FE Mechanical Engineering Economics

Knowledge area 4 of the FE Mechanical exam: 4–6 of the 110 questions. The subtopics NCEES lists, how they are tested and worked practice problems with solutions.

Take a full timed FE Mechanical practice exam

110 questions on the real 5 hours 20 minutes clock, weighted to the NCEES specifications, with a score by knowledge area and a worked solution for every answer.

Or start the free Engineering Economics drill

What the specification lists

  • Time value of money (e.g., equivalence, present worth, equivalent annual worth, future worth, rate of return, annuities)
  • Cost types and breakdowns (e.g., fixed, variable, incremental, average, sunk)
  • Economic analyses (e.g., cost-benefit, break-even, minimum cost, overhead, life cycle)

From the NCEES FE Mechanical CBT exam specifications, knowledge area 4.

Line drawing of a cash-flow timeline with up and down arrows, a stack of coins and a calculator

How Engineering Economics is tested

Engineering economics is the most formula-driven topic on the exam and one of the fastest to score: present worth, annual worth, future worth, rate of return, break-even and benefit-cost. The Reference Handbook gives the factor formulas and interest tables; practice converting a cash-flow description into P, F, A and G quickly.

On exam day the relationships you need are in the Reference Handbook section on Engineering Economics. The handbook is the only reference allowed, so practice finding each formula in it rather than memorizing a separate sheet.

Start the free Engineering Economics drill

FE Mechanical Engineering Economics practice problems

Work each problem with your calculator and the handbook, then open the solution.

Problem 1 · Cost types and breakdowns

Select all that apply.

A precast concrete plant is classifying its costs. Which of the following are variable costs that change in proportion to the number of panels produced? Select all that apply.

  1. A.Cement and aggregate used in each panel
  2. B.The plant manager's annual salary
  3. C.Annual property insurance on the plant
  4. D.Steam and electricity used to cure each casting
  5. E.Straight-line depreciation on the casting beds
  6. F.Piece-rate wages paid per panel finished
Show the answer and solution

Answer: A: Cement and aggregate used in each panel; D: Steam and electricity used to cure each casting; F: Piece-rate wages paid per panel finished

Variable costs rise and fall with production volume: materials, curing energy per casting, and piece-rate labor. Fixed costs such as salaries, insurance, and time-based depreciation are incurred regardless of how many panels are made.

Cost types and breakdowns · Reference Handbook: Engineering Economics

Problem 2 · Time value of money

A $30,000 vehicle loan carries a nominal interest rate of 6% per year compounded monthly and is repaid in 60 equal end-of-month payments. The monthly payment is most nearly:

  1. A.$500
  2. B.$580
  3. C.$650
  4. D.$1,856
Show the answer and solution

Answer: B: $580

The monthly rate is 6%/12 = 0.5% and n = 60. A = 30,000(A/P, 0.5%, 60) = 30,000[0.005(1.005)^60/((1.005)^60 − 1)] = 30,000(0.019333) = $580. Using 6% per month greatly overstates the interest.

Time value of money · Reference Handbook: Engineering Economics

Problem 3 · Economic analyses

A pump costs $18,000 installed, uses $6,500 of electricity at the end of each year for 15 years, and needs a $4,000 overhaul at the end of year 8. There is no salvage value. At 6% per year, the present-worth life-cycle cost is most nearly:

  1. A.$81,130
  2. B.$83,639
  3. C.$87,505
  4. D.$119,500
Show the answer and solution

Answer: B: $83,639

LCC = 18,000 + 6,500(P/A, 6%, 15) + 4,000(P/F, 6%, 8) = 18,000 + 6,500(9.7122) + 4,000(0.6274) = 18,000 + 63,130 + 2,510 = $83,639. The overhaul is a single future cost and must be discounted with P/F.

Economic analyses · Reference Handbook: Engineering Economics

Problem 4 · Cost types and breakdowns

A machine shop allocates its $360,000 annual overhead on the basis of 24,000 direct labor hours per year. A custom gearbox job uses $900 of materials and 40 direct labor hours at $28 per hour. What is the total cost of the job, including allocated overhead? Enter the value in dollars to the nearest dollar.

Fill in the blank: answer in $.

Show the answer and solution

Answer: 2620 $ (accepted 2595 to 2645)

Overhead rate = 360,000/24,000 = $15 per direct labor hour. Job cost = 900 + 40(28) + 40(15) = 900 + 1,120 + 600 = $2,620.

Cost types and breakdowns · Reference Handbook: Engineering Economics

More FE Mechanical practice problems from every knowledge area

Sit the full exam under the real clock

Take a full timed FE Mechanical practice exam

110 questions on the real 5 hours 20 minutes clock, weighted to the NCEES specifications, with a score by knowledge area and a worked solution for every answer.

Or start the free Engineering Economics drill

Common questions

How many Engineering Economics questions are on the FE Mechanical exam?

The NCEES FE Mechanical specification lists 4–6 questions on Engineering Economics, out of 110. Every examinee gets the same number per knowledge area.

What does Engineering Economics cover on the FE Mechanical exam?

Time value of money (e.g., equivalence, present worth, equivalent annual worth, future worth, rate of return, annuities); Cost types and breakdowns (e.g., fixed, variable, incremental, average, sunk); Economic analyses (e.g., cost-benefit, break-even, minimum cost, overhead, life cycle).

Where are the Engineering Economics formulas on exam day?

In the NCEES FE Reference Handbook, which appears on screen during the exam: the Engineering Economics section. Practice with your free copy from MyNCEES so you know where each relationship sits.

Original independent practice questions written to the published NCEES exam specifications. Not affiliated with or endorsed by NCEES (National Council of Examiners for Engineering and Surveying).