UNIT III - INTRODUCTION TO COST ESTIMATION
Importance of costing and estimation –methods of costing-elements of cost estimation –Types of estimates – Estimating procedure- Estimation labor cost, material cost- allocation of over head charges- Calculation of depreciation cost
PPCE unit 2 (ME8793 – PROCESS PLANNING AND COST ESTIMATION )TAMILMECHKIT
UNIT 2 – PROCESS PLANNING ACTIVITIES
Process parameters calculation for various production processes-Selection jigs and fixtures- Selection of quality assurance methods - Set of documents for process planning-Economics of process planning- case studies
This document discusses cost estimation for various manufacturing processes including forging, welding, and foundry. It provides details on estimating material, labor, and overhead costs for each process. For forging, it describes various forging operations and how to calculate material and labor costs. For welding, it defines different joint types and explains how to estimate costs for materials, pre/post welding labor, power, and overheads. For foundries, it outlines the process and provides a brief overview.
This document provides information on production cost estimation for different manufacturing processes like forging, welding, and foundry. It discusses the various components of cost estimation for each process. For forging, it describes how to estimate material, labor, and overhead costs. It also defines common forging operations and losses. For welding, the document outlines how to calculate direct material, labor, and overhead costs. Finally, it discusses the key steps to estimate material, labor, direct, and overhead costs for sand casting in a foundry process.
The document discusses process planning and cost estimation for manufacturing. It covers topics like process planning activities, documentation, computer-aided process planning, material selection and evaluation, process and machine selection methods, tooling selection, and drawing interpretation. The key aspects of process planning include designing the product, planning the manufacturing processes, and linking design to manufacturing.
This document discusses process planning. It defines process planning as systematically determining how a product will be manufactured economically. The objectives are to prepare instructions for manufacturing a product and its parts along with specifications. Process planning activities include analyzing part requirements, determining operation sequences, selecting equipment, calculating times, and documenting plans. Common approaches are manual and computer-aided process planning (CAPP), which can be retrieval-based or generative.
1. Interchangeability refers to parts that can be substituted for similar parts from other manufacturers without issues in assembly. It was pioneered by Eli Whitney who demonstrated interchangeable parts for firearms to Congress in 1801.
2. Selective assembly involves measuring and sorting parts into groups based on dimensions before assembly to achieve tighter tolerances not possible through interchangeability alone. It allows for assembling parts from within tolerance ranges that ensure proper fit and function.
3. The advantages of interchangeability and selective assembly include easier assembly, higher production rates, lower assembly costs, simplified repairs and replacements, and the ability to achieve mass production. Selective assembly also reduces waste and increases quality by avoiding needlessly tight tolerances.
CELLULAR MANUFACTURING & FLEXIBLE MANUFACTURING SYSTEM - UNIT 5 - CAD & MBalamurugan Subburaj
This document discusses group technology and cellular manufacturing. It begins by explaining the types of automation and levels of automation used in manufacturing. It then discusses group technology, which groups similar parts together to take advantage of their similarities in design and production. This allows for arranging production machines into cells to manufacture families of parts. Identifying part families and rearranging machines are two major tasks when implementing group technology. Benefits include reduced setup times and material handling. The Optiz classification system is also described for coding parts based on design and manufacturing attributes.
This document discusses methods for calculating machining times for various operations including lathe operations like turning, facing, knurling, reaming, tapping, and threading. It also covers drilling, boring, milling, shaping, planning, grinding, and provides formulas for calculating machining times based on factors like tool travel, feed rate, depth of cut, rpm, and cutting speed. Examples are provided to demonstrate how to estimate machining times for specific parts and operations using the appropriate formulas and time allowance factors. Calculating accurate machining times is important for cost estimation of parts involving multiple machining steps.
PPCE unit 2 (ME8793 – PROCESS PLANNING AND COST ESTIMATION )TAMILMECHKIT
UNIT 2 – PROCESS PLANNING ACTIVITIES
Process parameters calculation for various production processes-Selection jigs and fixtures- Selection of quality assurance methods - Set of documents for process planning-Economics of process planning- case studies
This document discusses cost estimation for various manufacturing processes including forging, welding, and foundry. It provides details on estimating material, labor, and overhead costs for each process. For forging, it describes various forging operations and how to calculate material and labor costs. For welding, it defines different joint types and explains how to estimate costs for materials, pre/post welding labor, power, and overheads. For foundries, it outlines the process and provides a brief overview.
This document provides information on production cost estimation for different manufacturing processes like forging, welding, and foundry. It discusses the various components of cost estimation for each process. For forging, it describes how to estimate material, labor, and overhead costs. It also defines common forging operations and losses. For welding, the document outlines how to calculate direct material, labor, and overhead costs. Finally, it discusses the key steps to estimate material, labor, direct, and overhead costs for sand casting in a foundry process.
