This above data is related with Sheet Metal fabricated product line.I have elaborated basic difference between Estimation & Costing with strategy for getting best pricing & calculations involved in Actual Spending.

1. Actual Spending

2. Summary:
 Estimation & Costing.
 Cost Savings
 Actual Spending & Best Pricing
 Processes & Overheads
 Improvements
 Strategy

3. Estimation & Costing
Difference
Estimation Costing
We Do these Calculation on the basis of input got
from client to predict price of new product
We do these Calculations on the basis of Actual
Spendings to make that product
we can take reference of previous cost sheet of
similar kind of projects or Changes As per
requirement & processes involved as per
drawing
We have all actual data (from material in to out),
So that will be accurate actual price.
Used for sending quotations to the clients to get
Purchase Order for Manufacturing.
Used for finding our profits & Losses after
manufacturing the Product

4.  We Can Save Our Cost through:
1. Considering Factors like Companies limitations in processing like Bending,
Laser Cutting, Punching etc. resulting in we can find out brought out items
& sorting out In-House processes & variables in process cost.
2. Finding out actual hidden cost.
3. Finding out ways to minimize losses in process & maximizing efficiency in
process planning.
4. Trying to work on Optimizing product cost through Material, Man &
Machine.
5. Exact Calculations of Actual Spending.
6. Maximizing business values while obtaining best pricing.
7. Improving the "value" of products and services by using an examination of
function or reducing the cost.
8. Finding out alternative substitution of materials & Methods without
affecting Functionality.(Value Engineering )
9. Settlement of price according to customer & requirements & Considering
our profit.

5. Let’s Have a Look On Actual Spending &
Pricing
 We must know Exact spending (Cost Variables
Factors ) on any project or Product to decide correct
Pricing.
 Exact spending is depends on Scope of Supply,
Material, (Design) Functionality, Processes &
Overheads .

6. Processes & Overheads :
 Machine Running Cost : To calculate actual running
cost of any Machine there are five Cost Variable
factors:
1. Machine Depreciation Cost
2. Electricity
3. Maintenance / Tooling / Consumables
4. Operator Cost
5. Overheads involved in process ( Overheads related
to processing will cover in process cost itself )

7. Considerations in Bellow calculations:
Not a Standard Categorization ( For Simplified Calculations Only)
Special Processes General Processes
Shearing
Other Fabrication Processes
Laser Cutting
Turret Punching
Bending
Powder Coating / Painting
Notes:
•We can get Machine Hourly Depreciation from machine Purchase price &
Date of purchase .
•Some Cost factors are complicate to calculate because, use of consumable are
different as per material & Application, So suggest average value for it.
•I have distinguished as pricing factors as per Estimation Purpose & Actual
Costing Purpose.

8. Unit rates of following special processes for
estimation purpose & Actual Cost Factors:
Machine Actual Running Cost
Special
Machines /
Processes
ACTUAL COST FACTORS
ESTIMATION
COST
FACTORS
Shearing
Machine
Depreciation
Electricity
Maintenance
/ Tooling/
Consumables
Operator
Cost
Overheads
As per No. of
Strokes
Laser Cutting
As Per
Cutting
Length ( OR
HOUR RATE)
Turret
Punching
As per No. of
punches
Bending
As per No. of
Bends
Powder
Coating /
Painting
As per m2

9. Areas to progress in Special
Processes:
 Make Sure about, Our Process Unit rates are Covering
mentioned cost Factors or not.
 If its actual cost not matching with our methods of
unit rates, It Means there is scope of improving its
Pricing.

10. OPERATIONS
FABRICATION & ASSEMBLY COST ESTIMATION
COST
CALCULATIONACTUAL COST FACTORS
CUTTING
DEPRECIATION
WHERE
APPLICABLE
ELECTRICITY
WHERE
CONSUMED
MAINTENANCE/
TOOLING/
CONSUMABLES
LABOUR/
OPERATOR
COST
OVERHEADS
RATE AS PER
MATERIAL KG
ROLLING
DRILLING
FINISHING /
MACHINING
1) MILLING
2) GRINDER
3) LATHE OR
SHAPER
MATERIAL
HANDLING
1) CRANE USAGE
2) FORK LIFTS OR
PALLET TRUCKS
3) INTERNAL
TRANSPORTATION
4) LOADING &
UNLOADING &
STORAGE
WELDING
ASSEMBLY
FITTING

11. Areas to progress in Fabrication
Process:
 Make Sure about Our Fabrication Cost per KG of
material weight are Covering mentioned cost Factors.
 If its actual cost not matching with our methods of KG
rates, It Means there is scope of improving its Pricing.

12. OVERHEADS IN COMPANY (% of TOTAL PRODUCT COST) INVOLVED
TYPE OF OVERHEADS (Categorized For Our Understanding)
WORK OFFICE SALES
BUILDING RENT OFFICE RENT SALES AMISSION
SALARY OF DRIVERS / SECURITY GUARDS
/ EMPLOYEES / MANAGERS / DIRECTOR
SALARY OF OFFICE STAFF SALARY OF SALES STAFF
All KIND OF INSURANCES LEGAL EXPENSES ADVERTISING
REPAIRING & REPLACEMENT OF SPARE
PARTS OF M/C
MAINTENANCE OF OFFICE EQUIPMENTS TRAVELLING EXPENSES
PLANT ELECTRICITY BILLS (EXCLUDING
MACHINE ELECTRICITY CONSUMPTION)
OFFICE ELECTRICITY BILLS
LIGHTING REQUIRED IN PLANT BUILDING MAINTENANCE
WATER BILLS
DEPRECIATION OF OFFICE USED
EQUIPMENT / M/C
FAX & TELEPHONES USAGE
OFFICE STATIONARIES
OFFICE EQUIPMENTS & SYSTEMS
POSTAGE & TELEGRAMS

13. Areas to Progress in Overheads:
 These are some overheads excluding overheads in
manufacturing processes.
 We need to calculate how much overhead factors we
are covering through our % of Overhead on total Price.
 We can Improve this by Replacing Assumptions with
exact calculations through Studying on available data.

14. Improvements :
 Try to work out for getting best Pricing.(Low Cost must be
our aim for compete a market)
 (What If Analysis)- To send a quote to client in short
duration we need to use some thumb rules & prices as per
Area(Square meter) & Total Weight (KGS) & Referring
Previous Cost Sheets, So Try to Improve these details by
Analyze these Data.
 We need to cross check both Estimated Price & Actual Cost
Price, study & Analyze those for getting best pricing.
 Use these details & Analyzed data for preparing further
quotations & modifying Estimation Calculations. (This is
Continuous Improvement Process).

15. Strategy Of Improvement
 Continuous Analyzing Available Data & Studies on
Processes & Cost Involvement.
 Having discussion with technical expert for finding
out Hidden Costs & Getting in to deep for getting
more exact values.
 Modifying (Correcting) Input Data on basis we are
doing further calculations.{Ex. Machine rates,
Depreciations, Consumable Prices , Formulae used}

16. Note: Most welcome to your Queries.
Your Expert Opinion can make it Correct & Complete.
_ Ajinkya Deshpande
Thank You