Costing Module Description

The fundamental premise of the cost analysis approach is that one can determine accurate costs by breaking a complex process into tasks (activities) consisting of cost elements that define time-based and per part consumption of resources.

• Introduction
• Product Definition
• Tasks
• Cost Elements

• Reports
• Analysis
• Cost Databases
• How to Build a Cost Model
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Introduction

Whether it is a machined part, injection molded component, extrusions, consulting project, design project, software development or even a home improvement project, you can do it with DeccaPro cost analysis.

The cost of a product is determined using production volume (where applicable), manufacturing duration, and numerous other parameters. Each product consists of many tasks (also called activities). Each task can include multiple cost elements defined as material, labor, expenditure, tooling, machinery & equipment (M&E), and investment. The cost elements thus define resource usage. Volume and parametric sensitivity analyses are easily done using the design model as a link to the cost analysis. The cost model provides ease of use, flexibility and power to model almost any process.

The fundamental premise of the cost analysis approach is that one can determine accurate costs by breaking a complex process into tasks and cost elements that define time-based consumption of resources.

The user can consult will persons knowledgeable about each task/activity and enter cycletimes, usage rates, and resource costs. This approach ensures accurate and detailed activity based costing.

Cost analysis models are built for each product. A new product can be created by copying and modifying an existing product.

Components of a product cost model are discussed below.

Product Definition

Product Manufacturing Factors: Product factors include production volume, manufacturing duration, working hours per day, down times, default overhead rates, markups, taxes, and profit objectives such as a percent of sales. These factors are used in the tasks and elements to calculate costs, number of lines/streams (parallel work stations required to make the specified quantity in a limited time), etc.

 Design Model: A design model must be attached to a product. The design model variables can be used to define resource usage values by linking to task variables (see Tasks). Production volume and duration variables can be linked to product values. By merely changing design variable values such as production volume, duration, part dimensions and cycle time you can control all key cost factors in the tasks and cost elements through links. This provides the ability to develop complex cost models.

Tasks

A molded product could consist of 1) product design 2) molding 3) trim and finish and 4) packaging and shipping. Product design would be a one-time task.

Each task can have a mini-design model attached to it containing task variables and related equations. For instance a molding task could have task variables that define part dimensions, volume, material quantity, scrap rate, cycletime, tooling cost, etc. These variables can be used to define task and cost element parameters.

 The user can also link a task variable to a design variable. Thus, a design model provides global variables for product cost analysis. The task variables are local to each task and its cost elements.

User defined tasks (including related cost elements and task model) can be saved to a library. These standard tasks, each consisting of many cost elements, are convenient building blocks for building new cost models.

Cost Elements

Resource usage is defined by cycletime, duration, consumption rate per part or per hour, resource cost, scrap rates, discount rates, depreciation period, etc. Line utilization modes can also be defined. Many of these parameters can be linked to task variables and by the latter's links also to the design model.

 You can change part dimensions at the design level and automatically trickle down cost element parameter values using equations at the design model and task model levels.

Reports

Analysis

In addition,you can study the effect of production volume and design variables on product cost. Enter 8 volume numbers and graph cost/unit profit/total profit as a function of volume. Any two products of the same costing type can be compared on one graph to study cost sensitivity to volume. This is a useful tool for selection of the optimum process for a given production volume. The profit graph can be used to do break-even analyses.

 Similarly, you can choose 8 values for any design variable and graph the effect on product cost/unit profit/total profit. Recall that through the design model and task mini-models all critical task and cost element parameters can be made dependent on design variables. An example would be to study the effect of cycle time on product cost by including the effect on resource use, scrap rates, and tooling cost using design model equations.

Cost Databases