05a AMP Basics Cost Accounting Pricing

TECHNICAL UNIVERSITY DEGGENDORF
5. Economic Calculation
5.1. Overview Cost Accounting

5.2. Systematics of Cost Types
5.3. Cost Unit Accounting, Pricing
5.4. Direct Costing
5.5. Break Even Point / Make or Buy
5.6. Static Investment Calculation
5.7. Dynamic Investment Calculation
5.8. Target costing Source: www.tqm.com
Prof. Dr.-Ing. Stefan Scherbarth www. t h - d e g . d e 1

Cost Type and Cost Center Accounting
● Cost categories
● account assignment
● direct costs
● overhead
● special direct costs
● changing degree of capacity utilization
● systematics of costs
● Cost center accounting
source: www.tqm.com

Systematics of Cost Types

● Subdivision of costs:
● According to the attributability to the cost object or company services:
Direct costs Overheads
● According to the behavior of the degree of capacity utilization
Fixed Costs Variable Costs
● Cost accounting systems at a glance:

● After the time reference of the processed costs
● Actual cost accounting
● Normal Costing (uses average values from actual period before)
● Plan cost accounting
● According to the extent to which the

allocated costs, a distinction is made between
● Full cost accounting considers fixed and variable costs
● Partial costing considers only the variable costs
source: according to Preißler, 2000

Components of Cost Accounting
cost recording cost allocation
What costs have Where are the What are the

been incurred? Costs incurred? Costs incurred?
overhead cost centers allocation

cost categories calculation cost object
calculation direct costs
calculation
acquisition distributive calculation and

calculation calculation income statement

Systematics of Cost Types - Examples

● personnel costs
● operating costs
● Type of production factors consumed
● material costs
● service costs
● procurement costs
● manufacturing costs
● Operational functions ● selling expenses
● administrative expenses
● development costs
● raw materials, consumables and supplies

● Cost of materials
● purchasing materials
● wages, salaries, ancillary wage costs,

● Labour costs
● company wage
● Cost of capital ● depreciation, interest, risks
● External service costs ● repairs, transport, etc.
● Costs of human society ● taxes of a cost nature, fees, contributions
source: according to Heberstock

Cost Types - Assignability to Cost Objects
Direct costs:
● Direct costs
● Costs that can be assigned directly to the individual cost object and are also to be
assigned directly.
Example
● Personnel costs: if time recording is carried out for cost objects
● Material costs: if withdrawal is based on cost object


Overhead
● Indirect costs
● Costs incurred by the individual cost object
● Can only be assigned indirectly (real overhead costs)
● Are difficult to allocate (non-genuine overheads)
Example
● Real overhead: salaries for administration, energy,
Insurance, Disposal, Foreman
● non-genuine overhead: small parts of the production, possibly setter
Watch Out! Compliance with the causation principle vs.

information destruction and economic efficiency


Exceptional costs
● Special single costs - SEK
● Costs that can be assigned directly to the individual cost object and are
attributable to customer-specific features.
Example
● Special single costs of production: Specific R&D, tools, models,
licenses
● Special single costs of distribution: special packaging, shipping, customs duties,
Commission, guarantees
Special single costs:
● Are irregular and unpredictable.
● Are not the basis for allocating overhead costs.
● Are not used for cost planning

Primary and secondary overheads
Overhead costs are often differentiated according to whether they are

● Originate from external activity relationships (for example, invoice for
cleaning by an external service provider): primary overhead costs or
● Whether they originate from internal activities (for example, activities

of the company's own maintenance department): secondary overhead
costs.
● While the primary overhead costs are simply entered on the basis of
invoices, account statements and contracts, the secondary overhead
costs must first be determined as part of internal activity allocation.

Systematics of Cost Types - Assignability to Cost Objects
cost type accounting
direct costs overhead
primary
overheads
cost center accounting
Main cost Auxiliary cost

centers centers
primary costs primary costs
secondary costs
Primary & secondary
direct costs
overheads
cost unit accounting
source: according to Steger 2001

Factors Influencing Costs
● Type of employment
● Company size
● Service program
● Quality
● Prices
Change in costs [%]

● Degree of responsiveness R =
Change degree of capacity utilization [%]
● Degree of responsiveness
● Fixed costs R=0
● Variable costs R=1
● Mixed costs R = ]0,1[

Degree of Capacity Utilization Related Costs
Capacity used
● Degree of capacity utilization =
Available capacity
● Degree of capacity utilization = Actual performance

Capacity
● Mixed costs are costs that cannot (without considerable effort) be

identified as fixed costs or variable costs.
● Mixed costs can be split mathematically into fixed costs and variable
costs if the costs for at least two employment levels are known. (Linear
Approximation)
If more data is available, the least squares method can be used.

Useful Costs and Idle Capacity Costs
Fixed costs Cf
0% Degree of capacity utilization b 100%
● used capaity CU = Cf ⋅ b CU used capacity costs [EUR/period]

costs
CI idle capacity costs [EUR/period]
● idle capacity CI = Cf – CN Cf fixed costs [EUR/period]
costs CI = Cf ⋅ (1 – b)
b degree of capacity utilization
Costs with Changing Degree of Capacity Utilization
● Fixed costs: Costs of operational readiness (Schmalenbach, 1963)

● Allocation of fixed costs: changing number of produced units =>
reduce allocation via. capacity utilization
Total fixed costs

● Fixed unit costs =
Quantity or share of sales
● Step Costs: Example Machine purchase, new building
● Variable costs a) Dependence on degree of responsiveness

b) Course
• proportionally
• progressive
• declining
• regressive

Costs for Changing Degree of Capacity Utilization
● Total costs= fixed costs + variable costs

C = Cf + Cv
● Average cost = total cost

or unit costs service quantity
C
little “c„ c=
x
Marginal costs or
incremental costs:
● Marginal costs =
first derivation of the
total costs for
C‘= activity quantity
C total costs [EUR/period] x activity quantity [piece/period]

Cf fixed costs [EUR/period] c average costs [EUR/piece]
Cv variable costs [EUR/period] C′ marginal costs [EUR/piece]

Fixed Costs - Total / Average / Marginal costs

Total costs Average costs Marginal costs
C c C‘ incremental costs
Absolute
fixed costs
Fixed Constant Declining No present

costs
C c C‘
Step costs
Constant in period Declining in period Only with increase

according to step cost of total cost

Variable Costs - Total / Average / Marginal costs

C Total costs c Average costs C‘ Marginal costs
incremental costs
Proportional
trend
Grow in the same way than Constant Constant

capacity utilization
C c C‘
Variable Declining
Costs trend
Grow slower than
Go down Go down with K’ < k
C c C‘
Progressive
trend
Grow quicker than
Go up Go up with K’ > k

Systematics of Costs
expenses
fixed costs variable costs
not directly directly directly not directly

allocable allocable allocable allocable
direct direct
fixed costs variable costs
direct costs
overhead

Example Cost Type Plan I. Total direct costs

II. Overhead
5. auxiliary wages
6. salaries
I. direct costs 7. social expenses
1. direct material costs 2,374,925 € 8. material overhead
2. direct production costs 7,945,380 € 9. external power

