Fundamentals of Engineering Exam (FE) Engineering Economics, Ethics and Professional Practice Syllabus

What is MARR (Minimum Acceptable Rate of Return) and its role in economic decisions?

MARR is the lowest rate of return a firm will accept on an investment, reflecting cost of capital and opportunity cost. It is the hurdle/discount rate; projects with ROR or yield below MARR are rejected.

Differentiate fixed costs, variable costs, and total cost.

Fixed costs do not change with output (rent, insurance). Variable costs change with output level (materials, direct labor). Total cost $= \text{fixed cost} + (\text{variable cost per unit}) \times \text{quantity}$.

What is the breakeven point in cost-volume analysis, and how is breakeven quantity found?

The breakeven point is where total revenue equals total cost (profit = 0). $Q_{BE} = \dfrac{\text{Fixed Cost}}{p - v}$, where $p$ = price per unit and $v$ = variable cost per unit.

Distinguish marginal cost from average (unit) cost.

Marginal cost is the cost to produce one additional unit ($\Delta\text{cost}/\Delta\text{quantity}$). Average cost is total cost divided by total units produced.

What is a sunk cost, and how should it be treated in economic decision making?

A sunk cost is a past expenditure that cannot be recovered. It is irrelevant to future decisions and must be excluded from economic analysis of alternatives.

Distinguish direct costs from indirect (overhead) costs.

Direct costs are traceable to a specific product or project (direct materials, direct labor). Indirect/overhead costs support operations but are not directly traceable (utilities, supervision, depreciation of shared equipment).

What is opportunity cost?

Opportunity cost is the value of the best alternative foregone when resources (capital, time) are committed to a chosen course of action instead of the next-best use.

Define depreciation in engineering economics and name its two general purposes.

Depreciation is the systematic allocation of an asset's cost over its useful life. Purposes: (1) book/accounting—match cost to periods of use; (2) tax—reduce taxable income via a deductible non-cash expense.

Write the straight-line depreciation formula and the resulting annual depreciation.

$D_t = \dfrac{C - S}{N}$, where $C$ = cost basis, $S$ = salvage value, $N$ = depreciable life. Annual charge is constant each year.

Give the book value formula at end of year t under straight-line depreciation.

$BV_t = C - t\,D = C - t\,\dfrac{C - S}{N}$, which decreases linearly to the salvage value $S$ at year $N$.

State the declining balance (e.g., double declining) depreciation method.

$D_t = d \cdot BV_{t-1}$, where the rate $d = \dfrac{\text{factor}}{N}$ (factor = 2 for double declining balance, 200% DB). Salvage is not subtracted from the basis; depreciation stops when book value reaches salvage.

What is MACRS and how does it differ from straight-line for US tax purposes?

MACRS (Modified Accelerated Cost Recovery System) is the required US tax depreciation method. It uses IRS-prescribed recovery periods and percentage tables (accelerated, based on declining balance switching to straight-line), assumes zero salvage, and uses a half-year (or other) convention in the first/last year.

Write the basic after-tax cash flow / taxable income relationship using depreciation.

Taxable income $= \text{Gross income} - \text{Operating expenses} - \text{Depreciation}$. Taxes $= (\text{Taxable income}) \times t$. After-tax cash flow $= \text{Before-tax cash flow} - \text{Taxes}$, where depreciation shields income (tax savings $= t \cdot D$).

What is a capital gain/recaptured depreciation when an asset is sold above its book value?

If sale price exceeds book value, the excess up to the original cost is depreciation recapture, taxed as ordinary income; any amount above the original cost basis is a capital gain. Selling below book value yields a deductible loss.

According to the NSPE Code of Ethics, what is the engineer's paramount, first-listed obligation?

Engineers shall hold paramount the safety, health, and welfare of the public in the performance of their professional duties.

Under most engineering codes of ethics, in what areas must engineers practice, and how should they represent qualifications?

Engineers shall perform services only in areas of their competence and shall be objective and truthful in professional reports, statements, and testimony—issuing no statements influenced by conflicting interests.

What does a code of ethics require regarding conflicts of interest?

Engineers must disclose all known or potential conflicts of interest that could influence or appear to influence their judgment or service quality, and must not accept compensation from more than one party for the same service without full disclosure and consent.

