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Cost Evaluation & Analysis - Coggle Diagram
Cost Evaluation & Analysis
Fundamentals of costing evaluation
The Importance Of Costing
What Is Costing Evaluation:
Process Determining How resources are being utilized based on cost allocation and benefits.
Why Need Costing Evaluation:
•Basis For Identification For Product Selling price •Basis for identification of Products Profit projection
What Is Cost:
Monetary valuation in dealing with the aspect of material, goods services,risk issues,resources and etc.
Cost Reduction
What is Cost Reduction
Process Involving Finding,and removing unwarranted expenses without discriminates the product’s quality and increase in product’s profit
Why Need Cost Reduction
•To fully utilize all production capabilities
•Improve methods and reduce unwanted work in progress and inventory of product
Cost Classification
Recurring cost: Direct functions involving manufacturing operation cost
Fixed cost: Unchanged Cost Of Production Of goods rate involving, (Investment cost, or Overheat Cost)
Non Recurring Cost: Capital cost, In example manufacturing cost
Variable Cost: Dependent Cost with the change of production of goods rate involving materials, direct labor, maintenance cost, packaging cost, etc.
Fundamentals of costing method
Parameter of Costing Evaluation :
In house components production and manufacture liaise with vendor(category: buy item)
In house components production and manufacture without vendor involvement(category: make item)
Finished components purchased from vendor (category: buy item)
Difference of Make-Buy Decision:
Make
-Cheaper
-Experience gained
-Compatible towards production line
Buy
-Higher value of reliability and quality assurance
-Ready availability of suppliers
-Inexperience of making/manufacture parts/components
Cost Evaluation Methods:
Analogy
Design project future cost relies on the past similar project cost in referred to cost escalation and project size difference
Statistical Approach
Regression analysis involving system cost initial parameter (weight, speed, etc.) establishment
Industrial Engineering Approach
Separation of cost for identical elements of work and summed into cost per part
Product Pricing
What is Product Pricing
Product selling price that simultaneously and positively affects the customer interest and greatest profit generation.
Method to Identify Price of Product
-Implementation of break-even chart :
shows and portrays the profit and loss on the selling price of product/price and manufacturing cost of product
-Manufacturing cost parameters involving :
i) variable cost: Labor, purchased parts, material
ii) fixed cost: tooling, overhead cost
Brake-Event Chart
How to design a break-even chart:
Determine the fixed cost. It does not depend on the volume or the number of products.
1.Determine the variable costs per product. It includes material, labor and purchased parts.
Draw the total cost as a function of the number of products on the chart.
Total cost = fixed cost + variable cost.
Determine a sale price of the product.
Draw the sales as a function of the number of the products on the chart.
6.The intersection of the sales line with the total price is the break-even point.