(cost of unit) 10. external service costs
11. taxes, contributions
3. order-related 30.980 €
12. insurance
manufacturing costs
13. leasing, rent
4. freight and 46.570 €
14. advertising, representation
packaging costs
15. general and administrative
II. sum of direct costs 10.397.855 € 16. calculatory depreciation
17. calculatory interest
18. calculatory risk costs
Total overheads
source: according to Steger 2001 III. total costs

Imputed Depreciation & Calculatory Interest
Straight-line depreciation: Calculatory interest:
"#
2
$%
"#
2
A: Depreciation amount per period Zt: Calculatory interest rates
in period t (t = 1, ..., n)
I0: Investment - replacement costs
I0: Investment spending – cash drain
RVn: Residual revenue at end of useful life
RVn: Residual revenue at end of useful life
n: Estimated useful life
RVt: Residual revenue at end of period
i: Calculatory interest rate

Cost Center:
● Independent area of responsibility Control
● Exact measures for cost allocation Exact calculation
● Possibility to record cost documents Efficiency of KRs
● Linking costs to operational function
● No 1-person cost center Reasonable size
● Cost Center Accounting:

● Economic efficiency control of individual functional areas
● Evaluation of unfinished (work in process) and finished products
● Make or buy decision
● Creation of a cost rate / hour
● Allocation of costs via

● Individual billing
● Allocation

Systematics of Cost Types - Assignability to Cost Objects
cost type accounting
direct costs overhead
primary
overheads
cost center accounting
Main cost Auxiliary cost

centers centers
primary costs primary costs
secondary costs
Primary & secondary
direct costs
overheads
cost unit accounting
source: according to Steger 2001

Types of Cost Centers
● According to function Structuring

e.g. Material, Production, Sales, Cost centers e.g.
possibilities
Administration, Development,
General Spatial Hall A, Hall B
Workshop, ...
● According to the type of
settlement Material Cost Center
e.g. auxiliary CIT: Costs are Production Cost Centers
initially charged to other main Administration Cost Center
CIT / auxiliary CIT Function
Sales Cost Center
or R&D cost center
Main CIT: Costs are allocated General, special food
directly to cost objects
Work
Jurisdiction Department - e.g. Sales
Product Group

Cost Centers and Cost Center Accounting
●Cost Center Accounting is the second level in the Cost and Activity
Accounting system.
●Their primary task is to allocate the costs entered according to cost

types to the respective area of responsibility according to the location in
which they were incurred and to compare them - as far as possible -
with the services performed.
●The particular importance of this task is that cost center accounting is

the only level in the cost/performance accounting system (CALR) that
makes it possible,
to confront responsible persons with the results of their actions (or non-
actions) with regard to costs and services.
Source: according to Kostenrechnung und Controling, Haupt Verlag

Objectives of Cost Center Accounting
Cost Center Accounting is an instrument:
1. The recording and cause-related allocation of costs to the areas of

responsibility defined as cost centers in the institution in question
2. To monitor and control the economic efficiency of the operating processes
3. For carrying out internal activity allocation
4. To determine costing bases, in particular overhead rates for Cost Object

Controlling.
Source: according to Kostenrechnung und Controling, Haupt Verlag

Cost Accounting Sheet Sheme: Here step Ladder Method
auxiliary cost centers main cost centers
primary Primary
overhead overhead cost
in cost groups
Allocation of primary overhead
∑
secondary ∑
Allocation of secondary overhead
overhead
total ∑ ∑ ∑ ∑ ∑ ∑
STOP
overhead
Allocation in
one direction

Cost Center Accounting - Cost Accounting Sheet
●Allocation of overhead costs to cost centers

●Internal activity allocation of auxiliary cost centers to main cost centers
●Allocation of overhead costs to cost objects
●Calculation Sequence:
1. General Cost Center on Main Cost Centers and Auxiliary Cost Centers
2. Auxiliary cost centers on main cost centers
3. Main cost centers on cost objects
●Cost allocation by means of cost accounting sheet is a prerequisite

for unit cost calculation in subsequent cost object controlling.

Operating accounting sheet principle
Cost centers Auxiliary cost centers Main cost centers
General Figures in General Production Production Material Adminis- Distribution

costs the operating auxiliary auxiliary costs costs tration costs
species accounts costs costs costs
cost-type 1 X X X X X X X
primary ΣX ΣX ΣX ΣX ΣX ΣX ΣX
overhead cost
general allocation ΣX
auxiliary cost centers
X X X X X
ΣX
allocation production
auxiliary cost centers
X
secondary overhead cost ΣX ΣX ΣX ΣX
Source: according to Steger 2001

Cost Accounting Sheet
●The operational accounting sheet is a tabular overview of cost center

accounting.
●It is used to display the costs documented by cost elements and their
allocation to the individual cost centers, to distribute the costs in the
auxiliary cost centers, to determine the actual or standard cost
surcharge rates for costing in Cost Object Time Controlling and Cost
Object Unit Accounting, and finally to control costs in order to
determine cost over- or under-recoveries in post-calculation.

Example of Internal Activity Allocation

manufacturing- adminis- sales
general repair process material
cost centers tration c.c. cost center
canteen workshop planning cost cent.
1 2
primary
8.701.695 232.720 151.750 660.850 2.125.200 2.073.300 301.750 2.133.995 1.022.130
overhead
allocation canteen 232.720

(per employee) 6.014 20.657 53.578 67.227 5.883 28.293 51.068
allocation 157.764
Repair (per h) 5.472 68.395 55.227 2.280 14.590 11.399
allocation 686.979
work schedule (per h) 242.331 444.648
secondary 364.304 567.503 8.163 42.883 62.467

overhead
total 8.701.6950 0 0 0 2.489.504 2.640.803 309.913 2.176.873 1.084.597
overhead
Source: Steger 2001

Internal Activity Allocation

Procedure According to the Step Ladder Procedure
●STEP 1: Allocation of costs to cost centers based on documents

● Personnel costs Wage and salary costs
● Calculatory depreciation Location of the asset item
● Energy costs with m² or m³
● Communication costs Billing documents
●STEP 2: Allocation of costs to cost centers via consumption quantities

● Room costs according to m² area consumption
(rent, cleaning etc.)
● Consumption of office supplies by number of persons employed in cost center
●STEP 3: Attributions based on key figures

● Calculatory interest 1 : 4 : 2 : 1 (according to the book values)
● Insurance 2 : 1 : 3 : 1 (by insurance value)

Distribution Basis of Different Cost Types
cost categories distribution basis

●auxiliary wages payrolls
●wages / salaries payrolls
●social expenses wage totals
●cost of materials material requisition slips
●external power kWh consumption, m³ of heated rooms
●external services utilization according to individual documents
●taxes, contributions unit value, ratios
●insurances insured value, sum insured
●leasing, rent contracts, usable space
●advertising, representation invoices (individual documents)
●general administrative exp. empirical theorem
●calculated depreciation impairment according to asset file
●calculated interest capital commitment according to asset file
●calculated risk costs sales volume, warehouse and receivables

