Costing Process Deep Dive¶

Detailed breakdown of how CostEngine calculates manufacturing costs.

Cost Component Architecture¶

graph TD
    A[Total Product Cost] --> B[Material Cost]
    A --> C[Manufacturing Cost]
    A --> D[Overheads]

    B --> B1[Raw Material]
    B --> B2[Scrap Allowance]

    C --> C1[Internal Operations]
    C --> C2[Outside Processes]

    C1 --> C1a[Setup Cost]
    C1 --> C1b[Cycle Cost]
    C1 --> C1c[Tooling Cost]

    D --> D1[Factory Overhead]
    D --> D2[Admin Overhead]

    style A fill:#fce4ec,stroke:#e91e63,stroke-width:3px
    style B fill:#fff3e0
    style C fill:#e3f2fd
    style D fill:#f3e5f5

Material Cost Calculation¶

Process Flow¶

flowchart TD
    Start[Start Material Costing] --> A[Get Part Specification]
    A --> B[Material Grade]
    A --> C[Gross Weight]
    A --> D[Net Weight]

    B --> E{Material in<br/>Database?}
    E -->|Yes| F[Fetch Current Rate]
    E -->|No| G[Manual Entry Required]
    G --> H[Add to Material Master]
    H --> F

    C --> I[Calculate Yield %]
    D --> I
    I --> J[Yield = Net/Gross × 100]

    F --> K[Apply Formula]
    J --> K
    C --> K

    K --> L{Override<br/>Required?}
    L -->|Yes| M[Apply Override]
    M --> N[Log Reason]
    L -->|No| O[Use Calculated]

    N --> P[Final Material Cost]
    O --> P

    style Start fill:#e3f2fd
    style P fill:#c8e6c9
    style M fill:#fff9c4

Formula Breakdown¶

Standard Calculation:

Example: - Gross Weight: 2.5 kg - Net Weight: 2.0 kg
- RM Rate: ₹180/kg - Yield: 80% (2.0 / 2.5)

Internal Operations Costing¶

Routing Structure¶

graph LR
    RM[Raw Material] --> OP1[Op 1: Cutting]
    OP1 --> OP2[Op 2: Turning]
    OP2 --> OP3[Op 3: Milling]
    OP3 --> OP4[Op 4: Drilling]
    OP4 --> OP5[Op 5: Deburring]
    OP5 --> FG[Finished Good]

    style RM fill:#fff3e0
    style FG fill:#c8e6c9

Operation Cost Model¶

flowchart TD
    A[Operation Definition] --> B[Setup Time]
    A --> C[Cycle Time]
    A --> D[Batch Size]
    A --> E[Machine Hour Rate]
    A --> F[Tooling Cost]

    B --> G[Setup Cost per Piece]
    D --> G
    E --> G

    C --> H[Cycle Cost per Piece]
    E --> H

    F --> I[Tooling Cost per Piece]
    D --> I

    G --> J[Total Operation Cost]
    H --> J
    I --> J

    style A fill:#e3f2fd
    style J fill:#c8e6c9

Cost Formulas¶

Setup Cost per Piece:

Cycle Cost per Piece:

Tooling Cost per Piece:

Total Operation Cost:

Example Calculation: Turning Operation¶

Inputs: - Setup Time: 0.5 hours - Cycle Time: 0.05 hours (3 minutes per piece) - Batch Size: 500 pieces - Machine Hour Rate: ₹600/hr - Tool Cost: ₹2,000 - Tool Life: 1,000 pieces

Calculation:

Outside Process Costing¶

flowchart TD
    A[Outside Process Required] --> B{Pricing Model?}

    B -->|Per Piece| C[Unit Rate × Quantity]
    B -->|Per Kg| D[Rate × Weight]
    B -->|Per Batch| E[Fixed Batch Rate]

    C --> F{Minimum Charge?}
    D --> F
    E --> F

    F -->|Yes| G["max(Calculated, Minimum)"]
    F -->|No| H[Use Calculated]

    G --> I[Final Outside Cost]
    H --> I

    style A fill:#e3f2fd
    style I fill:#c8e6c9

Common Outside Processes: - Heat treatment - Surface coating (plating, anodizing, powder coating) - Laser marking - Special testing/inspection - Packaging

Scrap & Yield Handling¶

Cascading Scrap Model¶

graph TD
    A[100 pcs Required] --> B[Material Scrap: 5%]
    B --> C[Need 105 pcs from material]
    C --> D[Operation 1 Scrap: 3%]
    D --> E[Need 108.15 pcs input]
    E --> F[Operation 2 Scrap: 2%]
    F --> G[Need 110.35 pcs input]
    G --> H[Final: Start with 111 pcs]

    style A fill:#e3f2fd
    style H fill:#fce4ec

Scrap Adjustment Formula:

For each stage with scrap percentage \(s\):

Example: - Required output: 1000 pieces - Material scrap: 5% - Op 1 scrap: 3% - Op 2 scrap: 2%

Overhead Allocation¶

Overhead Models¶

graph TD
    A{Overhead Model} --> B[Embedded in MHR]
    A --> C[Percentage Add-on]

    B --> B1[Factory OH in MHR]
    B --> B2[Admin OH separate %]

    C --> C1[Manufacturing Cost]
    C --> C2[Add Factory %]
    C2 --> C3[Add Admin %]

    B2 --> D[Total Cost]
    C3 --> D

    style A fill:#fff3e0
    style D fill:#c8e6c9

Option 1: Embedded MHR

Machine Hour Rate already includes factory overhead (utilities, rent, depreciation)

Option 2: Percentage Add-on

Complete Cost Assembly¶

flowchart TD
    A[Part] --> B[Material Cost]
    A --> C[Operation 1]
    A --> D[Operation 2]
    A --> E[Operation N]
    A --> F[Outside Processes]

    B --> G[Sum: Direct Costs]
    C --> G
    D --> G
    E --> G
    F --> G

    G --> H[Apply Scrap Adjustment]
    H --> I[Apply Overheads]
    I --> J[Total Manufacturing Cost]

    J --> K{Overrides?}
    K -->|Yes| L[Apply Overrides]
    K -->|No| M[Use Calculated]

    L --> N[Final Cost per Piece]
    M --> N

    style A fill:#e3f2fd
    style J fill:#fff3e0
    style N fill:#c8e6c9,stroke:#4caf50,stroke-width:3px

Final Cost Summary Table¶

Real-Time Recalculation¶

sequenceDiagram
    participant U as User
    participant UI as UI Layer
    participant CE as Cost Engine
    participant DB as Database

    U->>UI: Change material rate
    UI->>CE: Trigger recalculation
    CE->>DB: Fetch all dependencies
    DB-->>CE: Return data
    CE->>CE: Recalculate material cost
    CE->>CE: Recalculate scrap impact
    CE->>CE: Recalculate total cost
    CE-->>UI: Updated cost breakdown
    UI-->>U: Display new totals
    Note over U,UI: Update time: <100ms

Validation & Checks¶

Automated Validations¶

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