The document discusses process planning and cost estimation for manufacturing. It covers topics like process planning activities, documentation, computer-aided process planning, material selection and evaluation, process and machine selection methods, tooling selection, and drawing interpretation. The key aspects of process planning include designing the product, planning the manufacturing processes, and linking design to manufacturing.
This document discusses process planning. It defines process planning as systematically determining how a product will be manufactured economically. The objectives are to prepare instructions for manufacturing a product and its parts along with specifications. Process planning activities include analyzing part requirements, determining operation sequences, selecting equipment, calculating times, and documenting plans. Common approaches are manual and computer-aided process planning (CAPP), which can be retrieval-based or generative.
1. Interchangeability refers to parts that can be substituted for similar parts from other manufacturers without issues in assembly. It was pioneered by Eli Whitney who demonstrated interchangeable parts for firearms to Congress in 1801.
2. Selective assembly involves measuring and sorting parts into groups based on dimensions before assembly to achieve tighter tolerances not possible through interchangeability alone. It allows for assembling parts from within tolerance ranges that ensure proper fit and function.
3. The advantages of interchangeability and selective assembly include easier assembly, higher production rates, lower assembly costs, simplified repairs and replacements, and the ability to achieve mass production. Selective assembly also reduces waste and increases quality by avoiding needlessly tight tolerances.
CELLULAR MANUFACTURING & FLEXIBLE MANUFACTURING SYSTEM - UNIT 5 - CAD & MBalamurugan Subburaj
This document discusses group technology and cellular manufacturing. It begins by explaining the types of automation and levels of automation used in manufacturing. It then discusses group technology, which groups similar parts together to take advantage of their similarities in design and production. This allows for arranging production machines into cells to manufacture families of parts. Identifying part families and rearranging machines are two major tasks when implementing group technology. Benefits include reduced setup times and material handling. The Optiz classification system is also described for coding parts based on design and manufacturing attributes.
This document discusses methods for calculating machining times for various operations including lathe operations like turning, facing, knurling, reaming, tapping, and threading. It also covers drilling, boring, milling, shaping, planning, grinding, and provides formulas for calculating machining times based on factors like tool travel, feed rate, depth of cut, rpm, and cutting speed. Examples are provided to demonstrate how to estimate machining times for specific parts and operations using the appropriate formulas and time allowance factors. Calculating accurate machining times is important for cost estimation of parts involving multiple machining steps.
The document discusses process planning, which involves translating design requirements into manufacturing process details. It describes process planning as a bridge between design and manufacturing. The document then discusses several key aspects of process planning including analyzing part requirements, selecting materials and operations, interpreting designs, choosing equipment, and creating work instructions. Finally, it compares manual and computer-aided process planning (CAPP) methods, with CAPP helping to reduce time/costs and increase consistency and accuracy compared to experience-based manual methods. CAPP approaches include variant, generative, and automatic planning.
This document discusses the calculation of machining time for various operations. It begins by explaining why machining time calculation is important for cost estimation. It then provides formulas and factors to consider for calculating machining time for lathe operations like turning, drilling and boring. Similar information is provided for operations like milling, shaping, planning and grinding. The key factors discussed are tool travel, feed, depth of cut, rpm, cutting speed, setup time and allowances for factors like fatigue. The document emphasizes the importance of accurately estimating machining time for determining production costs.
This document discusses process planning and cost estimation. It covers topics such as process planning activities like drawing interpretation, material evaluation, process selection, and production equipment selection. It also discusses computer aided process planning approaches like retrieval and generative CAPP. For cost estimation, it covers importance of estimation, types of estimates, elements of estimation, estimating procedure, importance of costing, methods of costing, and calculation of costs.
Gauges are precision measurement tools used to ensure dimensional accuracy and interchangeability of manufactured components. There are several types of gauges classified by their design, including plug, ring, snap, and thread gauges. Key materials for gauges include high carbon steel and cemented carbides due to their hardness and wear resistance. Proper design of limit gauges involves allocating tolerances for manufacturing variability and wear over the gauge's lifespan.
What is process planning .Difficulties in traditional process planning,CAPP Model,Types of CAPP ,1.Retrieval type CAPP (variant) systems.
2.Generative CAPP systems.
3.Hybrid CAPP systems.
Process planning system , Machinability data systems , Benefits of CAPP
This document discusses group technology and computer aided process planning. It defines group technology as identifying and grouping similar parts to take advantage of their common design and production characteristics. The key benefits of group technology are outlined. Implementation involves identifying part families and rearranging production machines into cells dedicated to each family. Various part classification and coding systems used in group technology are also described.