Operating Accounting Sheet
The cost accounting sheet is a statistical cost summary sheet that lists the
cost center-related cost types in its vertical axis and the cost centers in its
horizontal axis - conveniently in the order of the dominant activity flow

Procedure for Internal Activity Allocation
Internal activity allocation assigns the (product-related) overhead costs

to the main cost centers (as far as possible, according to their origin).
internal procedures of the

cost allocation
No allocation
between stepladder equational
auxiliary cost method method
centers

Allocation Method: No Allocation between Auxiliary Cost Centers
primary
overhead
secondary
overhead
total ∑ ∑ ∑ ∑ ∑ ∑
overhead STOP
No Allocation

Allocation Method: Step Ladder Method
primary
overhead
∑
secondary ∑
overhead
total ∑ ∑ ∑ ∑ ∑ ∑
STOP
overhead
Allocation in
one direction

Allocation Method: Equation Method
primary
overhead
secondary
overhead
total ∑ ∑ ∑ ∑ ∑ ∑
overhead
Allocation in
all directions between all cost centers 4:39

Overhead Rates
● Material overhead costs Material overhead costs
=
surcharge rate Direct material costs
● Production overhead Production overhead

=
surcharge rate Direct production costs
● Administrative overhead Administrative overhead

=
surcharge rate Manufacturing costs of production
● Sales overhead selling expenses (distribution)

=
surcharge rate Manufacturing costs of turnover

Cost of Production
Direct material costs

+ Material overhead costs
+ Direct manufacturing costs
+ Production overheads
+ Special direct production costs
= Costs of production
Costs of production
- Inventory increases
+ Inventory reductions
- Own work capitalized
= Production costs of turnover

Calculation of the Cost of Goods Manufactured and Goods Sold
Production material 1.000.000

+ Material overheads 286.950
+ Production wages 900.000
+ Production overheads 732.235
= Cost of Production 2.919.275 goods
generated
+ Stock decrease 0
- Stock increase 0
- Own work capitalized 0
goods
= Production Cost of Turnover 2.919.275
sold

Surcharge base Direct Direct Cost of Cost of

material c. manf. cost prod. turnover
1.000.000 900.000 2.919.275 2.919.275
Cost Center Building Repair

Material
Manu- Adminis-
Sales Total
Cost Type Sum manag. Workshop factoring tration
Operating mat. 87.500 1.000 1.000 10.000 65.000 3.000 7.500
Energy costs 210.000 70.000 30.000 25.000 85.000 0 0
Auxiliary wages 337.600 20.000 32.000 81.600 163.200 13.600 27.200
Office expenses 120.000 0 0 0 0 80.000 40.000
Space costs 155.000 5.000 15.000 45.000 65.000 25.000 0
Risks 220.000 10.000 12.000 55.000 55.000 44.000 44.000
Depreciation 237.500 32.500 10.000 30.000 135.000 20.000 10.000
Sum 1.367.600 138.500 100.000 246.600 568.200 185.600 128.700
Allocation building manag. 3.500 30.000 75.000 15.000 15.000 135.000

Allocation repair workshop 11.500 86.250 2.875 2.875 103.500
Sum 288.100 729.450 203.475 146.575 1.367.600
Calculation of actual surcharge 288.100 729.450 203.475 146.575
Base for actual overhead calculation 1.000.000 900.450 2.919.275 2.919.275
Actual surcharge 28,81% 81,05% 6,97% 5,02%
Standard overhead surcharge 25,00% 80,00% 8,00% 5,00%
Standard overhead 250.000 720.000 233.542 145.964
Over/underfunding -38.100 -9.450 30.067 -611

Differentiated Overhead Calculation (Normal Case)

+ Material overhead costs per surcharge Mat._overhead_rate x direct mat. cost
+ Direct manufacturing costs
+ Production overheads per surcharge Prod._overhead_rate x Direct manuf. cost
+ Special direct production costs
= Costs of production
Only in exceptional cases
+/- Changes in inventories there is a price difference between
- own work capitalized costs of production and
= Production costs of turnover production costs of turnover!
+ Administrative overhead per surcharge Admin._overhead_rate x Cost of production

+ Sales overhead costs per surcharge Sales_overhead_rate x Prod. cost turnover
+ Special direct distribution costs
= Primary cost

From Primary Cost to Price
Primary cost
+ Profit surcharge (per surcharge rate)
= desired lower price limit
/ (1 - discount rate of the trade)
= retail price
+ transport, insurance, customs costs
= Cost price for trading
(if necessary, repeat for several trade levels)
* Gross margin (percentage of cost price)
= Net sales price for final consumers
* VAT rate
= Gross retail price for final consumers
* Fantasy percentage
= recommended retail price of the manufacturer

Procedure Cost Accounting Sheet
1 • Inclusion of direct costs
2 • Inclusion of (primary) overhead costs
3 • Distribution of (primary) overhead = primary distribution
4 • Distribution of (secondary) overhead = secondary distribution.
5 • Formation of actual overhead surcharges
6 • Transfer of normal overhead surcharges
7 • Determination of normal overhead costs
8 • Comparison of actual and normal overhead costs: Over/under coverage

Transfer of normal overhead surcharges
●In order to carry out the control function of Cost Center Accounting,
the system uses empirical values from the past that were used for
preliminary costing, that is, the normal overhead surcharges are to be
transferred to the allocation cost sheet:
●Overhead surcharges in example:
● Material cost center 9,7%
● Manufacturing main cost center A 210%
● Manufacturing main cost center B 143%
● Administration main cost center 4,8%
● Sales main cost center 6,7%
Often: Overhead < 100% one decimal place

Overhead 100% without decimal place

Exercise Cost Accounting Sheet
Calculate the sales price:

Profit margin: 50%
Raw material: 3000 EUR
Production personnel costs: 1500 EUR
Production energy costs: 600 EUR
Normal Material Overhead Surcharge: 70%
Normal Manufacturing Overhead Surcharge: 100%
Normal Sales Overhead Surcharge: 10%
Normal Administrative Overhead Surcharge: 3%

TECHNISCHE HOCHSCHULE DEGGENDORF
Database for Cost Allocation Sheet

Direct production production production
SLM SLM EBM Overhead costs
costs system S system M system XL
Raw materials 300.000 200.000 100.000 Space 100.000

Energy 100.000
Staff 150.000 110.000 176.000 Salaries 703.000
Depreciation 357.000
Energy 60.000 80.000 140.000
Others 100.000
Environ-
Material Analysis Prod. SLM Prod. SLM Prod. EBM Prod. Adminis-
Cost centers ment & Sales
Storage Laborat. system S system M system XL total tration
Quality
Log sheet salaries 38.000 280.000 70.000 29.000 29.000 27.000 148.000 46.000
Sheet depreciation 0 50.000 91.000 30.000 50.000 60.000 26.000 0
Work force 1 7 2 0,6 0,6 0,8 5 2
Keys other food. 5% 35% 10% 3% 3% 4% 25% 10%
Canteen key 5,263% 36,842% 10,526% 3,158% 3,158% 4,211% 26,316% 10,526%
Use of space m² 100 500 200 2000 2500 4000 300 200
Space+Energy key 1% 5% 2% 20% 25% 40% 3% 2%
QM key 20% 30% 10% 10% 10% 20%
Key Analysis Labor. 50% 25% 25%
Prof. Dr.-Ing. Stefan Scherbarth www. t h - d e g . d e

