3.1 COSTS ESTIMATES

---

Cost estimating attempts to estimate to estimate the value put into a product by each operation.

Cost estimates are based on historical records of expenses for equipment.

Costs are made up of a variety of components,

Estimated variables for a single product/unit. NOTE: yearly estimates are typically made by management.

We can write equations for the simple relationships,

We can select a profit using market conditions,

We need to estimate the total time for the job using the process plan.

We can then include time to find the various costs. There are many ways to do this - this is one possible way.

Some costs must be specific to materials used. Depending upon suppliers, shipping, handling, etc. these costs will vary widely. If we use a fairly consistent supplier we can use,

We can estimate indirect labor costs using an assumption that most labor types are fairly similar (this is not true but other book keeping problems may encourage this).

For continuous-long running jobs (minimal setups) using the process plan time estimates we are already to estimate the direct labor costs.

We can estimate direct material costs two ways using the process plan, the AMCE, and quotes from suppliers.

Jobs may run in small batches and require setups and multiple steps on a machine. We can do a more detailed cost estimate based on operation steps (using section 5 in the AMCE).

If operations at a machine contain multiple steps we can develop a more detailed estimate using the information in section 5 of the AMCE. To do this we need to break each operation down to specific steps. Detail is critical with this method.

We can use a tabular format (based on a process plan) to calculate,

Consider the example below,

******************** find a financial statement

**************************** find a simple part design