Cost analysis

Cost analysis is a step in function-cost analysis that identifies the absolute and relative costs of components that constitute an engineering system being analyzed.

Overview

Cost analysis is typically conducted in projects aimed at reducing system costs. It is conducted simultaneously with function analysis, specifically during function modeling. Function analysis supplemented with cost analysis is called function-cost analysis.

The analysis provides crucial information about the system and its components. On one hand, it helps identify its cost disadvantages, and on the other, it aids in making decisions about which components should be considered for trimming.

Two types of costs can be considered during the analysis:

absolute cost, i.e. the monetary value of a component (for example, if a component costs €7, its absolute cost is €7.
relative cost, i.e. the component’s cost as a percentage of the total cost of the system (for example, if the system costs €1000 and a component costs €23, its relative cost is 2,3%).

Using relative component costs not only makes comparison easier but also provides a more accurate assessment. A cost difference of €4 is significant if the total system cost is €13, but much less so if the system costs €2000. A high relative cost is considered a cost disadvantage. Cost disadvantages, along with function disadvantages, form the building blocks for cause-effect chain analysis.

Effects of the analysis are typically presented by adding a column to the function model table. If the project involves developing an innovation strategy, they can be used to create a function-cost diagram.

Cost analysis

Overview

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