School of PE Blog

1. Introduction

Engineering economics is the process of forecasting the expenses or operating costs that must be incurred to manufacture a product or to provide a service. A cost analysis takes into consideration all the expenses that are involved in designing and manufacturing a product. A professional design engineer manages manufacturing costs, which requires physical data, whereas a cost estimate engineer compiles and applies the costing data to determine the final cost of the product. Engineers preparing for the FE exam should be familiar with engineering economic equations and calculations.

2. Purpose of Cost Analyses

Cost analyses play a significant role in the decision-making process that an engineer makes in selecting materials, methods, tools, and facilities. An understanding of the cost-estimation process is essential to ensure that decisions are based on reliable cost analyses.

Quantity takeoff and unit costs must be reasonably accurate to finalize the actual product cost. If a product is overpriced, it will negatively affect business. It is always better to analyze competitor pricing strategies for the cost assessment of the product. Our FE exam review courses provide accounting principles and cost analyses for selecting the best alternative.

3. Detailed cost estimates are prepared to:

4. Cost Estimating or Costing

Costing is the process of listing all expenses incurred in various functional departments during product development. Accounting systematically records all expenses to determine the final cost of a manufactured product. The work of costing begins at the pre-planning stage and ends only after the product has been sold out or has been handed over to the project owner.

5. Purpose of costing:

6. Differences between estimating and accounting:

The above topics are covered in undergraduate engineering courses, but there is an opportunity to review the basics of estimating and accounting with School of PE's Fundamentals of Engineering exam review courses.