Costing, Estimation and Material Requirement Calculations
Estimation converts a drawing and process plan into material, labour, overhead and price. The exam favours a clean build-up per piece with allowances shown explicitly.
Cost build-up
- Material cost = mass required × rate; required mass includes a scrap or wastage allowance.
- Labour cost = time × rate, per hour or per piece.
- Overheads include power, depreciation, supervision, consumables and rent; apply them on a stated base such as material, labour, prime cost or machine hour.
- Prime cost = material + direct labour + direct expenses. Total cost = prime cost + overheads. Selling price = total cost + profit, or total cost ÷ (1 − profit margin) when margin is on selling price.
Worked example
A bush is turned from 50 mm MS bar, 80 mm long, 500 pieces. Volume = π/4 × 0.05² × 0.08 = 0.0001571 m³; mass = 0.0001571 × 7850 = 1.233 kg. At ₹75/kg, material = ₹92.48. Labour = ₹12.00. Overhead at 20% of material plus labour = 0.20 × 104.48 = ₹20.90. Total cost = ₹125.38. Profit at 15% of cost = ₹18.81; selling price = ₹144.19 per piece. For 500 pieces, material alone is 616.5 kg, so order with the scrap allowance.
Traps
- Applying overhead twice or on the wrong base.
- Forgetting the scrap allowance or the value of scrap credit.
- Confusing profit on cost with margin on selling price.
- Using finished mass when the blank is larger.
- Mixing per-piece and total-order quantities.