MGTS

Syllabus Chapter Key Concepts Tested Calculation-Based Question Examples Theory/Conceptual Question Examples
- Explain the importance of engineering economy to technical managers.
- Explain how opportunity cost influences daily decisions.
- Use supply-and-demand diagrams to show the effect of market events.
1. Fundamentals of Engineering Economy Principles of engineering economy, Opportunity Cost, Supply & Demand, Market Structures This is a theoretical chapter with no major calculation-based questions. - MCQs on the fundamental principles.
p = f(D).
- Calculate the time required for a specific production unit using learning curve formulas.
- Estimate the cost of new equipment using cost indexes and the power-sizing model.
- Explain different cost classifications (e.g., fixed, variable, sunk).
- Explain the concept of Value Engineering.
- Calculate the breakeven point in units and analyze profitability at different production levels. - Explain brainstorming and the nominal group technique for generating alternatives.
2. Cost Concepts & Design Economics Breakeven Analysis (Cost-Volume-Profit), Profit Maximization, Cost Estimation (Learning Curve, Power-Sizing, Cost Indexes)
- Determine the optimal production volume to maximize profit, given a price-demand relationship - MCQs on cost types (direct, indirect, sunk).
- Calculate the required deposit to fund a future series of payments (e.g., tuition).
- Calculate the present worth of complex cash flows involving multiple gradients and series. - Explain the concept of equivalence.
- Calculate the effective annual interest rate from a nominal rate compounded periodically or continuously. - Explain how compounding interest works.
3. Time Value of Money (TVM) Equivalence, Single & Uniform Series, Arithmetic & Geometric Gradients, Deferred Annuities, Nominal & Effective Interest-Rates
Solve for an unknown value (Z) in a gradient series loan repayment plan. - MCQs testing the understanding of different interest types and annuity structures (e.g., deferred annuity).
- Compare mutually exclusive alternatives by calculating the incremental IRR.
- Calculate the discounted payback period for a project.
- Determine the required annual benefit for one alternative to be preferred over another.
- For a single project, calculate PW, IRR, and Payback Period to determine acceptability. - Explain the decision rules for selecting projects based on PBP, PW, and IRR.
- Compare mutually exclusive alternatives with unequal lives using the Annual Worth (AW) method. This is a very common scenario. - Explain the problems associated with ranking projects using the IRR method.
4. Methods for Evaluating Economic Profitability PW, AW, FW, IRR, ERR, Payback Period (Simple & Discounted), Incremental Analysis for Mutually Exclusive Alternatives - MCQs on the definition of MARR and the decision rules for different evaluation methods.
- Prepare depreciation schedules for SL and DB methods and find cumulative depreciation.
- Calculate the book value of an asset after a certain number of years or hours of use.
- Explain why a business might use the DB method with a switchover to SL.
- Calculate the depreciation deduction and book value for a specific year using the UOP method. - Define what constitutes a depreciable property.
5. Depreciation Straight-Line (SL), Declining-Balance (DB), DB with Switchover to SL, Units-of-Production (UOP), Book Value - Compute a full depreciation schedule using the 200% DB method with a switchover to SL. - MCQs on depreciation terminology (book cost, salvage value) and methods.
- Explain the primary reasons for conducting a replacement analysis.
- Determine the Economic Service Life (ESL) of an asset by calculating the year with the minimum Equivalent Uniform Annual Cost (EUAC). - Explain the "sunk cost trap" and its irrelevance in decision-making.
6. Replacement Analysis Economic Service Life (ESL), Defender vs. Challenger, Sunk Cost, Outsider Viewpoint - Perform a defender-challenger analysis to decide if an old machine should be replaced now, using the AW/EUAC method. - MCQs on the definition of economic life and the factors considered in replacement studies.
- Determine which independent projects should be funded based on their individual B-C ratios.
- Analyze the percentage change in the B-C ratio when costs are reclassified as disbenefits.
- Explain the difficulties inherent in evaluating public-sector projects.
- Select the best public project from a set of mutually exclusive alternatives using incremental B-C analysis. - Explain why incremental analysis is necessary when using B-C ratios for mutually exclusive alternatives.
7. Benefit-Cost (B-C) Ratio Method B-C Ratio for Public Projects, Disbenefits, Incremental B-C Analysis for Mutually Exclusive Alternatives - MCQs on the conventional B-C ratio formula and decision rules.
- Explain the significance of a spider plot and how to interpret it to find the most sensitive factor (the one with the steepest slope).
- Perform a sensitivity analysis by varying parameters (e.g., revenue, useful life) by ±20% and calculating the resulting PW or AW. - Explain how brainstorming can be used to generate project alternatives.
8. Project Risk & Uncertainty Sensitivity Analysis, Spider Plots, Breakeven Analysis, Brainstorming - From a sensitivity analysis, create a spider plot to visualize the results. - Determine the range of an investment cost for one alternative to be preferred over another.
- MCQs on the purpose of sensitivity analysis.