Manufacturing-cost estimation

Commercial plant design cost estimates Manufacturing Research development... 

Capital Investment Cost. The capital investment involved in a proposed project is important because it represents the money that must be raised to get the project started, is used in profitabiUty forecasts, and is reflected in the estimated manufacturing cost of a product. The capital investment is classified herein as fixed capital, working capital, and land cost. Sample capital investment estimate forms provide for separate materials (M) and labor (L) categories, or just combined M L figures. 

Factor Methods. A more detailed product cost estimation method is to relate manufacturing cost items to a few calculated items, such as raw materials, labor, and utihties by means of simple factors (1,2). Internal accounting groups often develop factors to use with this method. This factor method is very popular. 

E. M. Malstrom, What Evey Engineer Should Knoiv About Manufacturing Cost Estimating Marcel Dekker, New York, 1981. 

L. M. Matthews, Estimating Manufacturing Costs—A Practical Guide For Managers and Estimators, McGraw-Hid Book Co., Inc., New York, 1983. 

Budgeted income statements are identical in form to ac tual income statements. However, the budgeted numbers are objectives rather than achievements. Budgetary models based on mathematical equations are increasingly being used. These may be used to determine rapidly the effect of changes in variables. Variance analysis is discussed in the treatment of manufacturing-cost estimation. 

Indirect Manufacturing Costs Estimates for the cost of payroh overhead, control laboratoiy, general plant overhead, packaging, and storage facilities are best based on company records for similar processes. 

Rapid Manufacturing-Cost Estimates Fixed manufacturing costs are a func tion of the fixed-capital investment and are independent of the production rate of the plant. Property taxes or rates depend on location. They may be taken as 2 percent of the fixed-capital cost of the plant in the absence of specific data. The cost of insurance depends on both location and the hazardous nature of the materials handled. This cost is normally of the order of 1 percent of the fixed-capital cost of the plant. 

Types and Accuracy of Estimates Capital-cost estimates may be required for a variety of reasons, among others to enable feasibility studies to be carried out, to enable a manufacturing company to select from alternative investments, to assist in selection from alternative designs, to provide information for planning the appropriation of capital, and to enable a contractor to bid on a new project. It is therefore essential to achieve the greatest accuracy of estimation with a minimum expenditure of time and money. 

Since the adjustments for inflation are so large, it is important to fix the date for historical data as closely as possible. For instance, a historical cost estimate from a vendor or contractor for equipment to be delivered in two years would have escalation built in, so the index should be for two years later, when the equipment was expected to be manufactured. However, data based on purchased equipment delivered on a certain date should use the index for the date the equipment was manufactured. 

A key aspect in most cost estimation studies is the evalutUion of the cost of individual pieces of equipment. In addition to quotations from equipment manufacturers, there are several methods for developing cost estimates. For a typical conceptual design, it is normally acceptable to develop an order of magnitude or preliminary estimate whose accuracy is within -h/— 25 to 50%. The following methods may be employed to develop order of magnitude estimates ... 

Using the several materials selected and the basic design possibilities, products should be designed to meet the criteria as far as deflection is concerned, and the cost of manufacture estimated. If the designer does not have this type experience it is best done with the assistance of the fabricator who will fabricate the product. In addition to the material cost and the production labor costs, the amortization costs of the tools are to be included. 

TCM uses an approach to cost estimating in which each of the elements that contribute to the total cost is estimated individually. These individual estimates are derived from basic principles and the manufacturing process. This reduces the complex problem of cost analysis to a series of simpler estimating problems and brings processing expertise rather than intuition to bear on solving these problems. 

Cost Estimation from Mass-manufacture Scenarios for Chip-based Microfabrication... 

After a product has passed the critical tests as an insecticide and a preferred process of manufacture has been decided upon, full information concerning use, potential raw materials, and process is the basis for the preparation of firm cost estimates. These estimates may cover production on a small or pilot plant scale, or on a large scale. If estimates are favorable, the process information is passed along to the manufacturing unit which, as a... 

Jenckes, L.C. Developing and Evaluating a Manufacturing Cost Estimate, Chemical Engineering, Jan. 11, 1971, p. 168. 

To provide some perspective on the viability of SOFCs in APU applications from a cost perspective, NETL sponsored an estimate of the cost structure of small-scale (5 kW), simple-cycle SOFC anode-supported system, operated on gasoline. The estimated manufacturing cost for such systems (see Figure 1-16) could well be close to that estimated for comparable PEM systems, while providing somewhat higher system efficiency. 

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