PRESENT ECONOMY

STUDIES
• This involve the analysis of problems for
manufacturing a product or rendering a service
upon the basis of present or immediate cost.
Present economy studies usually occur when the
effects of the time such as interest and
depreciation are negligible. Present economy
analysis is employed when the alternatives to be
compared will provide the same result and the
period of time involved in the study is relatively
short.
• PRESENT ECONOMY STUDIES OCCUR IN THE FOLLOWING
SITUATIONS:

1. SELECTION IN PRESENT ECONOMY

2. SELECTION AMONG MATERIALS
3. TOTAL COST IN MATERIAL SELECTION
4. THE PROFICIENCY OF LABOR
SELECTION IN PRESENT
ECONOMY
Studies that do not require considerations of time and-
money relationship are sometimes called present economy
studies and generally involve selection between alternative
design, materials, or methods.

Interest is not a factor.

SELECTIONS IN PRESENT
ECONOMY
The effect of interest do not apply because of the following conditions:
 There is no investment of capital: only out of pocket costs are
involved.
After any first cost is paid, the long- term costs will be the same for
all alternatives, or will be proportional to the first cost.
The alternatives will have essentially identical results regardless of
the capital investment involved.
SELECTION AMONG MATERIALS
One of the most frequent types of present- economy
studies is that in which selection must be made
among materials. As more new specialized materials
become available, such problems become more
numerous. These studies are frequently complicated
by the fact that materials usually differ from each
other in more that property.
TOTAL COST IN MATERIAL
SELECTION
In a large portion case, economic selection between
materials cannot be based solely on the cost of
materials. Very frequently, a change in materials will
affect the processing costs, and often shipping costs
may be altered.
THE PROFICIENCY OF LABOR
Workers of different proficiencies frequently produce
different amounts of output in a given time. Through
the use of various types of incentives workers of all
types may be induced to develop and exhibit
different degrees of proficiency, resulting in various
levels of output.