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8/12/2019 economy engineering
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!" $%&' $%()*+'&
1
Hatem Elayat
Mechanical Engineering Department AUC
ENGR 345
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8/12/2019 economy engineering
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Direct Material
Direct Labor
11
Cost Structure of Manufacturing
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Direct Material
Direct Labor
Indirect Material
Indirect Labor
Fixed & Miscellaneous
12
Cost Structure of Manufacturing
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Direct Material
Direct Labor
Indirect Material
Indirect Labor
Fixed & Miscellaneous
General & Administrative
Selling
Profit
13
Cost Structure of Manufacturing
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Direct Material
Direct Labor
Indirect Material
Indirect Labor
Fixed & Miscellaneous
General & Administrative
Selling
Profit
14
SellingPrice
C
ostof
G
oods
Prime + Factory Overhead = Cost of Goods Manufactured
Cost Structure of Manufacturing
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Direct Material
Direct Labor
Indirect Material
Indirect Labor
Fixed & Miscellaneous
General & Administrative
Selling
Profit
15
SellingPrice
CostofGoods
Cost Structure of Manufacturing
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3/4*5 0(5 J02/07.* $%&'&
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400
300
200
100
5 10 15 20
Fixed Cost
Total Annual Cost
(20, 300)
Dollars
(InThousand
s)
Units, Q (In Thousands)
Given: c=$10/unit F= $100,000
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82*09S*6*( +%/('N \%'0. T*6*(-* O \%'0. $%&'
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Profit
QCostand
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LE)
Fixed Cost
Total Cost
Total Revenue
B-E point
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Break-even
Quantity
400
300
200
100
5 10 15 20
Loss Fixed Cost
Total Annual
Revenues
Total Annual
Cost
Profit
(20, 300)
(20, 400)
Dollars(InThousands)
Units, Q (In Thousands)
Given: p= $ 20/unit c=$10/unit F= $100,000
0
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Patients (Q)
500 1000 1500 2000
Fixedcosts
Break-even quantity
Total annual costs
(2000, 300)
Loss
0
400
300
200
100
Total annual revenues
Profits
(2000, 400)
D
ollars(in
tho
usands)
Given: F= $ 10,000 p= $30/patient c= $20/patient
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>021/(0. $%&'
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For a total cost function that is continuous in the outputvariable x, marginal cost is defined as the derivative of theTotal cost function with respect to xMarginal Cost = dTC(x)/dx
True for continuous functions that are linearor nonlinearin theOutput variable xExample:For TC(x) = $950 + $0.15x, thenMarginal Cost = dTC(x)/dx = $0.15In this case the marginal cost is a constant
If the total cost function is discontinuous and defined only fordiscrete values of x (x = 1, 2, 3,) then difference equationsmust be used
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