Environment Material Analysis Prod. SLM Prod. SLM Prod. EBM Production
expenses worksheet Sum Canteen
& Quality storage Laboratory system S system M system XL total
Sales Administration
Raw materials 600.000 300.000 200.000 100.000

direct
Staff
Energy 280.000 60.000 80.000 140.000
Space 100.000 2.000 1.000 5.000 2.000 20.000 25.000 40.000 87.000 3.000 2.000
Energy
Salaries
Depreciation 357.000 50.000 50.000 91.000 30.000 50.000 60.000 231.000 26.000
Other
overhead
1.360.000 95.000 45.000 375.000 175.000 102.000 132.000 171.000 580.000 205.000 60.000
Allocation canteen 5.000 35.000 10.000 3.000 3.000 4.000 20.000 25.000 10.000
Allocation Q&M -
Allocation auxiliary cost
Allocation analysis labor.
Overhead 1.360.000 420.000 210.000 190.000 230.000 630.000 240.000 70.000
Prod. SLM - S Prod. SLM - M Prod. EBM - XL Manufacturing Manufacturing Manufactoring

Actual costs Basis Material Single
manufacturing manufacturing manufacturing total costs of cost of
Costs
costs costs costs costs production turnover
Cost of purchase
Material Prod. SLM - S Prod. SLM - M Prod. EBM - XL Manufacturing

Sales Administratio
Overhead manufacturing manufacturing manufacturing total
overhead n overhead
Costs overhead overhead overhead overhead
surcharge surcharge
Surcharge surcharge surcharge surcharge Surcharge
Actual overhead surcharge 70% 100,0% 100,0% 72,8% 88,0% 10,1% 3,0%
Normal overhead surcharge 70% 100,0% 95,0% 80,0% 90,0% 10,0% 3,0%
IST-Normal Cost Comparison

Normal overhead cost 1.370.880 420.000 210.000 180.500 252.800 644.400 236.600 70.980
Overall shortfall 10.880 - - - 9.500 22.800 14.400 - 3.400 980
Prof. Dr.-Ing. Stefan Scherbarth
Normal overhead costs basis total value www. t h - d e g . d e
184.777 167.179 278.045 48
Cost error related to manfacturing expenses -12% -12% 15%
Use the Database for Cost Allocation Sheet
1. How is the key for the allocation of space or energy costs calculated?
2. How is the key for other costs calculated?
3. How is the key for the allocation of canteen costs calculated?
4. Why does it make sense to show the energy costs for the production
of the lines individually?
5. What reasons are there for manufacturing an energy overhead key
rate to be estimated anyway?
6. What are the reasons for allocating QM costs to Material and Sales?
(material 20% or sales 20%)
7. What are the reasons why 7 people are employed in the material
department (approx. 1/3 of the total staff)?
8. When can a personnel key 0.6 / 0.6 / 0.8 be useful?

Use the Database for Cost Allocation Sheet
●Dissolve the auxiliary cost centers according to the step ladder principle!
●Determine the base reference values for overhead costing!
●The manufacturing costs of production are equal to the manufacturing
costs of sales, what does this mean?
●Calculate the actual overhead surcharge rates!
●Why does it make sense to continue to include the production cost
centers for the products in the sheet and not to group them together in
the "Production" cost center?
●Check the overhead rates!
Where do you see a need for action?
●How do you rate the normal costing overall?
●Does it make sense to use the production cost surcharges for the
individual production areas?
●Where is the biggest mistake in this calculation model?
5.3. Cost Unit Accounting
● Cost unit accounting

● Costing procedures
● Overhead calculation
● Machine hour rate calculation

The Iceberg Principle

Calculation Total Cost of Ownership
source: www.blog.buyq.org/wp-content/uploads/2017/06/unnamed-1024x768.jpg
fetch date: 2019-03-31

Classification of Cost Object Unit Accounting Methods

Cost unit accounting
(pricing calculation)
Division costing Calculation Overhead calculation

of
co-products
Simple Equivalence Simple Extended
Step division
division number surcharge overhead
calculation
calculation calculation calculation calculation
Single stage Multistage Heterogeneous

Production Heterogeneous
companies companies goods or
more similar Simultaneous goods or
with with services of
products generation of services of
uniform uniform medium-sized
(Variants Main and co- small
large-scale large-scale and large
production, products enterprises
production production enterprises
e.g. (e.g. oil refinery) (e.g. locksmith's
(e.g. (e.g. (e.g., machine-
brewery) shop)
waterworks) cement plant) tools factory)
Source: according to Handbuch Spanen, Kosten- und Investitionsrechnung, G. Schuh, A. Kampker, A. Gulden, P. Burggräf



of
co-products
Step division
calculation

brewery) shop)

Method of Simple Division Calculation
c : Cost price per unit

C with C : Total costs of settlement period
x : Activity quantity of the period
Total costs of settlement period

'
Activity quantity of the period
Conditions:
● One-Product Company
● No inventory changes to semifinished products permitted
● No changes in inventories of finished goods permitted

Method of Simple Division Calculation
source: www.westmorlandblog.files.
wordpress.com/2018/09/teba
y-evas- organic-apple-juice-
7-1.jpg?w=1620/
fetch date: 2019-03-27
Product: Apple juice nothing else

Beginning period: no apple in stock, no apple juice in stock No stock
End of period: no apple in stock, no apple juice in stock change
total cost of accounting period €

Cost of goods sold: ' '
quantity that period +



of
co-products
Step division
calculation

brewery) shop)

Method of Step Division Calculation

8
456 4;<
' '2 3
756 7=
9:%
with:
c : Cost per piece
cM : Material costs per piece
cPj : Production costs of cost center j
xPj : Quantity processed in cost center j (number)
CAD : Total administrative and selling expenses (distribution)
xT : Sales quantity of the period (turnover)
Conditions:
● Changes in stock of semifinished products are permitted
● Changes in stocks of finished goods are permissible

Method of Two-Step Division Calculation
45 4;<
' '2 Only differentiation of sales and
75 7= production volume
with:
c : Cost price per piece
cM : Material costs per piece
CP : Production costs
xp : Production quantity (number)
CAD : Total administrative and selling expenses (distribution)
xT : Sales quantity of the period (turnover)
Conditions:
● Stock changes to semifinished products are not permitted.

