# Engineer To Order Material Costs

Now that we have been investigating many of the details of material costs in quotations, we will now take a look at the mathematical calculations required.

# Engineer To Order Material Costs

Step 1)  Determine the quantity of parts required.   This is the number of parts required to make the end product.  In many situations if you are building a large assembly there may be situations where parts required would be greater than 1.

partsRequired = 1   // Usually 1

Step 2) Determine the total quantity required to manufacture the quantity that is being requested on the quotation

totalQuantity   = quotationQuantity*partsRequired

Step 3)  Calculate the number of parts or pieces that can be made out of a single purchased stock.

stockPieces = xxx

Step 4)  Stock Required is the number of purchased units that are required to manufacture the quoted quantity

stockRequired = Ceiling(totalQuantity / stockPieces)

Step 5) Determine the unit cost of the stock item.  With quantity breakouts the cost may vary depending on the quantity.  Also, the breakouts may be in different units, i.e. LBS versus EACH.  So we find the matching price based on the totalQuantity multiplied by the Unit Of Measure conversion.

price = FindMatchingPrice(stockRequired*unitOfMeasureConversion)

The goal now is to come up with a Unit Cost of material based on the values above and the type of material calculation which was described earlier.

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.

Assuming sheets or plates of material which have both width and length.

return price

## Lot Price

return price/totalQuantity

## Amortize

return (unitOfMeasureConversion*stockRequired*price)/ totalQuantity

## Calculate Include Scrap

return price *unitOfMeasureConversion/stockPieces

## Calculate Without Scrap

return price *(unitOfMeasureConversion / ((stockWidth*stockLength)*(blankWidth*blankLength))/partsPerBlank

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.

http://www.mie-solutions.com/mie/index.php/MIE-QuoteIt-Quoting-and-Estimating-Software/mie-quoteit.html

## 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.