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Sunday, February 20, 2011

Measurement Of Value In Value Engineering

Value engineering measures the price cost ratio for each function of the product. Value is, in fact, utility or the level of satisfaction to be acquired from a product.

Value = Price Of The Function/Cost Of The Function

Price of the function is expected price for that particular function which the customers are ready to pay. Cost of the function is the expected expenses to be made by the company to achieve that function. It is obvious that price must exceed cost; therefore value should be greater than one. The higher the value,the higher will be the contribution of the function towards the product's profitability.