Method of Step Division Calculation
Raw materials for 100l: 1000€

Moonshine:
Production costs: 500€
Produced quantity: 1000l
Sharp:
Production costs: 800€
Produced quantity: 500l
Sales & Administration:
Distribution costs: 3000€
Administrative costs: 500€
Sales volume: 700l source:
fetch date:
www.angermuende-tourismus.de/fileadmin/tmbimport/46/8a/qGR1LF_Destellerie.jpg
2017-11-28
1000€ 500€ 800€ 3000€ 500€ €

net costs: '
100A 1000A 500A 700A A
Production level 1: Production level 2:

Material costs Sales + Administration
Production costs / Production costs /
per unit costs / sales volume
activity quantity activity quantity


of
co-products
Step division
calculation

brewery) shop)

Single Step Equivalence Number Calculation
4 unit costs of the

' ∙K
cost block
standard unit
∑ :% 7 ∙ K
4
' ∙K
with:
ci : Cost price of a unit
of the product i ∑ :% 7 ∙ K
C : Total costs
n
quantity equivalence
: Number of products number
i
unit quantity
: Index of product types
aj : equivalence number of the product i
xi : Total quantity of product i
Conditions:
● Variant production: similar but not identical products
● No inventory changes to semifinished products permitted
● No changes in inventories of finished goods permitted
Equivalence Number Calculation
● Applicable for variant production

● beer
● stone slabs
● wheat products
● metal sheets
● screws
● steel slabs
● In variant production, the costs of different products are in a stable

relationship to each other - one only has to determine the costs of a
basic product and can conclude on all other variants.

Single Step Equivalence Number Calculation
● Different products of one type are produced (e.g. 3 beers)

● In principle the same raw materials are used
● In principle, the same production steps are carried out
● Light beer 3vol%: 1 kg malt per hl, 5 h cooking time
● Middle beer 5vol%: 2 kg malt per hl, 7 h cooking time
● Strong beer 9vol%: 4 kg malt per hl, 12 h cooking time

Example of Single Step Equivalence Number Calculation
● 3 beers
● Other raw materials identical, cost 30 € per hl
● Malt costs 6 € per kg
● Other processing steps identical
● Cooking costs 0,5 € per h
other malt cooking cooking
costs costs time costs
● Light beer: 30 + 1 6 = 36 (€) 5 0,5 = 2,5 (€)=> 38,50€
● Middle beer: 30 + 2 6 = 42 (€) 7 0,5 = 3,5 (€)=> 45,50€
● Strong beer: 30 + 4 6 = 54 (€) 12 0,5 = 6 (€)=> 60,00€
● Light: 38.5; Medium: 45.5; Strong: 60

● Equivalence number: Light: 1; Medium: 1.18; Strong: 1.56
45,50€
Medium =
38,50€

Single-level equivalence number

Single Step calculation
types of products Light Medium Strong sum

base
production volume 5.000 hl 7.000 hl 3.000 hl
total cost 7.000 1,18 = 8.260 691.000
Equivalence Number 1 1,18 1,56

allocation of costs
rounding errors
unit quantities 5.000 8.260 4.680 17.940
LMN. PPP
Unit costs of the unit variety ST, VW 38,52
NQ. MRP
38,52 1,18 = 45,45
unit cost 38,52 45,45 60,09
total cost 192.600 318.150 180.270 691.020
45,45
Prof. Dr.-Ing. Stefan 7.000
Scherbarth = 318.150
www. t h - d e g . d e 66
Method of the Multi Step Equivalence Number Calculation

8
4\ 459 4;^_ . 4` a .
' ∙ K\, 3 ∙ K]9, + ∙ K;^_ . + ∙ K< .,
∑ 75, ∙ K\, ∑ 759, ∙ K59, ∑ 75, ∙ K;^_ ., ∑ 7=, ∙ K< .,
9:%
n, i : Number / index of products aM,j : Equivalence number of the product i

m, j : Number / index of production sites
for the material costs
aP j,i
ci
: Equivalence number of the product i
: Cost of a unit Product i for cost center j
CM : Material costs aAdmin.,i : Equivalence number of the product i
CPj : Total costs of cost center j for administrative costs
aDist. ,i
CAdmin. :
: Equivalence number of the product i
Administration costs for distribution costs
CDist. : Distribution costs xP,i : Production quantity of product i
xT,i : Sales volume product i (turnover)
xP j,i : Quantity cost center j of product i
conditions:
● Variant production: similar but not identical products
● Changes in stock of semifinished products are permitted

' bKcde#KA 'fgc hde i #c

bK ijK'cie# k lcdh 1: Manufacturing 'fgc hde i #c
bK ijK'cie# k lcdh 2: Manufacturing 'fgc hde i #c
m Manufacturing center
…
bK ijK'cie# k lcdh r: Manufacturing 'fgc hde i #c
sr# #gceKc#f 'fgc hde i #c
lKAdg 'fgc hde i #c

' bKcde#KA 'fgc hde i #c 4\

' ∙ K\,
∑ 75, ∙ K\,
bK ijK'cie# k lcdh 1: bK ijK'cie# k 'fgc hde i #c +∑ tu

∙ K5%,
tu,v ∙ tu,v
bK ijK'cie# k lcdh 2: bK ijK'cie# k 'fgc hde i #c +∑ tw

∙ K5x,
tw,v ∙ tw,v
… …
bK ijK'cie# k lcdh r: bK ijK'cie# k 'fgc hde i #c +∑

ty
∙ K58,
ty,v ∙ ty,v
sr# #gceKc#f 'fgc hde i #c +∑ z{|}~.

∙ K;^_ .,
t,v ∙ z{|}~.,v
lKAdg 'fgc hde i #c +∑ •}€•.

∙ K< .,
‚,v ∙ •}€•.,v

Multi Step Equivalence Number Calculation

4\
' ∙ K\,
∑ 75, ∙ K\, Example: Material Costs
C\ : Material costs
+∑ tu
∙ K5%, 75, : Production quantity product i
tu,v ∙ tu,v
K\, : Material Equivalence number Product i
+∑ tw
∙ K5x,
tw,v ∙ tw,v
unit costs of the
cost block
… standard unit
+∑ ty
∙ K58,
ty,v ∙ ty,v
4\
∙ K\,
+∑ z{|}~.
∙ K;^_ .,
∑ 75, ∙ K\,
t,v ∙ z{|}~.,v
quantity equivalence
•}€•.
∙ K< unit quantity number
+∑ .,
‚,v ∙ •}€•.,v

Multi Step Equivalence Number Calculation

4\ : Material costs
4\
' ∙ K\, 75, : Production quantity product i
∑ 75, ∙ K\,
K\, : Material equivalence number product i
+∑ tu
∙ K5%,
tu,v ∙ tu,v
For all production stages:
+∑ tw
∙ K5x, 45… : Manufacturing costs
tw,v ∙ tw,v
75… , : Production quantity product i
… K5… , : Production equivalence number product i
+∑ ty
∙ K58,
ty,v ∙ ty,v
4;^_ .. : Administrative expenses

+∑ z{|}~.
∙ K;^_ ., 75, : Production quantity product i
t,v ∙ z{|}~.,v
K;^_ ., : Administrative equivalence number product i
4<
•}€•.
∙ K< . : Administrative expenses
+∑ .,
‚,v ∙ •}€•.,v 7=, : Sales volume product i
K=, : Sales equivalence number product i
Multilevel Equivalence Number Calculation
Cost overview Equivalence numbers table

