Actual Spending

Summary:

Estimation & Costing. Cost Savings Actual Spending & Best Pricing Processes & Overheads Improvements Strategy

Estimation & CostingDifference

Estimation Costing

We Do these Calculation on the basis of input got from client to predict price of new product

We do these Calculations on the basis of Actual Spendings to make that product

we can take reference of previous cost sheet of similar kind of projects or Changes As per requirement & processes involved as per

drawing

We have all actual data (from material in to out), So that will be accurate actual price.

Used for sending quotations to the clients to get Purchase Order for Manufacturing.

Used for finding our profits & Losses after manufacturing the Product

We Can Save Our Cost through:1. Considering Factors like Companies limitations in processing like Bending,

Laser Cutting, Punching etc. resulting in we can find out brought out items & sorting out In-House processes & variables in process cost.

2. Finding out actual hidden cost.3. Finding out ways to minimize losses in process & maximizing efficiency in

process planning.4. Trying to work on Optimizing product cost through Material, Man &

Machine.5. Exact Calculations of Actual Spending.6. Maximizing business values while obtaining best pricing.7. Improving the "value" of products and services by using an examination of

function or reducing the cost.8. Finding out alternative substitution of materials & Methods without

affecting Functionality.(Value Engineering )9. Settlement of price according to customer & requirements & Considering

our profit.

Let’s Have a Look On Actual Spending & Pricing

We must know Exact spending (Cost Variables Factors ) on any project or Product to decide correct Pricing.

Exact spending is depends on Scope of Supply, Material, (Design) Functionality, Processes & Overheads .

Processes & Overheads : Machine Running Cost : To calculate actual running

cost of any Machine there are five Cost Variable factors:

1. Machine Depreciation Cost2. Electricity3. Maintenance / Tooling / Consumables4. Operator Cost5. Overheads involved in process ( Overheads related

to processing will cover in process cost itself )

Considerations in Bellow calculations:Not a Standard Categorization ( For Simplified Calculations Only)

Special Processes General Processes

Shearing

Other Fabrication Processes

Laser Cutting

Turret Punching

Bending

Powder Coating / Painting

Notes:•We can get Machine Hourly Depreciation from machine Purchase price & Date of purchase .•Some Cost factors are complicate to calculate because, use of consumable are different as per material & Application, So suggest average value for it.•I have distinguished as pricing factors as per Estimation Purpose & Actual Costing Purpose.

Unit rates of following special processes for estimation purpose & Actual Cost Factors:

Machine Actual Running Cost

Special Machines / Processes

ACTUAL COST FACTORSESTIMATION

COST FACTORS

Shearing

Machine Depreciation Electricity

Maintenance/ Tooling/

Consumables

Operator Cost Overheads

As per No. of Strokes

Laser Cutting

As Per Cutting

Length ( OR HOUR RATE)

Turret Punching

As per No. of punches

Bending As per No. of Bends

Powder Coating / Painting

As per m2

Areas to progress in Special Processes:

Make Sure about, Our Process Unit rates are Covering mentioned cost Factors or not.

If its actual cost not matching with our methods of unit rates, It Means there is scope of improving its Pricing.

OPERATIONSFABRICATION & ASSEMBLY COST ESTIMATION

COST CALCULATIONACTUAL COST FACTORS

CUTTING

DEPRECIATION WHERE

APPLICABLE

ELECTRICITY WHERE

CONSUMED

MAINTENANCE/ TOOLING/

CONSUMABLES

LABOUR/ OPERATOR

COSTOVERHEADS RATE AS PER

MATERIAL KG

ROLLING

DRILLING

FINISHING / MACHINING

1) MILLING

2) GRINDER

3) LATHE OR SHAPER

MATERIAL HANDLING

1) CRANE USAGE

2) FORK LIFTS OR PALLET TRUCKS

3) INTERNAL TRANSPORTATION

4) LOADING & UNLOADING & STORAGE

WELDING

ASSEMBLY

FITTING

Areas to progress in Fabrication Process:

Make Sure about Our Fabrication Cost per KG of material weight are Covering mentioned cost Factors.

If its actual cost not matching with our methods of KG rates, It Means there is scope of improving its Pricing.

OVERHEADS IN COMPANY (% of TOTAL PRODUCT COST) INVOLVED

TYPE OF OVERHEADS (Categorized For Our Understanding)

WORK OFFICE SALES

BUILDING RENT OFFICE RENT SALES AMISSION

SALARY OF DRIVERS / SECURITY GUARDS / EMPLOYEES / MANAGERS / DIRECTOR SALARY OF OFFICE STAFF SALARY OF SALES STAFF

All KIND OF INSURANCES LEGAL EXPENSES ADVERTISING

REPAIRING & REPLACEMENT OF SPARE PARTS OF M/C MAINTENANCE OF OFFICE EQUIPMENTS TRAVELLING EXPENSES

PLANT ELECTRICITY BILLS (EXCLUDING MACHINE ELECTRICITY CONSUMPTION) OFFICE ELECTRICITY BILLS

LIGHTING REQUIRED IN PLANT BUILDING MAINTENANCE

WATER BILLS DEPRECIATION OF OFFICE USED EQUIPMENT / M/C

FAX & TELEPHONES USAGE

OFFICE STATIONARIES

OFFICE EQUIPMENTS & SYSTEMS

POSTAGE & TELEGRAMS

Areas to Progress in Overheads:

These are some overheads excluding overheads in manufacturing processes.

We need to calculate how much overhead factors we are covering through our % of Overhead on total Price.

We can Improve this by Replacing Assumptions with exact calculations through Studying on available data.

Improvements : Try to work out for getting best Pricing.(Low Cost must be

our aim for compete a market) (What If Analysis)- To send a quote to client in short

duration we need to use some thumb rules & prices as per Area(Square meter) & Total Weight (KGS) & Referring Previous Cost Sheets, So Try to Improve these details by Analyze these Data.

We need to cross check both Estimated Price & Actual Cost Price, study & Analyze those for getting best pricing.

Use these details & Analyzed data for preparing further quotations & modifying Estimation Calculations. (This is Continuous Improvement Process).

Strategy Of Improvement Continuous Analyzing Available Data & Studies on

Processes & Cost Involvement. Having discussion with technical expert for finding

out Hidden Costs & Getting in to deep for getting more exact values.

Modifying (Correcting) Input Data on basis we are doing further calculations.{Ex. Machine rates, Depreciations, Consumable Prices , Formulae used}

Note: Most welcome to your Queries.Your Expert Opinion can make it Correct & Complete.

_ Ajinkya Deshpande

Thank You