Cost Estimating Versus Cost Accounting

What is the difference between cost estimating and cost accounting?

Cost estimating is a precursor to cost accounting because it done at the beginning of the process.   Lets define cost estimating as the estimation of the cost of a goods or services  prior to the actual production of the goods or services.  Cost estimating is used in both the production of goods and services to perform a specified action.

Cost accounting or costing is different then cost estimating because its an analysis of the costs to actually product the goods or services.  Cost accounting is done after the production while the cost estimating is done prior to the costing of the goods and services.

I like to think of  cost estimating as being an educated guess.  Unless there are simulations which can be run to determine the exact cost estimate, the estimator is performing a best guess based on previous knowledge.  Cost estimating is a prediction while cost accounting is actually what expenses where where incurred during the production process.

Cost estimating is a complex process and requires a person who understands the domain in which the cost estimating is taking place.  Some of the items that are considered

Product Design

Materials and how they are used in the product or services

Operational steps required to produce the product or services

Machine and Labor costs involved

Visually be able to understand all the areas of manufacturing from the requirements

MIE QuoteIt from MIE Solutions offers free quoting software for step by step quoting.  The quoting software is very user friendly and offers customization of operations, materials, formulas and even table lookups.   Please visit our website and take a tour of the free quoting software instead of the old method of quoting in excel.

Author: MIE Solutions

David Ferguson has over 20 years of experience in the manufacturing and fabrication industry. David Ferguson has been to over 100 manufacturing companies helping and guiding them to be more efficient and cost effective. As a child in Junior High School David Ferguson found a passion for the early computer systems, which would drive much of his future work. David Ferguson created and sold his first computer program, Arrow Data Systems, which was an early CAD/CAM system for the Apple 2e Computer. In the late 1980's after seeing his father (a sheet metal manufacturer) come home many nights estimating, David Ferguson saw an opportunity to optimize his effort through computer technology. Shortly thereafter the FabriTRAK Production Control package was developed. The Quote It! estimating package was developed out of the FabriTRAK system to become one of the leading sheet metal estimating packages in the world. David Ferguson has always had a passion for developing software to make the manufacturing process simpler, faster and more efficient. Prior to founding MIE Solutions David Ferguson worked with his father at Alco Sheet Metal, METALSOFT Inc. and was a consultant at Toyota Motors Sales. David Ferguson has his Masters in Computer Science and Mathematics from California State University, Long Beach.

2 thoughts on “Cost Estimating Versus Cost Accounting”

  1. I agree that a cost estimate service would require an expert who knows the domain. Because of this, it would probably be smart to find someone who can do it for you that knows the business. In addition to this, you would want to talk with past references to see what they think of the service.


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