Date: 08/08/06
Author: Mike mhall@whipmix.com
Subject: need help with part costing
 We have a small screw machine dept. the operators oversee 2 machines each. How do you cost out the parts? By cycle time of the machine? Divide labor cost then multiply by cycle time? Or some other variation? Would appreciate the help

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Date: 01/07/07
Author:
Subject: cost out parts
 are you referring to quoting? or finding the cost you have into them?

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Date: 01/10/07
Author: mhall@whipmix.com
Subject: cost out parts
 finding the cost we have into them

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Date: 04/23/07
Author: Elroy Bucchan ebucchan@darcor.com
Subject: Cost Out Parts
 Did you ever find an answer to this?

I am having a similar problem in attributing cost. We have many parts that we run simultaneously with other parts in our machine shop. Some are bar fed and some are not. The machine time does not necessarily equal the labour.

I can only think that there may be a standard that can be used in this situation. But since each part of ours is different the equation must include the complete product mix and then divide through. I have done this with our mold department where we only have 20 molds or so. However, we machine many different parts and it would be a nightmare to complete the equation.

My only suggestion is to review past labour tickets to see when each job started and stopped. This information may give you an understanding of how many parts one labourer can produce in a set time on both machines, divided by the labour. Therefore both jobs may be costed accordingly. Obviously there will be variances depending on the product mix. But it will never be perfect, just close.

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Date: 04/25/07
Author: David rogersd@etczone.com
Subject: How to figure cost
 100 People will give you 100 diff. answers, but as a cutting tool rep, i can say that you need to look at your time to machine all parts and apply that to your shop rate.....i.e. $45-$100 per hr. This is the simple way

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Date: 05/25/07
Author:
Subject:
 A shop rate cannot be used for costing. A shop rate is what you wold ideally like to bet paid from a customer. To determine actual cost, you need to use actual burden rates. These should be less than your shop rate, unless you do not plan to make any profit.

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Date: 05/29/07
Author: Mike mhall@whipmix.com
Subject: part costing
 Thanks for the comments but from what I have discovered David is correct 100 people will give you 100 diff. answers. It is pretty much what is best for your situation. It looks like the path we are going to take is to use the actual amount of hands on labor. So for our automated machines this will greatly reduce their labor content. I am going to have to recalculate each item ran on those particular machines accordingly.

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Date: 06/08/07
Author: John john.english@lpalum.com
Subject:
 As the previous posters have noted you will find that every situation is different. Here is "simple" method for your individial situation.

1) Determine how many machines of each class you have and how many hours per year they run
2) Determine your annual fixed costs ie- Electricity, water, phone, rent, total amount paid for machine financing etc.
3) Determine the average annual labor and overhead burden- ie operator pay, office and support staff.
4) Add up 2 and 3 and divide it by number of hours.
That's your required cell rate to keep the busniess operating. You can adjust the amount of fixed burden you assign to each type of operation but you need to be sure you cover the whole amount. Otherwise you'll be in trouble. Let's say you come up with $50 per hour.
You then figure the amount of parts you can run, minus downtime and scrap, and divide the $50 by that. 100 Parts per hour is $.50 each. You may want to add costs for special cutters or tooling into the price of each piece. They can be VERY expensive.

Make sure that you understand your real scrap and downtime or you will also get in trouble.

Then you add you desired profit margin to the total. There are 2 ways to calculate margin but I prefer to divide the .50 by the margin. That gives you margin as a % of the total sales price. Say you want 25%. Ou take .50 and divide it by 1-.25 (or .75). The total price is $ .667.

It does get a bit complex but knowing why your hourly rate is a certain number is very important. That's how you learn to control your costs and become a better business.

Good luck!

This is a perinnial question. Till date there is no correct method to correctly rate or to quote machining parts and there will be no correct method even in future.

All businesses will try to get maximum for their efforts/parts/works and in the same way will try to give minimum to buy services/parts/works. That is very basic of commercial world.

However you can estimate the fair value of any services or parts by experiance. If you can get or give some "X" price for a period of time without either you or the supplier looking for alternative sources, if you can sustain the relationship, then you have a fair value for the services.

IMHO

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