17.

Value Analysis for

Cost/Value
Theory at a Glance (For IES, GATE, PSU)

Value Engineering
Value engineering some meaning
Value analysis
Value management
Value performance
Value control etc.
1. Define value Engineering [IAS-1996; 2004]
What is value analysis? [IAS-2003]
“A systematic inter-disciplinary examination of design and other factors affecting the
cost of a product or service in order to devise means of achieving the specified
purpose most economically, at the required standard of quality and reliability”.
Achieves Matches with
Required Value
Function Function
Value * Performance
Engineering * Reliability
* Product
* Appearance
* Service
* Maintainability
* System Lowest * Service Life
Overall * Range of operation
Cost * Safety
* Alternatives

What is Value Engineering

2. What is the objective of value Engineering? [IAS-1984]

The systematic application of recognized technique
¾ To identify the function of a product or service.
¾ Establish norms for the function.
¾ And provide the necessary function with lowest cost.

3. What is value?
Value is the required or needed performance at minimum cost.
Value in general is the ratio of function and cost.

Function
Value =
Cost
4. Define the terms
(i) Use value
(ii) Esteem value

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 Value Analysis for Cost/Value
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(iii) Cost value
(iv) Exchange value
as related to value engineering. [IAS-1994]
Use Value: It is defined as the qualities and prosperities needed to accomplish a service,
product or work.
Esteem Value: It provides properties, features and attractiveness to a service, product or
work which make the ownership desirable.
Scrap Value: It is the money which can be recovered when the item is not needed. It is
the scrap value.
Cost Value: It is the total cost of material, labour, overhead and services to produce an
item.
Exchange Value: It is the property and qualities which enables to exchange a product for
something else, which is needed by the exchange.
5. How can the value be increased? [IAS-2003]
¾ To secure the best combination of ideas, processes materials methods and
approach to problems involving the least expenditure of resources, time and
money.
¾ Identification and removal of unnecessary costs and hidden costs which provide
neither quality, nor use, nor life, nor appearance, nor customer features, are the
just rewards for value studies.

Function
Value =
Cost
So to increase value we many increase Function taking cost constant and may
decrease cost without affecting function.
6. List down the question which needs to be answered when carrying out
value analysis for a product (or) what are the value tests for developing
better value alternatives? [IAS-1996]
1. Does it use contribute value?
2. Is its cost proportionate to its usefulness?
3. Does it need all its features?
4. Is there anything better for the intended uses?
5. Can a usable part be made by lower cost method?
6. Can a standard product be found which will be usable?
7. Is it made on proper tooling considering quantities used?
8. Do materials reasonable?
9. Will another dependable supplier provide it for less?
10. Is anyone buying it for less?
7. In value engineering approach, functional approach a key feature. Discuss
three techniques of functional approach. [IAS-1984]
In functional approach
(i) Functions of the items are identified
(ii) Each function is evaluated and compared
(iii) Alternative strategy for cost reduction or function improvement is adopted.

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 Value Analysis for Cost/Value
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(A) FAST Diagram (Function Analysis system Techniques)
(B) FIRST (Functional Ideas Regarding System Techniques)
(C) FACTS (Functional Analysis of Components of Total System)
(D) PROFIT (Product Return Opportunities by Function Investigated Technique)

8. Other approaches in value engineering

(i) MISS: Modify, Substitute or subdivide or exchange/eliminate to help change.
M od
I fy
S ubstitute
S ub divide

(ii) DARSIRI: Data colleting, analysis, record ideas, speculate, innovate, review
and implement.
D ata collection
A nalysis
R ecod
S peculate
I nnovate
R eview
I mplement

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S K Mondal Chapter 17

OBJECTIVE QUESTIONS (GATE, IES, IAS)

Previous 20-Years IES Questions

IES-1. Consider the following: [IES-2009]
1. A system-oriented approach
2. A multidiscipline team approach
3. A function-oriented approach
Which of the above refer to value engineering?
(a) 1, 2 and 3 (b) 1 and 2 only
(c) 2 and 3 only (d) 1 and 3 only
Codes:
(a) Both A and R are individually true and R is the correct explanation of A.
(b) Both A and R are individually true but R is not the correct explanation of
A.
(c) A is true but R is false.
(d) A is false but R is true.