Cost of materials 385.950 EUR Product A B C D E
+ Production costs 436.209 EUR Material 0,89 1,67 1,11 0,67 1

= Cost of goods Manfac-
822.159 EUR 0,81 1,68 0,98 0,7 1
manufactured
turing
+ Administration+Sales Admin.+
260.165 EUR
overheads 1 1,78 1,23 0,8 1
Sales
= Cost of goods sold 1.082.324 EUR
Production quantity [pieces] Sales quantity = Production quantity
Product A B C D E
Material 4.500 7.200 11.100 12.450 10.500

Multilevel
Multilevel Equivalence NumberCalculation:
Equivalence Number Calculation: Part
Part 1 Material
1 Material &
& Manufacturing
Manufacturing
types of products
base A B C D E sum
production volume 4.500 7.200 11.100 12.450 10.500
cost of materials 4.500 0,89 = 4.005 385.950
material area
equivalence num. material 0,89 1,67 1,11 0,67 1
rounding errors
unit quantities 4.005 12.024 12.321 8.341,50 10.500 47.192
unit material costs STV. MVP
T, NT 8,18
of the standard unit 0,89 8,18 = 7,28 RQ. NMW
material costs per piece 7,28 13,66 9,08 5,48 8,18

cost of materials 32.760 98.352 100.788 68.226 85.890 386.016
manufacturing costs 4.500 7,28 = 32.760 436.209
production area
equivalence num. prod. 0,81 1,68 0,98 0,7 1
rounding errors
unit quantities 3.645 12.096 10.878 8.715 10.500 45.834
unit production costs
9,52
of the standard unit
production costs per unit 7,71 15,99 9,33 6,66 9,52
manufacturing costs 34.695 115.128 103.563 82.917 99.960 436.263
cost of manuf. per unit 14,99 29,65 18,41 12,14 17,7
total manufacturing costs 67.455 213.480 204.351 151.143 185.850 822.279
Multilevel Equivalence Number Calculation: Part 2 Sales & Total

Multilevel Equivalence Number Calculation: Part 2 Sales & Total
types of products A B C D E sum
base
sales quantity 4.500 7.200 11.100 12.450 10.500

(here identical to production quantity)
sales + admin. Expenses 12.450 0,80 = 9.960 260.165

administration
equiv. number sales & admin. 1 1,78 1,23 0,80 1
rounding errors
sales &
unit quantities 4.500 12.816 13.653 9.960 10.500 51.429

sales & admin. expenses WLP. NLV
0,8 5,06 = 4,05 V, PL 5,06
per standard unit VN. RWM
sales + admin. costs per unit 5,06 9,01 6,22 4,05 5,06
sales + admin. Expenses 22.770 64.872 69.042 50.423 53.130 260.237
cost of goods manufactured
14,99 29,65 18,41 12,14 17,7
per unit
cost price per unit 20,05 38,66 24,63 16,19 22,76
total manufacturing costs 67.455 213.480 204.351 151.143 185.850 822.279
total cost 90.225 278.352 273.393 201.566 238.980 1.082.516
12.450 4,05 = 50.423


Distinction:
Cost unit accounting Direct to overhead costs

of
co-products
Step division
calculation

brewery) shop)

Simple Overhead Calculation with Overhaed Rates
● Cost of goods sold = direct costs + product-related overhead surcharge
● Cost of goods sold = direct costs + surcharge rate for activity consumption of product
● Overhead rate Total overhead costs of a period

=
(per time unit) Activity consumption of the period

Simple (Cumulative) Overhead Calculation
● Cost Object Time Calculation:

Periodic accounting to determine the overhead rate
● Direct costs of the period: Directly assignable to the cost object!
● Overhead costs for the period: Cannot be directly assigned to the cost object!
Total overhead costs of a period

● overhead rate
Direct costs of a period
● Cost Object Unit Accounting:

Calculation of the cost price of a cost object
● Cost of goods sold = direct costs + overhead rate x direct costs


Distinction:
Cost unit accounting Direct to overhead costs

of
co-products
Step division
calculation

brewery) shop)

Cost Unit Accounting

Overhead Calculation
+ Overhead material Material
+ Costs Supplied parts costs
+ Overhead %
Production
costs
Wage costs for manufact.
+ Overheads % Manufacturing prime
+ Special direct costs cost net
manufacturing costs sales
price
Admini. overhead %
+ Sales and marketing
overheads %
+ special individual
distribution costs
profit
surcharge

Example Calculation of Overhead Costing

Overhead rates, full cost accounting, cost center accounting
Overhead rates are calculated on the basis of the figures in the cost element plan of Max Müller Maschinenfabrik GmbH (K016/0102) and the
overhead costs of the main cost centers.
Administrative overheads are allocated to the manufacturing costs of the products produced.
(cost of production); for selling overheads, the reference figure is the cost of goods sold (cost of turnover).
The following information is available for finished goods, work in progress and own work requiring capitalization for the previous accounting
period:
Direct material costs 2.400.000 EUR The direct manufacturing costs 8.000.000 EUR
Material overhead costs 300.000 EUR are distributed among the production cost centers:
Production overheads 1 2.500.000 EUR Production cost center 1: 3.000.000 EUR
Production overheads 2 2.600.000 EUR Production cost center 2: 5.000.000 EUR
Order-related production costs 31.000 EUR Administrative overheads 2.100.000 EUR
Increase in stocks: 430.000 EUR Sales overhead costs 1.000.000 EUR
Stock reductions: 120.000 EUR
Own work capitalized: 140.000 EUR
Calculate the cost of goods manufactured for production and for sales using the appropriate
overhead rates for material, prod. 1, prod. 2, administration and sales.

Overhead Rates
● Material overhead costs Material overhead costs 300.000€
12,5%=
surcharge rate Direct material costs 2.400.000€
● Manufacturing center 1 Production overhead 1 2.500.000€

83%=
surcharge rate Direct production costs 1 3.000.000€
● Manufacturing center 2 Production overhead 2 2.600.000€

52%=
surcharge rate Direct production costs2 5.000.000€
Administrative cost center 2.100.000€

● Administrative overhead 13,2%=
surcharge rate Cost of production 15.831.000€
● Sales group overhead Sales overheads 1.000.000€

6,5%=
surcharge rate Production cost of turnover 15.381.000€

Cost of Production and Turnover
Direct material costs 2.400.000€

+ Material overhead costs 300.000€
+ direct manufacturing costs 8.000.000€
+ Production overheads 5.100.000€
+ Special direct manufacturing costs 31.000€
= Cost of Production 15.831.000€
Cost of Production 15.831.000€

- Increase in inventories 430.000€
+ reduction of stocks 120.000€
- Own work capitalized 140.000€
= Production cost of turnover 15.381.000€

Cost Unit Accounting
Problems with overhead costing:
● Small order and large order

● High proportion of production overheads
Administrative and selling overheads
....
● Assignment according to cost causation
Improvement through extended overhead costing

on the basis of cost rates:
● Machine hour rates instead of production overheads
● Allocation amounts per order, such as order-fixed administration costs
Source: according to Preißler, 2000

