Manufacturing costs consist of multiple elements which arrive at the full cost. When estimating a product to be manufactured the entire costs are distributed between the following elements.
Material Costs – This includes both raw materials, which is reshaped, formed, etc to produce the item and purchased prefabricated items, like nuts, bolts, screws. The raw material would be considered commodity items in which the costs may fluctuate widely.
Labor Costs – This includes the wages of the employee’s actually manufacturing the product.
Labor Overhead Costs – This includes the overhead of the employee’s which include benefits.
Machine Costs – This includes the costs of running the equipment and machines to produce the product.
Engineering Costs – This includes costs like prototyping, testing, etc.
Burden – This includes all the other costs not included in the above.
An ERP software system should report all these costs in an easy to read format so the manufacturer can operate profitably. Look for an ERP package like MIE Trak from MIE Solutions which is an ERP software for manufacturers.
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