Академический Документы
Профессиональный Документы
Культура Документы
Produce
and sell
Screen
Ideas
Perform
Business
Analysis
Test to verify
business
judgements
made earlier
Convert Idea
into a
producible and
demonstrable
end
Product Manager
Product
adverting
agencies
Purchasin
g officers
Marketing
research
team
Product
Manager
Interfaces
Marketing
Force
The
purchasin
g public
Product
distributor
s
Other
necessary
company
personel
Product Costing
Whatever product an engineering company
manufactures, it has to purchase some kind of raw
or other materials from outside, to employ
manpower to carry out the work, to pay for
overheads, to know what the capital requirements
are, etc. Therefore all these items require cost
estimations to make effective decisions.
Furthermore cost estimations play an important
role in the future planning of the company.
Without the proper cost estimations such plans
may not be effective.
procedure.
To determine the product price for the use in various purposes.
To establish the profitability of the product under consideration with respect to
manufacture and market.
To establish the amount of money to be spent in equipment and other related items
to produce a product.
To determine if it is cheaper to fabricate the components or assemblies or procure
them from outside agencies.
To study whether or not it is economical to modify the existing production facilities
to manufacture a product.
To provide input to the longterm company financial plans.
To perform new products feasibility analysis.
To verify bids from outside agencies.
To measure the product manufacturing process efficiency.
To provide assistance in controlling the cost of product manufacturing.
Estimate
derivation
Data collection
Documentation
Estimate
presentation
Cost Estimation
Cost of tooling
Cost of overheads
Cost of bought equipments
Costs of raw and finished materials
Testing and direct labour charges costs
Cost of pattern
Cost of engineering
Pricing Model I
This model is concerned with the breakeven analysis. This analysis is very simple and
useful for investigating the effect on profits by changing the priceand volume of the
product sales units.
The term breakeven pinpoints that point where the total cost to produce the product
units is equal to the total revenue from the sales of those product units.
Example 12.1
An engineering company has estimated the fixed cost of
$60,000 to develop an engineering product.
Furthermore, the estimated variable cost of the
product for one product unit is $4. Determine, the
quantity of units to be sold at the following prices to
breakeven:
a.) $5/unit
b.) $6/unit
c.) $4.5/unit
d.) $7/unit
Solution:
y*sp = 60000 + 4y
y=
60000
(sp 4)
y=
60000 = 60000 units
(5 4)
y=
60000 = 30000 units
(6 4)
y=
60000 = 120000 units
(4.5 4)
y=
60000 = 20000 units
(7 4)