ABSTRACT
In this chapter, we present the mathematical basis of economic analysis for sustainable engineering. We will present engineering economics principles in the simplest terms, as most engineers are exposed to engineering economics principles in detail. In any engineering project, the cost input in the project is most important to analyze the future profitability of the endeavor. Cost terms that are relevant to project economy are fixed cost, variable cost, and incremental costs. Fixed costs are unaffected by increase or decrease of production level. Typical fixed costs include insurance and taxes on facilities, general management and secretarial salaries, and interest on borrowed capital. However, if there is any addition to the existing facilities, fixed costs will change. Variable costs are those that vary with output of production, such as material and labor costs. An incremental cost (or incremental revenue) is the additional cost (or revenue) resulting from increasing the output by one (or more) units. This may be useful in making a decision on whether to increase production by a certain amount, as sometimes incremental cost may prohibit such a decision.
