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Cost Estimation

This document discusses cost estimating in product design. It provides a 1-3-9 rule of thumb for estimating materials, manufacturing, and sales price costs. Materials typically account for 1/3 of total costs, while manufacturing accounts for 3/9 and sales for the remaining 5/9. Costs will vary by product and production volume, but manufacturing and total costs are always higher than material costs alone. Examples are given for estimating costs of bikes, electric motors, and machined steel components at different volumes. Tighter tolerances generally increase manufacturing costs.

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khemraj deore
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1K views5 pages

Cost Estimation

This document discusses cost estimating in product design. It provides a 1-3-9 rule of thumb for estimating materials, manufacturing, and sales price costs. Materials typically account for 1/3 of total costs, while manufacturing accounts for 3/9 and sales for the remaining 5/9. Costs will vary by product and production volume, but manufacturing and total costs are always higher than material costs alone. Examples are given for estimating costs of bikes, electric motors, and machined steel components at different volumes. Tighter tolerances generally increase manufacturing costs.

Uploaded by

khemraj deore
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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1-3-9 Rule of Thumb for Cost Estimating in Design

Materials Manufacturing Sales Price


(Includes raw materials, (Includes labor for mfg (Includes salary and benefits
purchased parts and and assembly and for design, finance and
scrap) related overhead, accounting, utilities and
packaging materials for building costs and all other
shipping, ) overhead needed to run the
company, plus profit margin)

This is a rough guideline for companies whose products are


manufactured primarily in house at high volume. It will vary based on
the product, the company and the production volume, but it is
important to realize that the manufacturing cost and the total cost are
always significantly higher than the cost of materials.
Ref: The Mechanical Design Process, 2003, Ullman
Some details on Cost Estimating in Design – Bike Example

Ref: The Mechanical Design Process, 2003, Ullman


Volume Discount – Electric Motor Example

Electric
Motors

Ref: The Mechanical Design Process, 2003, Ullman


Volume cost reduction for a Steel Machined Component with 3 turned surfaces and
7 other surfaces and some tight tolerances and surface finish requirements

Ref: The Mechanical Design Process, 2003, Ullman


Tolerance vs.
Manufacturing
Process
Tighter tolerance =
Higher cost
C ost

Tolerance

ME471, Dr. Kremer

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