Material cost is a big subject and will be handled in multiple blog entries. Material costs are costs that go directly into producing the desired product. Material costs can be divided into both direct and indirect material costs. We will focus on direct costs because they directly affect the product’s price.
Material can also be broken between raw materials which are commodities and other items which would include pre-manufactured “things” including nuts, bolts, screws, hard drives, memory chips, etc. Raw materials dealing with commodities where their price may fluctuate daily is what we will deal within the next few blogs entries.
Direct commodity material costs are those expenditures which can be allocated directly to the cost of the specific product. Here is a basic outline of estimating the material cost
1. Catalog all the raw materials required from all the drawings.
2. Calculate the amount of material required for each cataloged raw material.
3. Total common materials, gauges, and sizes to come up with total requirements
4. Sum all the weights with the requirements
5. Obtain supplier pricing
6. Total costs
This is just a high-level summary of calculating material costs. We will investigate calculating volumes, lengths and other types of raw material calculations.
MIE Solutions provides software resources to help you manage your direct and indirect costs throughout the product lifecycle from quoting and estimating, job costing to invoicing.