Factors that contribute to the outcome of cost calculations

There are a number of important elements that have a direct impact on how RanFab calculates the costing of parts and assemblies :

1. Break-Even Cost/hour. Can be found when setting up a production process. This figure represents as the name suggests, the break-even cost of running that production process within your business expressed on a per hour basis. Costs such as your equipment leasing, electricity to run the machine, space rental, wages and taxes associated with the operator cost, maintenance costs etc. The better you approximate this figure the more accurate your future costing and profits will be.

2. Target Net Profit. This is the level of clean profit that you expect to achieve for a given customer. You can set a value as a percentage for each customer individually. RanFab will calculate a charge hourly rate or a minute rate as applicable required to achieving this target net profit. Doing so will eliminate the price fluctuation found in standard costing and contribute dramatically to building confidence with your customer as your costing becomes predictable.

Other costs and elements that have a major impact on the price of a profile cutting process are the fixed costs. These costs cover things like machine setup time, programming time, loading and unloading time etc. These are called fixed costs because they are the same irrespective of the number of parts being quoted. The logic will spread the total of the fixed costs among the number of parts in the quote. If the costing is made with the automatic nesting module the option of spreading the fixed costs among all the parts being nested together exists and should be used. Profile cutting processes also have the extra option to add an hourly extra charge for the cutting gas used. This is linked to a material type and will add this cost on top of your break-even cost.

When one calculates the estimated break-even cost for a given production process they should account for all activities that can and influence the running and the outcome from that production process. If the cost is calculated as an average over a period of at least 6 months of activity that would ensure that all incidental costs and daily ones are accounted for and represented as an hourly cost for the production process.

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