Material costs in job estimates can come in a variety of ways. When you are estimating the cost to manufacture a product and the product is made out of either plate material, sheets, tubing, etc there are a few calculation methods that may be required.
Here is a list of 7 calculation methods which are used to determine the cost.
Lot Price – This method is used when you are giving the price as a single lot charge. For example, if you are quoting 10 pieces and the lot charge for the material is $50.00, the price each would be $5.00
Amortize Price – This method is used when you want to distribute the costs among all the material even if there is a lot of scrap left over. This situation is used when the material may only be used for this job and you cannot reuse the material so it has to be charged back to the customer.
Single Part Price – This is the simple method where you just put in a cost. This is not usually used unless your getting the raw material as actual size the customer requires and the cost you were given is piece price.
Calculate Without Scrap – This method will take the cost of the part size directly and not include any scrap that may be associated with it including left over blank scrap and full stock size scrap.
Calculate With Scrap – This method will take the left of scrap of the stock size and amortize this into the piece price.
Calculate Blanks Include Scrap – This method will use the minimum cost of the blank required and amortize that into the cost. Also the scrap of the stock size will be used.
Calculate Blanks Without Scrap – This method will use the minimum cost of the banks required and amortize that into the cost but will not include the stock scrap cost.
The next blog entry will go over real life calculations of each of these types.
MIE Solutions provides software resources to help you manage your direct and indirect labor throughout the product life cycle from quoting and estimating, job costing to invoicing.