Week #2 - Costing & RFP Flashcards
what is cost estimating
an educate “guess” made by estimating department, as to what the costs will be prior to the job
what method will we use to determine the final price?
- standardized price lists (simple if repeats, hard if complex)
- % based = sliding scale per customer
some pricing policies are based on
operations strategy & business objectives
operations strategy includes
- competitive priorities
- level of difficulty
business objectives include
- new customers and sales effort
- -trends in industry
- material supplies
T or F an estimator needs to know/understand all the production methods within company
TRUE
who adds the markup
sales or CSR
T or F…know the cost est. before negotiating final price
TRUE
without a cost estimate
you don’t know if the job is profitable until it’s done
How many steps are involved in cost estimating
2 steps
what are the 2 steps involved in cost estimating
- planning production
2. assigning production times and costs
each department in planning production is called
a cost center (other cost centers might be marketing or sales)
the planning production steps involves
- estimators breaking down into steps to make product
- creates an accurate job of plan
what is the formula for assigning production times and costs?
cost center estimates= (production time x BHR) + consumables (materials) + buyouts (outside services)
Production time is the
rate/time it takes to consistently produce a product in repeatable conditions (eg. Folder: 20,000 sheets per hour (1 hour)
how do you determine the rate?
- industry average
- collected info from production
what is BHR?
rate at which it costs you to use that cost center
what are the issues with BHR
- incl small portion of indirect costs (e.g. admin costs)
- might over inflate costs (if job too small)
production time includes
- consumables (materials used, quantity and cost)
2. buyouts (outside services or outsourcing)
define job order costing
tracking and applying actual costs to the job after production
whats the purpose of job costing
- compare actual cost to estimated cost
2. ensure all changes that customer make are accounted for on final invoice to customer
How to calculate job order costing?
job order costing = dL + dM + OH
how do you calculate dL?
direct labour
dL = dLH x dLC
hours tracked by: timesheet, computer
how to you calculate dM?
direct materials
- directly allocated to “1” product
- tracked by: consumables used, purchase orders
