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CHAPTER 6 : Cost Evaluation and analysis - Coggle Diagram
CHAPTER 6 : Cost Evaluation and analysis
Cost evaluation
the importance of cost
definition of cost
Monetary evaluation in dealing with the expect of material , goods/service, risk issues , resources and others
what is costing evaluation
•Process of determining how resources are been utilized based on cost allocation and benefits.
why needs costing evaluation(the importance)
basis for identification for selling product price
basis for identification for product's profit projection
method
Parameters of costing evaluation
finished components purchased from vendor : buy item
in house components production and manufacture liaise with vendor : buy item
in house components production and manufacture liaise without vendor involve : make item
Difference of make-buy desicion
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
industrial engineering approach
separation of cost for identical elements of work and summed into cost per part
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,) establishment
Cost reduction
definition
Process involving finding and removing unwarranted expenses without discriminates the product's quality and increase product's profit
the importance
to fully utilize all production capabilities
improve methods and reduce unwanted work in progress and inventory of product
Cost Classification
Nonrecurring cost
capital cost : manufacturing cost
recurring cost
direct function involving manufacturing operation cost
fixed cost
unchanged cost of production of goods rate involving
investment cost : insurance, property taxes
overhead cost : rental, water, electric bills
variable cost
dependable cost with the change of production of goods rate involve materials, direct labor, maintenance cost, packaging cost
Product pricing
definition
Product selling price that simultaneously and positively affects the customer interest and greatest profit generation.
Method to identify price of product/service
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
Break Even Chart
determine the variable cost per product. include material labor and purchased parts
determined fixed cost. does not depends on volume or number of products
draw the cost as a function of the number of products on the chart . Total cost = fixed cost + variable cost
determined a sale price of the product
draw the sales as a function of number of product on the chart
the intersection of the sales line with the total price is the break-even point
examples
