Laser cutting sheet metal parts is very common in the industry. Not too many years ago laser cutting was new and estimating the costs was new. Now, laser cutting estimating has become much more accurate through software simulations.
The simplest way to estimate laser cutting time and material is using the actual laser programming software like Metacam by Metamation. A flat DXF file can be loaded into the software and the software will accurately estimate the laser time based on a simulation cutting the part. The part can actually be nested giving you a more accurate time cutting the parts from a nested sheet. Once the estimated time has been calculated you would enter that time into the cycle time of the nesting software to calculate your costs. The Gas, Depreciation, Utilities would be included in your overhead rate of the machine which in turn gives you the cost to run the part.
There are other situations where you do not have a good DXF file and you must estimate by estimating the number of inches, pierces, cut speed, etc. The screen shot below shows where you would create an a formula and use the formula to enter values. The formula would have to be customized for your specific machine and manufacturing process which in turn brings consistent estimates.
Lastly, a calculator can be created to assist you in calculating the number of linear inches of cutting as shown below.
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Overhead expenses are all the costs not directly associated with the manufacturing of a specific product. Raw material costs and direct labor are two examples which do not fall into the category of overhead expenses. These costs are incurred by the manufacturer but cannot identified as part of the direct product costs.
One of the goals in manufacturing or any business is to minimize the direct costs of manufacturing some product. If you are a made to order manufacturer you may find your overhead less then the actual direct manufacturing costs. The reason is your expenses to carry out the daily activities of the company are low compared to the labor and material costs directly associated to the manufacturing of a product. In other companies the overhead may be greater then the actual direct manufacturing costs. For any business the real goal to reach for is lowering your overhead rate while keeping product production at the same level or increased level.
There are three main categories that overhead can be subdivided into. The three would be Selling and administration, distribution and plant factory overhead costs. Each of these cost take away from the companies bottom line.
In the next section we will review each of these overhead categories in detail.
Please see MIE Solutions which offers ERP Software and Cost Estimating software for the manufacturing industry.
Direct Burden Expenses
The are expenses that are not included in direct labor costs and material costs and these would be direct burden expenses. Direct costs are those costs directly involved in the manufacturing of a product. All other direct expenditures can be classified as direct burden expenses. These would include required fixtures, jigs,molds, etc that have not been included in direct engineering expense. Normally marketing, sales and shipping expenses would be indirect costs unless they are directed at a specific product. For example, if you are doing an advertising campaign for a specific product this expense would be an direct burden expense.
Indirect Burden Expense
All expenses except direct expenses are classified as indirect expenses. This would be administrative expenses, factory overhead expenses. Factory expenses can include many different items such as indirect material, indirect labor and indirect engineering costs which are not direct costs. The office or factory rent, utilities, insurance and equipment would all be categorized as indirect burden expenses.
There are many different types of indirect burden expenses which you should probably talk to your account to get a full list which you may be interested in.
MIE Trak ERP software is designed to capture these expenses in order to manage your job costs.
Indirect material costs are those costs that are not directly added into the product. There are many times materials required to manufacturer a part but those materials are not put into the product. Examples of this situation are oils, lubricants for machines, sandpaper, molds and castings. There are some situations where the molds and castings would be included into the direct material costs because they specific for the product. When doing estimates in this way you have the choice of amortizing the mold and casting costs into the product or charge the customer separate as a one time charge.
Other possible indirect material costs are nuts, bolts, screws or inexpensive items. Usually this would be added into the product causing those materials to be direct costs but there are situations depending on the product being manufactured where these type of items would be indirect costs.
Job Costing has been around for many years to determine the cost of manufacturing a given product. The process by which the expenses are record is costing. Job costing software should make the process of recording the transaction simpler and not more difficult and time consuming. Job costing software is not like cost accounting because it does not incur the situation of debit-credit transactions. Job costing does use the same data to determine profitability and to evaluate all the cost of manufacturing the product. Here are a few purposes which may help you determine the need for a proper job costing software package.
1. To determine the actual costs of the manufactured item.
2. To determine the total costs of all the components of a manufactured item.
3. To determine the standard price of the product
4. To determine the selling price of a the product which would include profit above the actual costs.
5. To determine feasibility of manufacturing the product at a profit
6. To evaluate the accuracy of estimates. This is after the fact and the goal is to match or better the estimate cost.
7. To determine which components should be purchased versus those to be manufactured. In the day and age of outsourcing it may be more cost effective to purchase some parts.
8. To compare the costs of manufacturing the item with different processes.
Costing is an essential component to the manufacturing processes because without it you would be waiting until the end of the month to see if you were profitable. Also, you would not know what jobs were profitable versus the losers.
Try this estimating software.