IES-2. Consider the following steps which are involved in constructing a

function analysis system technique of value engineering: [IES-2003]
1. Find the critical path 2. Prepare a function worksheet
3. Listing of functions 4. Diagram layout
Which of the following gives the correct sequence of steps?
(a) 1-3-2-4 (b) 2-1-3-4 (c) 4-2-3-1 (d) 3-2-4-1

IES-3. Assertion (A): Value Engineering is concerned with increasing the

quality of the product even at enhanced cost to fulfil the customer.
Reason (R): Customer requirements are changing very rapidly and
survival of a manufacturing industry is linked with fulfilling the
customer’s requirements. [IES-2008]
(a) Both A and R are true and R is the correct explanation of A
(b) Both A and R are true but R is NOT the correct explanation of A
(c) A is true but R is false
(d) A is false but R is true
IES-4. Consider the following phases: [IES-1994]
1. Information phase 2. Evaluation phase
3. Creative phase 4. Investigation phase
The correct sequence of these phases in value engineering is:
(a) 1, 3, 4, 2 (b) 1, 3, 2, 4 (c) 3, 1, 4, 2 (d) 3, 1, 2, 4

IES-5. Consider the following statements: [IES-2006]

The objective of value analysis is:
1. To reduce the cost 2. To increase the profit
3. To improve quality
Which of the statements given above are correct?
(a) Only 1 and 2 (b) Only 1 and 3 (c) Only 2 and 3 (d) 1, 2 and 3
IES-6. In value engineering important consideration is given to: [IES-1995]
(a) Cost reduction (b) Profit maximization
(c) Function concept (d) Customer satisfaction.

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IES-7. Assertion(A): Value engineering is a technique applied to compete
in the market only at the time of introduction of a product or
service. [IES-2007]
Reason(R): Increasing the functional worth of a product
appreciably, keeping the cost almost constant, is the real objective
of value engineering.
(a) Both A and R are individually true and R is the correct explanation of A
(b) Both A and R are individually true but R is not the correct explanation of
A
(c) A is true but R is false
(d) A is false but R is true

IES-8. In value engineering the term 'value' refers to: [IES-1992]

(a) Market value
(b) Relation between cost and efficiency
(c) Relation between function and cost
(d) Relation between predictability and cost

IES-9. Value analysis is particularly of interest when [IES-1992]

(a) Jobbing work economics are involved
(b) Production is one large scale
(c) Only few components are involved
(d) Costly equipment is used.

IES-10. Assertion (A): Value analysis is superior to other conventional cost

reduction techniques. [IES-2005]
Reason (R): In conventional cost reduction techniques, value is
increased by widening tolerance bands.
(a) Both A and R are individually true and R is the correct explanation of A
(b) Both A and R are individually true but R is not the correct explanation of
A
(c) A is true but R is false
(d) A is false but R is true

IES-11. Consider the following basic steps involved in value analysis:

1. Create 2. Blast 3. Refine
The correct sequence of these steps is: [IES-1997]
(a) 1, 2, 3 (b) 3, 1, 2 (c) 1, 3, 2 (d) 2, 1, 3

IES-12. Value is usually considered as a relationship between IES-1996]

(a) Utility and cost (b) Profit and cost
(c) Psychology and reliability (d) Appearance and utility

IES-13. Aluminium tie pin and gold tie pin, both, serve the purpose of
keeping the tie in position. But the gold pin has significance due to:
[IES-1996]
(a) Exchange value (b) Use value
(c) Esteem value (d) Cost value

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Answers with Explanation (Objective)

Previous 20-Years IES Answers

IES-1. Ans. (a)
IES-2. Ans. (d)
IES-3. Ans. (d) Value: It differs from both price and cost in sense, that it is cost
proportionate to function i.e.
Function  or utility 
Value =
Cost
It can be therefore seen that value of a product can be increased either by
increasing its utility with the same cost or decreasing its cost for the same
function. Function specifies the purpose of the product or what the product
does, what is its utility etc. Thus Assertion is wrong reason is correct answer
is (d). A large increase in utility with a small increase in cost.
IES-4. Ans. (b)
IES-5. Ans. (b) Profit is not direct objective of value analysis but it indirectly increases
profitability.
IES-6. Ans. (d) In value engineering important consideration is given to customer
satisfaction.
Function
IES-7. Ans. (d) A is false. Value = , it is used every time; not only at the time of
Cost
introduction of a product or service.
IES-8. Ans. (c)
IES-9. Ans. (a)
IES-10. Ans. (b)
IES-11. Ans. (d)
IES-12. Ans. (a)
IES-13. Ans. (c)

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