Machine Hour Rate Calculation
Sum of the production overhead costs of the cost center

Hourly machine rate =
Total duration of the cost center
Actual and Plan Invoice
Advantages of the machine hourly rate calculation:

Cost allocation to the products in a more causal way
Charging with residual overhead costs only after use of the machine (standard time)
Enables profitability calculation and cost comparisons (Make or Buy) on a better basis
Determination of downtime costs
Promotes efficiency measures, cost reduction, sense of responsibility

Example machine hourly rate card
Machine No.: 15
Acquisition value: 210,000 EUR
Designation: Lathe
Replacement value (WBW): 277,500 EUR
Type: SCF 10
Cost center: 3112
Annual machine operating time: 1,500 hours
Year of acquisition: 2000
Energy consumption: 60 kWh
Useful life: 10 years
lime. Interest rate: 8%.
cost categories Reference value EUR / year

• lime. amortization Replacement cost / useful life 27,750
• lime. Interest (average born cap.) Acquisition cost 8,400
• Energy costs kWh Actual values / empirical values 12,000
• Maintenance / servicing Actual values / empirical values 5,700
• occupancy costs Actual values / empirical values 750
• operating costs 1.050
• other expenses 375
Machine-dependent costs (EUR) 56.025

Hourly machine rate (EUR / hour) 37,35

Overhead Costing versus Machine Hourly Rate Costing
Differentiated overhead Hourly machine rate

calculation calculation
production material production material
material overheads material overhead
production wage production wage
depreciation
amortization
prime price
production overhead calculatory interest
machine costs
occupancy costs
energy costs
maintenance costs
remaining production overheads
-> remaining prod. overheads surcharge
selling and marketing expenses selling expenses

administrative expenses administrative expenses

Cost Object Controlling Calculation of Machine Hour Rates

machine hour rate calculation formula
Replacement value (€)
Calculatory depreciation =
Useful life (a) x Useful life (h/a)
Acquisition value (€) x lime. Interest rate (%/a)

Calculatory interest =
2 x time-of-use (h/a)
Room requirement (m² ) x room costs (€/m² a)

space costs =
Time of use (h/a)
energy costs = Energy demand (kW) x electricity tariff (€/kWh)
Replacement value (€) x maintenance cost rate (%/a)

maintenance costs =
Time of use (h/a)
Experience value (€/a)

Tool costs + auxiliary materials =
Time of use (h/a)
machine hour rate Sum of costs (€/hour)

Example: Comparison of Overhead Cost Estimate and

Machine Hour Rate Calculation
Input data expenses
Production hours (wage) for the production of a part 70
Wage costs (€/h) 10
Overhead calculation
Production overhead surcharge (%) 500,00
Wage costs (€) 700,00
Production overhead (€) 3500,00
Production costs (€) 4200,00
Cost calculation via machine hour rates

Residual production overhead surcharge (%) 20
Machine hourly rate Order time

Machine costs
(€/h) (h)
Machine 1 50 40 2000,00
Machine 2 20 20 400,00
Machine 3 60 10 600,00
Total machine costs 3000,00
Wage costs (€) 700,00
Remaining production overheads (€) 140,00
Production costs (€) 3840,00
Difference: Too much € is calculated with the overhead calculation: -360,00

Exercise machine hour rate calculation 1

Operating situation:
In a plant, the main production cost center „Prototyping“ has the following results
for a AM system in one month:
Replacement costs: 84.000 € In addition, the following machines were subject

Useful life: 10 years to independent manufacturing overheads in the
Depreciation method: linear same month in the cost center "Prototyping":
Acquisition value: 84.000 € Auxiliary wages: 10.000 €
Calculatory interest: 8 % p. a. Social expenses: 6.000 €
(average value method!) General operating costs: 4.000 €
Power consumption: 15 KW The cost center "Prototyping" had additional
Electricity price per kWh: 0,12 € Production wages of: 12.500 €
Basic fee electricity: 66 € (monthly)
Maintenance costs/year: 4.800 €
Task 1a:
Stand and work area: 20 sqm Use the above data to determine the machine
Room costs per sqm: 30 € (monthly) hour rate for the AM-System.
Tool costs (per month): 200 €
Task 1b:
Auxiliary costs per month: 120 €
Determine the remaining production overhead
Machine running time (month): 130 h using the above data.

Exercise machine hour rate calculation 2

Task 2a:
Then calculate the prime cost using the machine hourly rate
for an order of 500 parts, which causes the following total costs:
Direct costs: The following overheads shall be charged
Production material: 750 € surcharge rates are used:
Production Wage: 600 € Material overhead rate: 6 %
Special direct costs of production: 250 € Administration overhead rate: 10 %
Workload on the AM-system: 30 h Sales overhead rate: 5 %
Machine hour rate from exercise 120 €/h
Remainder production overhead 160 %
Task 2b:
For an order of 1.500 parts, another machine can be used.
Machine hour rate: 30 €/h Machine hour rate: 20 €/h
Remaining production surcharge 160% Remaining production surcharge 160 %
Production material: 2250 € Production material: 2250 €
Production Wage: 1200 € Production wage: 1800 €
Special direct costs of production: 250 € Special direct costs of production: 250 €
Workload on the AM-system: 60 h Workload on the AM-system: 90 h
Which machine can be used for cheaper production?


One company produces the chipboards A, B and C. The only difference between the
individual chipboards is their thickness. Production and sales quantities do not
match. Empirical observations and measurements have shown that the production
and distribution costs of the various particleboards are in a proportional relationship
to each other. This proportional relationship is reflected in the following series of
equivalence numbers:
Product Production Equivalence num. Sales equivalence num.
type quantity Production quantity of the distribution
A-wood 3.500 m² 0,8 2.000 m² 1,2
B-wood 7.000 m² 1,0 4.500 m² 0,6
C wood 1.800 m² 1,6 2.500 m² 1,0
The total costs amount is 228.200€. This includes distribution expenses of 38.000€.
a) Determine the manufacturing costs per sqm for each product type.
b) Determine the cost price per sqm for each product type.
c) Is a differentiated consideration of production and sales volumes necessary,
if the equivalence number series from the production and sales are identical?

Frequency of Application of Different Product Calculation Methods

● The machine hour rate calculation is used frequently in combination with a
surcharge calculation (55%).
● The differentiated overhead calculation is used 75% of the time in retail.
● In about half of the companies, two methods are used in combination.
● The chemical industry often produces co-products,
Therefore, the coupled calculation is of great importance.
costing method utilization

Single-level division costing 7,5%
Multi step division costing 35%
Equivalence number calculation 10%
Coupled calculation costing 7,5%
Simple overhead calculation 15%
Differentiated overhead calculation 22,5%
Surcharge calculation with
55%
machine hour rate calculation

Economics of Laser Powder Bed Metal AM
!!!
!!!
!!!
source: Roland Berger

Additive Manufacturing - next generation (AMnx) Study by Roland Berger (HiRes) 160411.pptx , 69

Economics of Laser Powder Bed Metal AM
Roland Burger’s breakdown of the hourly machine rates for laser metal additive
manufacturing is a good foundation for understanding the costs of AM:
● First print successes are uncommon, especially when starting out. It can take +5
iterations to successfully print a part, dialing in settings and support structures.
Better modeling software is improving the success rate.
● Providing suppliers with additive CAM and machine operation experience is critical
to achieve good production numbers. Training a supply network can benefit your
competitors, especially if there are strong part similarities…
● Material costs range from $35 to $500 per kg and Material build rates range from
5 mm³/h to over 50 mm³/h, depending on the machine. Metal powder can age
due to atmospheric exposure and repeated print cycles.
● Metal powders for AM are often hazardous or even explosive, as in the case of
titanium and aluminum powders. Added safety training and operation costs are
part of AM.
● The cost of post processing to achieve the desired surface finish, final dimensions,
and part properties through annealing or hot isostatic pressing can run more than
3x as much as the metal AM printing costs.

