Manufacturer Price Sheet: Material, Labor, Overhead & Profit
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- Опубликовано: 21 авг 2024
- The following video breaks down how a manufacturer should come up with a price for industrial finished goods. First, the company must account for its material costs and apply a 5 percent indirect cost to that portion of the manufacturer's price sheet.
This 5 percent is meant to offset overruns in production and or additional costs of financing inventory and material purchases.
Second, the company must account for its labor relative to each operation performed to turn a raw material into a finished good. The calculation involves defining the operation and applying the labor cost to both the setup time in manufacturing and the actual run time.
Third, all labor costs are added in order to come up with a complete total for all the costs of manufacturing a given product. Those costs are then followed up by the company's overhead, which is calculated by taking its indirect expenses divided by its direct expenses. Indirect expenses are those expenses that are in addition to the the costs needed to produce a part. Direct expenses are exactly that. These include the costs involved or expenses involved in manufacturing the part.
Finally, the company adds its mark-up in order to secure a profit on the sale. Profit is critical because it helps to fund the company's pursuit of new product introductions and secure its long-term future.
Here is a sample of the Manufacturer Price Sheet in Excel Format
www.driveyoursu... Video explains how to price a product with direct material, labor, overhead and profit
Thank you Ian for the clear explanation, really good video
- The material cost is $768.6 = (732*1.05)
- The formula for Labor cost in the spreadsheet is multiplying setup and run time cost (it should be added), that's why the cost of 45 mins is higher than 1 hour. (=($C17/60)*($E17)+($D17/60*$E17))
Great Point Andres. Take care
Just finished watching the video and setting up the spreadsheet. I noticed these points as well. Thanks for clarifying!
Thank You Sir, very usefull for me. Simple and very clear Manufacturer Cost Calculations.
Great video and easy to understand!
I wish my production would be this simple...
Just a quick question on this set up. looking at the first line of the second graph: If it takes 10 minutes to set up and 35 minutes to do that is 45 minutes total at $20 an hour which wouldn't that be $15 to charge, I don't know how you got $38.89?
Something not adding up huh
Hi Ian, I enjoyed watching your video above. Looking at LAB RATE - Cutting, why did you multiply Setup by Run instead of adding the two columns for the cost per hour ? It does not initially make sense to me.
My calcs show...
1. Total Material = $732 + 5% = $768.60...?
2. Labour times - how does 45 minutes of labour - (set up of 10 mins and run time of 35 = total 45 mins...) at $20 per hour equal $38.89...? Should be $15.00...???
It is incorrect
I’m in the same boat I’m so confused how he got $38.89 when it should be $15.00 for 45 mins of work at $20.00 an hour. I’m not great at math but his calculations are confusing me even more.
Very interesting!
Where is the material shipping cost and duty/tariff from the supplier to your factory?
Great video!!!
Thank you a great work
Mr. Ian Johnson. Really appreciate your effort! Thanks a lot.
Setup Cost and Run Cost should be added or multiplied?
(In your example sheet, you have multiplied)
very useful
Thank you Ali.
Hi Ian !, I am many years late. lol, it's 2021. If you're still around I would like it if you would answer this question for me. Just say I made different sizes of 1 said product. Should I do this for each category?
Hello sir, I just started my home made production factory last week. How can I show you my cost.
How your business making out
Hello Mr. Ian, my big question is and problem at the moment is how did you determine that overheads are 30%?
Hello Bilal = I will be doing a video soon about how to determine your overhead rate. In this video I may have just taken 30% as an example of overhead rate - But I will explain how to calculate overhead rate in the future.
@@Driveyoursuccess Mr.Ian, thanks for your reply. I currently own a metal false ceiling manufacturing business and we have over 20 products with each product having several sizes in thickness. I'm having a very hard time calculating how much I should add for overhead charges after finding my cost to produce this material. This cost excludes labor charges, electricity, maintenance of machines. You're video is one of the best examples I found online. You seem like you know what you're talking about. And I would appreciate your help. Do you provide a service for advising/helping others analyze their business and determine how to reduce costs, overheads, and how to make sure they're pricing properly? Would love if we could discuss in detail.
Thanks
I use 2 types of overhead (ME Manufacturing Expenses and AE Administration expenses) which are using 730* Account codes and 770* Account codes. So I have a manufacturing company welding machining painting, Every Workcenter has multiple machines and multilabour plus ME on it. AE equals Administration Costs / Direct Costs( Mat+Labour+ME)
I have same big question with you Mr. Bilal
@@Driveyoursuccesshelo Mr. Ian, thanks for the tutorial.
I have some big question similary with Mr. Bilal, about how are the ways to determine the completion rate for direct labor & factory overhead. Would you please send the links to calculate & undertanding about completion rate?
Regards
Why did you use 30% of material and labor? Why not use a higher or lower percentage
Sir by the increment in factory overhead does inventory turn over ratio increase???
In one of the case it is increasing can you explain me how it is increasing?
You figure it out yet?
Hi, Nice explanation. But am confused about labor cost calculation. Can please elaborate?
Sir how it is 0.75?? Where as 25÷100=2.5