MID TERM

EXAMINATION ANSWER SHEET

Page No. SPRING-2021

Name:  AHED NOOR Program: BET MECHANICAL

Semester 5 Sub. Code MT-304
Subject Name Engineering Economics Reg. No. SUIT-18-01-106-0069
Roll No. 18-FA-07456 Date: 29-7-2021

1. Time allowed for attempt is 12 Hours (10:00 am to 10:00 pm).

2. The Answer sheet will be accepted in PDF. File name must be in this format: (Subject Code & Roll No.) ABC123_00-FA-12345
3. Paper must be solved conceptually and any observation regarding copying/ cheating found, the same will be cancelled and UFM case will be
initiated against the student. Similarly, if answers are matched then the paper will also be treated as cancelled.
4. The Answers numbers should exactly same as question number, written on answer book/sheet.
5. Anyone failing to submit his/ her answer book/sheet within specified time will be declared ABSENT.
6. Fill the form carefully & recheck before uploading your solved answer sheet.
7. Submission of Answer sheets via e-mail will not be entertained in any case .

Start your answers here: -

Q-1. What do you understand by Direct, Indirect and Overhead Costs?
Direct Costs:
Direct costs are the costs which are completely attributable to the production of specific goods
or service. Direct cost may be related to material, labour, fuel or power consumption.Hence
we can say that these are the costs which are traceable to the particular cost object

Indirect Costs:
Indirect cost are the cost which are not directly traceable to a cost object like product, service,
department etc. These cost are administrative, selling, personnel cost etc. These cost of object
is not directly traceable. Manufacturing overhead which are not directly attributable to cost
object is also included. The examples are insurance, depreciation, manger salaries etc.

Overhead Costs:
Overhead are the costs which are incurred in a business except those are directly related to
the core product of the business like direct labor, direct materials, direct expenses like
production costs. Costs other than these which are incurred to support the business are the
overhead costs.

Overheads can be advertising expenses, legal expenses, travel expenditures, utilities costs, etc.
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EXAMINATION ANSWER SHEET
Page No. SPRING-2021

Q-2. What do you understand by Sensitivity Analysis of Risk Assessment

for choosing the right project?
Sensitivity Analysis: 
Sensitivity analysis is the quantitative risk assessment of how changes in a model variable
effect the yield of the model.It is also the variation in the output parameter due to deliberate
changes made in input parameters that is objective function coefficients and right hand side
values of constraints.

Sensitivity analysis for good project boundaries Duration, Cost, Finish Time, and Success Rates
just as for each risk class. The analysis incorporates permits you to take a gander at sensitivity
for every one of the above boundaries for Task Duration, Task Start Time, Task Success Rate,
Task Cost, Lags, and Risks. Likewise, you can see the sensitivity for Task Finish Time for
assignments utilizing the Tornado Plot which can be found in the vast majority of the Analysis
sees.

Sensitivity analysis is extremely important for engineers and it is not only done by looking at
charts or graphs but Excel Solver and matrix calculation are also used along with other tools.

Q-3. What do you understand by Uncertainty? What are different

decision rules under Uncertainty?
Uncertainty:
Uncertainty is a condition in which decision maker has to make decision without knowing
consequences. In general terms, if we discuss about uncertainty, it is the condition when we're
not confirm what will happen in future. Moreover, while making decisions we're not confirm
which way to go. Uncertainty is almost in every field and situation. For example, in Physics we
observe uncertainty in measurements. In economics uncertainty means when we can't predict
the behavior of economy in future. When inflation rate is not under control of Government
that is also an example of uncertainty.
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Decision can be defined as chose between multiple options. Uncertainty In decision making
exist when we have no of consequences for single course of action. It means we aren't aware
of results of our decisions.

Decision rules under uncertainty:

Laplace criterion

Maximin

Maximax

Hurwicz

Minimax regret

1) Laplace Criterion: It is definitionally true that each outcome has an equal chance of
occurring. Despite the fact that probabilities are being used, we are presuming that each
option has an equal chance regardless of the real probabilities. I'll follow Blanchard and
Fabrycky's lead and include it in decisions that are questionable.

We just average the outcomes for each scenario to evaluate the alternatives.

2) Maximin: The maximin criterion chooses the option with the smallest minimal result. This
is a conservative criterion in which we choose the option with the best worst-case scenario .

3) Maximax: The maxi-max criterion chooses the option with the highest maximum result.
This is an aggressive criterion in which we choose the option with the best possible outcome.

4) Hurwicz: The Hurwicz criterion represents a middle ground between maximin and maxi-
max. To create a compromise between maximin and maxi-max, we apply a subjective
coefficient in this rule. Our weighting on maximin is determined by the coefficient of
pessimissm.

5) Minimax regret: We're attempting to reduce the worst-case regret from our decision
with Minimax Regret. The decision matrix is repeated for each case, with the best outcome.
We deduct each outcome from the case's ideal outcome to arrive at the regret values.