dimensioning & tolerances 2 manufacturing cost analysis basics cost basics manufacturing cost...
TRANSCRIPT
Dimensioning & Tolerances 2
Manufacturing Cost Analysis Basics
COST BASICS
Manufacturing Cost Analysis 1
Importance Your company wants to make money!
Profit and price (and ultimately your salary) depend on how you manage manufacturing costs.
You will have to address costs and economics in presentations about your work
Manufacturing Cost Analysis 1
Dimensioning & Tolerances 2
Cost Definition: The cash amount (or equivalent) sacrificed to obtain some asset and make it ready for use.
Manufacturing Cost Analysis 1
Dimensioning & Tolerances 2
Cost Definition: The cash amount (or equivalent) sacrificed to obtain some asset and make it ready for use.
Example 1: A student pays $200 for their ME 382 Textbook. The cost is $200.
Manufacturing Cost Analysis 1
Dimensioning & Tolerances 2
Cost Definition: The cash amount (or equivalent) sacrificed to obtain some asset and make it ready for use.
Example 1: A student pays $200 for their ME 382 Textbook. The cost is $200.
Example 2: A real estate investor buys land for $200,000 and spends $90,000 to put in streets, utility connections, and divide it into lots.
Cost = +$200,000 $90,000 = $290,000
Manufacturing Cost Analysis 1
Dimensioning & Tolerances 2
Fixed Costs Definition: A cost that does not change due to increased or decreased production of a good or service.
Manufacturing Cost Analysis 1
Dimensioning & Tolerances 2
Fixed Costs Definition: A cost that does not change due to increased or decreased production of a good or service.
Common Fixed Costs:◦ Rent
Manufacturing Cost Analysis 1
Dimensioning & Tolerances 2
Fixed Costs Definition: A cost that does not change due to increased or decreased production of a good or service.
Common Fixed Costs:◦ Rent ◦ Taxes
Manufacturing Cost Analysis 1
Dimensioning & Tolerances 2
Fixed Costs Definition: A cost that does not change due to increased or decreased production of a good or service.
Common Fixed Costs:◦ Rent ◦ Taxes◦ Salaries
Manufacturing Cost Analysis 1
Dimensioning & Tolerances 2
Fixed Costs Definition: A cost that does not change due to increased or decreased production of a good or service.
Common Fixed Costs:◦ Rent ◦ Taxes◦ Salaries◦ Depreciation
Manufacturing Cost Analysis 1
Dimensioning & Tolerances 2
Fixed Costs Definition: A cost that does not change due to increased or decreased production of a good or service.
Common Fixed Costs:◦ Rent ◦ Taxes◦ Salaries◦ Depreciation
Example: Shüz, a shoe manufacturing company, increases production by 20% due to higher demand. They still pay $4,000 each month to rent their large industrial facility.
Manufacturing Cost Analysis 1
Dimensioning & Tolerances 2
Variable Costs Definition: A cost that changes due to increased or decreased production of a good or service.
Manufacturing Cost Analysis 1
Dimensioning & Tolerances 2
Variable Costs Definition: A cost that changes due to increased or decreased production of a good or service.
Common Variable Costs:◦ Labor
Manufacturing Cost Analysis 1
Dimensioning & Tolerances 2
Variable Costs Definition: A cost that changes due to increased or decreased production of a good or service.
Common Variable Costs:◦ Labor◦ Raw materials
Manufacturing Cost Analysis 1
Dimensioning & Tolerances 2
Variable Costs Definition: A cost that changes due to increased or decreased production of a good or service.
Common Variable Costs:◦ Labor◦ Raw materials◦ Waste removal or treatment
Manufacturing Cost Analysis 1
Dimensioning & Tolerances 2
Variable Costs Definition: A cost that changes due to increased or decreased production of a good or service.
Common Variable Costs:◦ Labor◦ Raw materials◦ Waste removal or treatment◦ Packaging
Manufacturing Cost Analysis 1
Dimensioning & Tolerances 2
Variable Costs Definition: A cost that changes due to increased or decreased production of a good or service.
Common Variable Costs:◦ Labor◦ Raw materials◦ Waste removal or treatment◦ Packaging
Example: Due to low sales, Sherman Pharmaceuticals slows production by 25%, so the company spends 25% less on buying containers for the medicine they produce.
Manufacturing Cost Analysis 1
Dimensioning & Tolerances 2
Homework Problem (MC 1)Fixed versus Variable Costs
What is the definition of cost? State whether each cost below is fixed or variable and explain why you decided to give it your classification.A) Waste DisposalB) Unemployment insuranceC) Property Taxes for company facilitiesD) A company’s electric bill
Manufacturing Cost Analysis 1
Dimensioning & Tolerances 2
Sources: Cost:
◦ http://www.businessdictionary.com/definition/cost.html◦ http://www.accountingcoach.com/terms/C/cost
Fixed Costs:◦ http://www.investopedia.com/terms/f/fixedcost.asp◦ http://www.accountingtools.com/questions-and-answers/what-are-examples-of-fixed-costs.html
Variable Costs:◦ http://www.investopedia.com/terms/v/variablecost.asp◦ http://www.accountingtools.com/dictionary-variable-cost
Images:◦ http://www.freeimages.com
Manufacturing Cost Analysis 1