3 views

Original Title: 5 Ways to Determine Cost Production for Product

Uploaded by Bong Kuek Kong

- Consumer Price Index - Dec 13
- jp-littlebook.pdf
- Consumer Price Index - Jan 14
- data_tr
- InternetRisingPricesFalling Powerpoint
- Consumer Price Index, June 2014
- US Federal Reserve: bull01972
- lind51640_ch15
- Primer on Consumer Price Index2_1.pdf
- Luxury Goods Pitch
- 3a395fac98ab3055ca4276405f5d4e3a_EC103 Week 02 S14.ppt
- SSC GK Economy Notes_ Various Price Indices in India
- Corruption Index 2010[1]
- Pindyck Cap1 Ej resueltos.doc
- Boss One
- Inflation
- Warehouse Management
- Nominal vs Real
- Source4Teachers Contract
- OPS 571 Week 2 Quiz or Knowledge Check Answers

You are on page 1of 10

service

1. Per unit model

2. Segmenting model

3. Cost indexes

4. Power-sizing model

5. Learning curve model

Estimates the cost of producing and selling one unit.

The estimate of total cost for a given volume of

production is computed by multiplying the estimated

cost/unit with the volume of production/service. This

method does not consider the benefits of scale of

production.

Segmenting Model

Splits the tasks of the product/service into different

segments. Then the cost of each segment is to be

estimated and finally, the cost of the product is

obtained by summing the costs of all the segments of

the product/service.

Example: if we consider the cost of a two-wheeler-motor

cycle or scooter-its different subsystem/segment are

engine, frame, electrical system, break system, sound

system, silencer, transmission system, fuel supply

system, etc. Under this system, the estimator should

estimate the cost of each of the segments and sum

Cost Indexes

The prices of commodities increase/decrease over a period of time.

Though both options are possible, most of the time the process

increase. Such changes can be used to estimate the cost of a product

based on the cost of that product in the past and consumer price index

(CPI).

Continue.

The formula is given by

P2 = Cost of the product at time T1 *(

This method helps the estimator to avoid repeating the detailed estimate

as done at time T1. But it will carry some error.

The cost of product/service of a particular size may not be in direct

proportion to that of a comparable product, but definitely there will be

reduction in total cost when the size of the product/service increases in

relation to that of a comparable product

Continue

Let,

the 10 HP engine be product X1 and its cost be P1, and let the 20 HP engine be product X2, and its

cost be P2. The cost of the product X2 can be determined using the following formula. (Here, 10 HP

engine is considered to be a comparable unit):

Cost of X2 = Cost of X1 *( )k

Where

Cost of X2 = cost of 20 HP engine

Cost of X1 = cost of 10 HP engine

Size of X1 = 10 HP

Size of X2 = 20 HP

k = exponent which indicates the economy of scale

If k = 1, there is no economy of scale and if k > 1, it represents the scale of diseconomy.

Let the cost of X1 be $ 20,000 and the scale of economy k be 0.8. Hence , the cost of X2 = $ 20,000 *

( 20/10 )0.8 = $ 34,822.02.

The size of the product may be physical size of the product or capacity of the product or any other

comparable unit.

The learning curve model depends on the effect of the learning curve.

If a task is repeated by an operator over a period of time, then the time

taken to complete Nth unit will be less than that of the first unit of that

task. Using this concept, the time taken to produce the Nth unit of a

task/product may be estimated. Then, based on these estimated times if

the units from 1 to N units, we can obtain the total time for carrying

out the N units of that product/task.

Continue

If

N is the number of units produced initially, the time required to complete

2N units will be a fixed percentage of the time required to produce N units,

for all positive values of N.

The formula to compute the time of completing N units is given by

Time of completing N units, TN = T1 * Nk

Where

N = number of units to be produced

T1 = time to complete one unit

TN = time to complete N units

k = learning curve exponent which is given by the formula:

k=

Continue

Example

If the time to complete one unit of a task is 20 min and the learning curve rate is 80%, find

the time to complete the 50th unit of that task.

Solution

Time to complete the first unit of the task, T1 = 20 minutes

Learning curve rate = 80 % = 0.8

Learning curve exponent, k = log (learning curve rate) / log 2.0

= log (0.8)/log 2.0

= -0.3219

Time to complete the 50th unit of the task = T1 * Nk

= 20 * (50-0.3219)

