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This document provides an overview of the Software Engineering Economics course taught at Mirpur University of Science and Technology. It outlines the course details including learning outcomes, grading criteria, and topics to be covered such as economic analysis techniques, cost estimation methods, and issues in cost estimation for software projects. The lectures will also cover rational decision making processes, predicting future costs and benefits, and types of strategic economic decisions faced in engineering such as equipment selection, replacement, and cost reduction.

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49 views24 pages

Lec 1

This document provides an overview of the Software Engineering Economics course taught at Mirpur University of Science and Technology. It outlines the course details including learning outcomes, grading criteria, and topics to be covered such as economic analysis techniques, cost estimation methods, and issues in cost estimation for software projects. The lectures will also cover rational decision making processes, predicting future costs and benefits, and types of strategic economic decisions faced in engineering such as equipment selection, replacement, and cost reduction.

Uploaded by

Online Worker
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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MIRPUR UNIVERSITY OF SCIENCE AND TECHNOLOGY

DEPARMENT OF SOFTWARE ENGINEERING

BUE-1006 Software Engineering Economics 1


Engineering Economic Decisions
(Lecture # 01)
CLO PLO
1 1

Engr. Samina Fazilat


(Junior Lecturer)

BUE-1006 Software Engineering Economics


Date: 2
Dishonesty, Plagiarism

All parties involved in any kind of cheating in any exam (Quizzes,


Assignments & Projects) will get their respective test cancelled
right away.

BUE-1006 Software Engineering Economics 3


About Course
• Course Title: Software Engineering Economics
• Course Code: BUE-1006
• Credit Hours: 02 (02 hours Per Week)
• Grading Criteria
• Quizes 10%
• Assignments 10%
• Mid –Term 30%
• Final 50%

BUE-1006 Software Engineering Economics 4


Course Learning Outcomes (CLOs)

At the end of the course the students will be able to: Domain PLO

1. Overview economic analysis techniques and their applicability to software


engineering C-2 1

2. Develop software cost estimation skills using industry standards.


C-3 3

3. Critically evaluate and discuss the issues in cost estimation of different


applications in the real world with course participants and learners. C-5 4

BUE-1006 Software Engineering Economics 5


Engineering Economics Overview
• Rational Decision-Making Process
• Economic Decisions
• Predicting Future
• Role of Engineers in Business
• Large-scale engineering projects
• Types of strategic engineering economic decisions

BUE-1006 Software Engineering Economics 6


Rational Decision-Making Process

1. Recognize a decision problem


2. Define the goals or objectives
3. Collect all the relevant information
4. Identify a set of feasible decision
alternatives
5. Select the decision criterion to use
6. Select the best alternative

BUE-1006 Software Engineering Economics


7
Which Car to Lease? Saturn vs. Honda

1. Recognize a decision • Need a car


problem
2. Define the goals or • Want mechanical
objectives security
3. Collect all the relevant • Gather technical as well
information as financial data
4. Identify a set of feasible • Choose between
decision alternatives Saturn and Honda
5. Select the decision • Want minimum total
criterion to use cash outlay
6. Select the best alternative • Select Honda

BUE-1006 Software Engineering Economics 8


Financial Data Required to Make an Economic Decision

SE-361 Software Engineering Economics 9


Engineering Economic Decisions

Manufacturing Profit

Planning Investment

Marketing
SE-361 Software Engineering Economics 10
Predicting the Future

• Estimating a Required
investment
• Forecasting a product demand
• Estimating a selling price
• Estimating a manufacturing cost
• Estimating a product life

BUE-1006 Software Engineering Economics 11


Role of Engineers in Business

Create & Design

• Engineering Projects

Analyze Evaluate Evaluate

• Production Methods • Expected • Impact on


• Engineering Safety Profitability Financial Statements
• Environmental Impacts • Timing of • Firm’s Market Value
• Market Assessment Cash Flows • Stock Price
• Degree of
Financial Risk

BUE-1006 Software Engineering Economics 12


Accounting Vs. Engineering Ecom.

Evaluating past performance Evaluating and predicting future events

Accounting Engineering Economy


Past Future
Present

BUE-1006 Software Engineering Economics 13


Two Factors in Engineering Economic Decisions

The factors of time and uncertainty


are the defining aspects of any
engineering economic decisions

BUE-1006 Software Engineering Economics 14


A Large-Scale Engineering Project

• Requires a large sum of investment


• Takes a long time to see the
financial outcomes
• Difficult to predict the revenue and
cost streams
(Remember Cash flow discussed earlier)

BUE-1006 Software Engineering Economics 15


Types of Strategic Engineering Economic Decisions
in Manufacturing Sector

• Service Improvement
• Equipment and Process Selection
• Equipment Replacement
• New Product and Product Expansion
• Cost Reduction

BUE-1006 Software Engineering Economics 16


Service Improvement
◼ How many more jeans would Levi need to sell to justify the cost of additional robotic
tailors?

BUE-1006 Software Engineering Economics 17


Equipment & Process Selection

• How do you choose between the Plastic SMC and the Steel
sheet stock for an auto body panel?
• The choice of material will dictate the manufacturing process for
an automotive body panel as well as manufacturing costs.

BUE-1006 Software Engineering Economics 18


Which Material to Choose?

BUE-1006 Software Engineering Economics 19


Equipment Replacement Problem

• Now is the time to replace the old


machine?
• If not, when is the right time to
replace the old equipment?

BUE-1006 Software Engineering Economics 20


New Product and Product Expansion

• Shall we build or acquire a new


facility to meet the increased
demand?
• Is it worth spending money to
market a new product?

BUE-1006 Software Engineering Economics 21


Example - MACH 3 Project

• R&D investment: $750 million


• Product promotion through
advertising: $300 million Gillette’s MACH3
• Priced to sell at 35% higher Project
than Sensor Excel (about $1.50
extra per shave).
• Question 1: Would consumers
pay $1.50 extra for a shave
with greater smoothness and
less irritation?
• Question 2: What would
happen if the blade
consumption dropped more
than 10% due to the longer
blade life of the new razor?

BUE-1006 Software Engineering Economics 22


Cost Reduction

• Should a company buy equipment


to perform an operation now done
manually?
• Should spend money now in order
to save more money later?

BUE-1006 Software Engineering Economics 23


THANKS

24

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