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  • ME349 Engineering Design Cost Estimation

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    Benedictus Murdono
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    Direct costs include materials, labor, and expenses. Production costs are direct costs plus factory expenses like indirect labor and costs. Total cost is production cost plus commercial costs like administration and sales. Selling price equals total cost plus a mark-up. When estimating costs at the embodiment stage, consider all items that contribute to total cost such as material, fabrication, assembly, finishing, design work, and direct expenses. Material cost depends on unit weight and scrap weight. Fabrication, assembly, and finishing costs include things like labor, space, and machine depreciation, often estimated per unit time. Rules of thumb for rough cost approximation include the 1-3-9 rule where selling price equals 3 times manufacturing cost

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    Procedure costing

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    Cost estimation

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    Direct costs include materials, labor, and expenses. Production costs are direct costs plus factory expenses like indirect labor and costs. Total cost is production cost plus commercial costs like administration and sales. Selling price equals total cost plus a mark-up. When estimating costs at the embodiment stage, consider all items that contribute to total cost such as material, fabrication, assembly, finishing, design work, and direct expenses. Material cost depends on unit weight and scrap weight. Fabrication, assembly, and finishing costs include things like labor, space, and machine depreciation, often estimated per unit time. Rules of thumb for rough cost approximation include the 1-3-9 rule where selling price equals 3 times manufacturing cost

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    21 views2 pages

    ME349 Engineering Design Cost Estimation

    Uploaded by

    Benedictus Murdono
    Direct costs include materials, labor, and expenses. Production costs are direct costs plus factory expenses like indirect labor and costs. Total cost is production cost plus commercial costs like administration and sales. Selling price equals total cost plus a mark-up. When estimating costs at the embodiment stage, consider all items that contribute to total cost such as material, fabrication, assembly, finishing, design work, and direct expenses. Material cost depends on unit weight and scrap weight. Fabrication, assembly, and finishing costs include things like labor, space, and machine depreciation, often estimated per unit time. Rules of thumb for rough cost approximation include the 1-3-9 rule where selling price equals 3 times manufacturing cost

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    ME349

    Engineering Design Projects


    Cost Estimation
    Definitions
    direct (prime) cost = direct materials + direct labor including direct engineering + direct
    expenses
    production cost = direct cost + factory expenses
    factory expenses = indirect labor + indirect expenses
    total cost = production cost + commercial costs
    commercial costs = general administration + sales expenses
    selling price = total cost + mark-up
    Cost Estimation at Embodiment Stage
    In most customer driven design processes, cost is a huge issue. For a design to achieve
    commercial success, minimizing the final selling price is prime concern.
    In estimating costs you must be aware of those items that contribute to the total cost of
    your system. You can estimate the cost as the sum of the individual contributions.
    For example; direct cost of a machine frame =
    material cost
    + preliminary fabrication cost (cutting, drilling , etc.)
    + assembly cost (welding, bolting)
    + finishing and installing cost
    + design work (your time at $x /hr) *
    + direct expenses (tooling, jigs) *
    * fixed costs, e.g. independent of quantity produced
    Material cost = material cost per unit weight * (weight of finished part weight of scrap)
    Fabrication/Assembly/Finishing costs include machine operator pay, floor space
    (building depreciation), machine depreciation, and utility costs. These costs are often
    estimated as a total cost per time. For example, fabrication costs for milling may be
    $150/hr.
    Rough Cost Approximation:

    Some Rules of Thumb

    All of these "rules" are for broad guidance only - USE with CAUTION. They give order
    of magnitude answers only.
    1-3-9 "Rule" =>Selling price = 3x manufacturing cost = 3 x 3 x material cost

    Note: the numbers 1, 3, and 9 are indicative only and vary according to industry,
    product type and many other factors
    For some products cost is proportional to mass (or volume)
    Note: Most industries are moving away from a cost per mass type basis for
    estimating. Nevertheless this method can give some indicative numbers.
    For fabricated products the number of joints or the length of welds may be a primary
    indicator of cost.
    Likewise the cost of assembly is closely related to the number of parts.
    Cost of purchased items will increase with "size" (e.g. dimension, power, mass), usually
    in a non-linear way.
    Note: The price also depends on production volume and demand. Primary preferred
    sizes may be cheaper (on average) than secondary preferred sizes. Commonly used
    sizes will be cheaper than similar sized components that are seldom used and not kept
    in stock.

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