recovery must occur before a company can
earn a profit on its investment.
The term "capital recovery" has several business definitions.
When you make an investment in an asset or a company, you get
a negative return on your investment until you recoup your initial
investment. The return of that initial investment is called capital
recovery.
4. Cost Accounting
Cost accounting is a type of accounting process that aims to
capture a company's costs of production by assessing the input
costs of each step of production as well as fixed costs such as
depreciation of capital equipment. Cost accounting will first
measure and record these costs individually, then compare input
results to output or actual results to aid company management in
measuring financial performance.
5. Public Economics
PUBLIC ECONOMICS (or economics of the public sector) is the
study of government policy through the lens of economic
efficiency and equity. At its most basic level, public economics
provides a framework for thinking about whether or not the
government should participate in economics markets and to what
extent its role should be.
6. Risk and Uncertainty
RISK is when we dont know what the outcome is, but we do know
the distribution of the outcomes.

UNCERTAINTY is when we dont know what the outcome, and we

dont know the distribution.
7.Inflation and Deflation
Inflation occurs when the price of goods and services rise,
while deflation occurs when those prices decrease. The balance
between the two economic conditions is delicate, and an
economy can quickly swing from one situation to the other.
Inflation
Inflation is the rate at which the general level of prices for goods
and services is rising and, consequently, the purchasing power of
currency is falling. Central banks attempt to limit inflation, and
avoid deflation, in order to keep the economy running smoothly.
Deflation
Deflation is a contraction in the supply of circulated money within
an economy, and therefore the opposite of inflation. In times of
deflation, the purchasing power of currency and wages are higher
than they otherwise would have been. This is distinct from but
similar to price deflation, which is a general decrease in the price
level, though the two terms are often mistaken for each other and
used interchangeably.
8. Depletion
Depletion is an accrual accounting technique used to allocate the
cost of extracting natural resources such as timber, minerals and
oil from the earth. Unlike depreciation and amortization, which
mainly describe the deduction of expenses due to the aging of
equipment and property, depletion is the actual physical
depletion of natural resources by companies.
9. Property Valuations or Appraisal

They are the same in terms that they are used for computing for
the value of a certain material but they dont have the same
process.
Property Appraisal (Educated Guesswork)
A property appraisal is an estimate of price, usually given by a
real estate agent. The agent uses their knowledge of the local
area and recent sales in that area, to provide a guide as to the
price that might be obtained for a particular property. There is an
inherent bias in appraisals, as they are usually requested by
potential vendors, and so higher values are likely to be suggested.
Appraisals are an opinion, are generally free and have no legal
standing.
Property Valuation (Systematic Process)
A formal property valuation differs from an appraisal in that it
determines the actual value of a property from an independent
and impartial point of view. Its a complex process, and in most
Australian states a formal valuation can only be provided by a
qualified valuer who has undertaken the necessary education and
training. This provides some security that all factors relevant to
the particular property are adequately considered. A written
report will be produced, and a fee charged.
10. Break Even Analysis
Break - even analysis is used to determine when your business
will be able to cover all its expenses and begin to make a profit. It
is important to identify your start up costs, which will help you
determine your sales revenue needed to pay ongoing business
expenses.