- Consumer Price Index - Dec 13Uploaded byBernewsAdmin
- jp-littlebook.pdfUploaded byManoj Shah
- Consumer Price Index - Jan 14Uploaded byBernewsAdmin
- data_trUploaded bySudip Dhakal
- InternetRisingPricesFalling PowerpointUploaded byKenny Glennon
- Consumer Price Index, June 2014Uploaded byThe Province
- US Federal Reserve: bull01972Uploaded byThe Fed
- lind51640_ch15Uploaded bySubhasish Goswami
- Primer on Consumer Price Index2_1.pdfUploaded byTumblr_user
- Luxury Goods PitchUploaded bynickbuch
- 3a395fac98ab3055ca4276405f5d4e3a_EC103 Week 02 S14.pptUploaded byюрий локтионов
- SSC GK Economy Notes_ Various Price Indices in IndiaUploaded byMalu Sakthi
- Corruption Index 2010[1]Uploaded byRijo Khan
- Pindyck Cap1 Ej resueltos.docUploaded byJosue SB
- Boss OneUploaded byMoulana Rizqi
- InflationUploaded bysandyskadam
- Warehouse ManagementUploaded bykamlesh
- Nominal vs RealUploaded byvickey_auja
- Source4Teachers ContractUploaded bypublicschoolnotebook
- OPS 571 Week 2 Quiz or Knowledge Check AnswersUploaded byEmilia Taylor
- DGPR Relatively ReValuing GoldUploaded bydevnev
- 04.04.12 Minimum Wage Letter Release (4)Uploaded byjspector
- Geary_KSUploaded bymsaini
- Methods of PaymentUploaded byaredeca042882

- Account Types NamesUploaded byBong Kuek Kong
- ITR011 Application FormUploaded byBong Kuek Kong
- Leadership ProfileUploaded byBong Kuek Kong
- Subs-FFBUploaded byBong Kuek Kong
- Work With a MentorUploaded byBong Kuek Kong
- chapter_2Uploaded byBong Kuek Kong
- Answer Tutorial 2 Transistor and Its ApllicationUploaded byBong Kuek Kong
- Answer Tutorial DiodesUploaded byBong Kuek Kong
- 8100 Evaluation and FeedbackUploaded byBong Kuek Kong
- Assignment KNJ2332 2015Uploaded byBong Kuek Kong
- Book Title 2Uploaded byBong Kuek Kong
- AnswerT1Uploaded byBong Kuek Kong
- chapter_1Uploaded byBong Kuek Kong
- Home Work1Uploaded bykixyo
- Tutorial 1Uploaded byBong Kuek Kong
- chapter_2Uploaded byBong Kuek Kong
- MidtermUploaded byBong Kuek Kong
- Climate ChangeUploaded byBong Kuek Kong
- lab resuUploaded byBong Kuek Kong
- Kancil n BuayaUploaded byBong Kuek Kong
- Kancil n BuayaUploaded byBong Kuek Kong
- AssignmentUploaded byBong Kuek Kong
- Mid Term Ssx 0022Uploaded byBong Kuek Kong
- New Microsoft Word DocumentUploaded byBong Kuek Kong
- IntroUploaded byBong Kuek Kong
- IntroUploaded byBong Kuek Kong
- Control Volume3Uploaded byBong Kuek Kong
- New Microsoft Word DocumentUploaded byBong Kuek Kong
- First DraftUploaded byBong Kuek Kong

- lutkepohl-kratzigUploaded byIlau Paul
- 11-03-05_walmartUploaded byShanky Aggarwal
- When-Doves-Cry_Final.pdfUploaded byJohn Hadriano Mellon Fund
- Demand Estimation Slides A.pdfUploaded byতানভীর মাহমুদ
- inflation deflation (1).pptxUploaded byDiamond Nongmaithem
- Stephen G CecchettiUploaded byapi-26691457
- Compensation and Reward Management - Chapter 2Uploaded bykrsatyam10
- 2013.05.08.Cpp.sess4.3.Poverty.reduction.philippinesUploaded byYan Lean Dollison
- Time SeriesUploaded byDino Mandic
- Bangladesh Bank Audit Report 2015-2016.pdfUploaded byMusafir
- FB_SR_2014_06_10_EUploaded bybuihongmai171090
- 2018 Erie County CSRC Final ReportUploaded byWGRZ-TV
- Ans Course Ch 05Uploaded byMisham Alibay
- JRC Statistical Assessment CPI2012 FINALUploaded byactcapkoh
- 8C.pdfUploaded byReina
- Focus on Personal Finances - Chapter 1Uploaded byboondoklife
- Barro ConvergenceUploaded byIrán Apolinar
- June 2016 InternationalUploaded byIvan Fisgativa Villarraga
- saUploaded byromana
- Chapter 30 Money Growth and InflationUploaded bylulu
- buncombeUploaded byJennifer Bowman
- Johnson CorruptionUploaded bypetra1981
- MacroeconomicsUploaded byС. Баатар
- Proposal for thesis.docUploaded byMahboob Ul Haq
- CPI_vs_ IIPUploaded bySupreet Gupta
- ESM_17_18_engUploaded bylovelynature
- Ngailo EdwardUploaded bysharktale2828
- HCMC QMR Q2 2015 - ENUploaded byTrung Võ
- China 101Uploaded byCarter Liang
- Ep 2Uploaded byZulfikarMuhammad