Cost of Metal AM
' c„ ∙ … † '2 '‡ 'ˆ
Batch cost [€]

Engineering cost [€]
Material cost [€]
Operator rate [€/h]
Printer (AM machine) rate [€/h]
Build time of part [h]
Part cost [€]

Cost of Metal AM: Batch cost
' c„ ∙ … † '2 '‡ 'ˆ
'ˆ : Batch cost [€]

'ˆ ' ˆ '‰Š '…‹a
' ˆ: Consumables Batch [€]
'‰Š : Quality check [€]
'…‹a : Post Processing cost [€]
Batch cost - QA & Post Processing:

Part design and build orientation will
impact part properties, post-
processing cost, the need for
additional fixturing, QA costs and QA
pass rates.

Cost of Metal AM: Engineering cost
' c„ ∙ … † '2 '‡ 'ˆ
'‡ : Engineering cost [€]

c‡ ∙ ‡ ∙Œ
'‡
…
c‡ : time design for AM [h]
‡: Rate Engineer [€/h]
Œ : Design Complexity Factor
…: Number of parts produced
Engineering cost - Complexity Factor:
Complexity impacts design time, QA,
and print difficulty rather than print
time directly, unlike traditional
manufacturing.

Cost of Metal AM: Material cost
' c„ ∙ … † '2 '‡ 'ˆ
'2 : Material cost [€]

'2 … •Ž• ∙ '2•
…: Volume part [mm³]
•Ž• : Volume support [mm³]
'2• : Material cost per volume [mm³/€]
Volume Based Material Costs:

Removing unneeded material pays
dividends in lower material costs and
faster printing speeds.

Cost of Metal AM: Rate for Operation AM machine
' c„ ∙ … † '2 '‡ 'ˆ
†: Operator rate [€/h]

…: Printer (AM machine) rate [€/h]
'` '‘ '•’“ '•• '…”“ ' '† ’“
…
•†•
'` : Depreciation [€]
Machine & Service Costs:
'‘ : Interest [€]
Machine and service costs
are a significant source of '•’“ : Service cost [€]
part costs, good operations '•• : Floor space cost [€]
and usage rates can '…”“ : Power cost [€]
effectively lower costs, but
' : Consumables cost (Shield gas!!!) [€]
watch out for consumables
expenses. '† ’“ : Overhead cost [€]
•†• : Operating time [h]

Cost of Metal AM: Time for part
' c„ ∙ … † '2 '‡ 'ˆ
cˆ : Build time [h]

… •Ž• •… ••Ž• ∙ c—
cˆ
–ˆ •—
Build Time Factors: …: Volume part [mm³]
With the potential for •Ž• :Volume support [mm³]
thousands of layers per mm,
–ˆ : Build speed [mm³/h]
part orientation, support
height, and the time to setup •… : Height part [mm]
each layer can significantly
••Ž• :Height support [mm]
impact print time.
c— : Layer reset time [h]
••Ž• :Height of Layer [mm]

05a AMP Basics Cost Accounting Pricing

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

05a AMP Basics Cost Accounting Pricing

Uploaded by

Copyright:

Available Formats

TECHNICAL UNIVERSITY DEGGENDORF

5.1. Overview Cost Accounting

Prof. Dr.-Ing. Stefan Scherbarth www. t h - d e g . d e 1

Cost Type and Cost Center Accounting

Prof. Dr.-Ing. Stefan Scherbarth www. t h - d e g . d e 2

Systematics of Cost Types

● Cost accounting systems at a glance:

● According to the extent to which the

Prof. Dr.-Ing. Stefan Scherbarth www. t h - d e g . d e 3

Components of Cost Accounting

cost recording cost allocation

What costs have Where are the What are the

overhead cost centers allocation

acquisition distributive calculation and

Prof. Dr.-Ing. Stefan Scherbarth www. t h - d e g . d e 4

Systematics of Cost Types - Examples

● raw materials, consumables and supplies

● wages, salaries, ancillary wage costs,

● Cost of capital ● depreciation, interest, risks

● External service costs ● repairs, transport, etc.

● Costs of human society ● taxes of a cost nature, fees, contributions

source: according to Heberstock

Prof. Dr.-Ing. Stefan Scherbarth www. t h - d e g . d e 5

Cost Types - Assignability to Cost Objects

Prof. Dr.-Ing. Stefan Scherbarth www. t h - d e g . d e 6

Cost Types - Assignability to Cost Objects

Watch Out! Compliance with the causation principle vs.

Prof. Dr.-Ing. Stefan Scherbarth www. t h - d e g . d e 7

Cost Types - Assignability to Cost Objects

Prof. Dr.-Ing. Stefan Scherbarth www. t h - d e g . d e 8

Primary and secondary overheads

Overhead costs are often differentiated according to whether they are

● Whether they originate from internal activities (for example, activities

Prof. Dr.-Ing. Stefan Scherbarth www. t h - d e g . d e 9

Systematics of Cost Types - Assignability to Cost Objects

cost type accounting

direct costs overhead

cost center accounting

Main cost Auxiliary cost

cost unit accounting

source: according to Steger 2001

Prof. Dr.-Ing. Stefan Scherbarth www. t h - d e g . d e 10

Factors Influencing Costs

Change in costs [%]

Prof. Dr.-Ing. Stefan Scherbarth www. t h - d e g . d e 11

Degree of Capacity Utilization Related Costs

● Degree of capacity utilization = Actual performance

● Mixed costs are costs that cannot (without considerable effort) be

Prof. Dr.-Ing. Stefan Scherbarth www. t h - d e g . d e 12

Useful Costs and Idle Capacity Costs

0% Degree of capacity utilization b 100%

● used capaity CU = Cf ⋅ b CU used capacity costs [EUR/period]

Costs with Changing Degree of Capacity Utilization

● Fixed costs: Costs of operational readiness (Schmalenbach, 1963)

Total fixed costs

● Step Costs: Example Machine purchase, new building

● Variable costs a) Dependence on degree of responsiveness

Prof. Dr.-Ing. Stefan Scherbarth www. t h - d e g . d e 14

Costs for Changing Degree of Capacity Utilization

● Total costs= fixed costs + variable costs

● Average cost = total cost

C total costs [EUR/period] x activity quantity [piece/period]