What is the engineer's duty to act as a 'faithful agent or trustee'?

Engineers shall act for each employer or client as faithful agents or trustees—maintaining confidentiality, avoiding conflicts, and not disclosing confidential information without consent.

What ethical principle covers gifts and bribery for engineers?

Engineers shall not solicit or accept gratuities, gifts, or favors (directly or indirectly) intended to influence professional judgment, and shall neither offer nor accept bribes to secure work.

List the typical sequence of steps to become a licensed Professional Engineer (PE) in the US.

(1) Graduate from an ABET-accredited engineering program; (2) Pass the FE exam to become an Engineer Intern / EIT; (3) Gain qualifying engineering experience (typically 4 years under a PE); (4) Pass the PE exam; (5) Obtain state license.

What does ABET accreditation signify and why does it matter for licensure?

ABET (Accreditation Board for Engineering and Technology) accredits engineering programs that meet quality standards. Graduating from an ABET-accredited program is generally required (or shortens experience requirements) for engineering licensure in the US.

What is the legal/professional significance of the PE seal (stamp)?

Only a licensed Professional Engineer may seal/stamp engineering documents. The seal certifies the engineer takes professional and legal responsibility for the work and that it was prepared by or under the engineer's direct supervision; an engineer must not seal work outside their competence or not done under their supervision.

Distinguish the FE exam from the PE exam in scope and purpose.

The FE (Fundamentals of Engineering) exam is the first licensure step, taken near graduation, testing broad fundamentals to earn EIT/EI status. The PE (Principles and Practice of Engineering) exam is discipline-specific, taken after qualifying experience, testing competence to practice independently.

What is the difference between civil law and criminal law as relevant to engineering practice?

Civil law governs disputes between parties (e.g., breach of contract, negligence/tort) seeking remedies like damages; criminal law involves offenses against the state with penalties such as fines or imprisonment. Engineering liability for defective work is usually civil (tort/contract).

Define negligence and the standard of care expected of an engineer.

Negligence is failure to exercise the care a reasonably prudent engineer would under similar circumstances, causing harm. The 'standard of care' is the level of skill and diligence ordinarily exercised by competent professionals in the same field and locale at that time.

What is whistleblowing in the engineering context and what ethical tension does it involve?

Whistleblowing is reporting illegal, unsafe, or unethical conduct (often by one's employer) to authorities or the public. It pits the duty of confidentiality/loyalty to the employer against the paramount duty to protect public safety, health, and welfare—which takes precedence.

What is the purpose of OSHA and what is the General Duty Clause?

OSHA (Occupational Safety and Health Administration) sets and enforces US workplace safety standards. Its General Duty Clause requires employers to provide a workplace 'free from recognized hazards' likely to cause death or serious physical harm.

What is Process Safety Management (PSM) and what hazard analysis technique is central to it?

PSM (OSHA 1910.119) is a framework for managing hazards of highly hazardous chemicals to prevent catastrophic releases. A central element is Process Hazard Analysis (PHA), using techniques such as HAZOP (Hazard and Operability study), what-if, and fault tree analysis.

Define risk in safety analysis and give the standard hierarchy of hazard controls (most to least preferred).

Risk $= \text{Probability of occurrence} \times \text{Severity of consequence}$. Hierarchy of controls (most to least effective): Elimination, Substitution, Engineering controls, Administrative controls, Personal Protective Equipment (PPE).

In quality management, distinguish a control chart's use from process capability, and define the basic 3-sigma control limits.

A control chart monitors a process over time to detect special-cause (out-of-control) variation; control limits are $\bar{x} \pm 3\sigma$. Process capability ($C_p, C_{pk}$) compares the process spread to specification limits to see if the process can meet requirements; $C_p = \dfrac{USL - LSL}{6\sigma}$. A process can be in control yet not capable.

In project planning, what does the critical path represent in a CPM network, and what is total float (slack)?

The critical path is the longest-duration sequence of dependent activities through the network; it sets the minimum project completion time, and its activities have zero float. Total float $= LS - ES = LF - EF$ (latest minus earliest start/finish); activities with positive float can be delayed without delaying the project.