Tool life is measured by the time period from when a tool starts cutting until failure or until it needs resharpening. Tool life can be measured in units of time, number of pieces cut, volume of material removed, or length of cut. Tools typically fail due to high temperatures, mechanical impacts, or gradual wear. Wear occurs on the flank and crater faces of tools and is caused by abrasion, diffusion, electrochemical reactions, and other mechanisms. Factors like cutting speed, workpiece properties, tool geometry, and cooling influence tool life.
The document discusses process planning, which involves selecting and sequencing manufacturing processes and operations to transform raw materials into finished components. It covers manual and computer-aided process planning methods. The key steps in manual process planning are interpreting drawings, selecting processes and operations, choosing tools and equipment, and documenting the plan. Computer-aided process planning can retrieve existing plans or generate new optimized plans. Important considerations in process planning include equipment selection, tooling selection, and interpreting engineering drawings and specifications.
Computer-Aided process planning (CAPP) aims to capture the logic, judgements, and experience required for process planning and incorporate them into computer programs that can automatically generate manufacturing operation sequences. There are three main approaches to CAPP: retrieval systems that retrieve standardized process plans, generative systems that create plans through decision logic and algorithms, and hybrid systems that combine aspects of both. CAPP reduces routine work for manufacturing engineers and aims to standardize and optimize the process planning procedure.
The document discusses various metal forming processes. It describes hot working and cold working of metals, where hot working involves shaping metals above their recrystallization temperature and cold working is below this temperature. Specific metal forming processes covered include forging processes like open die forging, closed die forging, and roll forging. Other forming methods discussed are drawing, extrusion, and bending. The advantages and limitations of hot and cold working are also compared.
Non-traditional machining techniques remove material using various energy sources besides traditional cutting tools. They are divided into mechanical, electrical, thermal, and chemical techniques. Non-traditional techniques are needed for hard or complex materials, and can machine intricate shapes and deep holes. Selection depends on the part geometry, material properties, machining capabilities, and cost effectiveness. While more expensive initially than traditional techniques, non-traditional machining offers higher precision, surface finish, and ability to machine difficult materials.
This document discusses different coordinate systems used in geometric modeling:
1. The model coordinate system (MCS) is the reference space where all model geometric data is stored.
2. The working coordinate system (WCS) is user-defined to facilitate geometric construction.
3. The screen coordinate system (SCS) is device-dependent with its origin at the lower left display corner.
Geometric modeling refers to techniques for efficiently representing a design's geometric aspects. Approaches include wireframe modeling using points and curves, surface modeling defining objects by bounding faces, and solid modeling representing objects as solids.
This document provides information on measuring various geometric features of screw threads and gears. It discusses measuring the major diameter, minor diameter, pitch, and other elements of threads using instruments like micrometers, thread gauges, and comparators. For gears, it describes measuring runout, pitch, profile, backlash, tooth thickness, and alignment using devices like dial indicators, involute measuring machines, and angular measurement techniques. The document also defines common terminology for screw thread and gear geometry.
COMPUTER AIDED PROCESS PLANNING (CAPP)KRUNAL RAVAL
Computer-aided process planning (CAPP) helps determine the processing steps required to make a part after CAP has been used to define what is to be made. CAPP programs develop a process plan or route sheet by following either a variant or a generative approach.
This document discusses different layout configurations for flexible manufacturing systems (FMS). It describes five types of FMS layouts: progressive or line type, loop type, ladder type, open field type, and robot centered type. For each type, it provides a brief explanation of the layout and flow of parts. It also lists some factors that influence the selection of an FMS layout, such as availability of materials and labor, transportation infrastructure, and local business conditions.
Unit 2 Machinability, Cutting Fluids, Tool Life & Wear, Tool MaterialsMechbytes
Concept of machinability, machinability index, factors affecting machinability
Different mechanism of tool wear types of tool wear (crater, flank etc.), Measurement and control of tool wear
Concept of tool life, Taylor's tool life equation (including modified version)
Different tool materials and their applications including effect of tool coating
Introduction to economics of machining
Cutting fluids: types, properties, selection and application methods
This document provides an overview of group technology (GT) in manufacturing. It defines GT as an approach that groups similar parts into families to take advantage of their common design and production processes. The key benefits of GT include reduced setup times and inventory costs through specialized machine cells for each part family. While identifying appropriate part families and rearranging production equipment into cells can be challenging initially, GT aims to improve manufacturing efficiency through standardization and reduced material handling.
This document provides information about cost estimation. It defines cost estimation and discusses its purpose and importance. It outlines the key elements involved in cost estimation like direct labor cost, material cost, and overhead charges. It also describes different types of estimates and the typical cost estimating procedure. Common costing methods like job costing, process costing, and uniform costing are defined. Examples are provided to demonstrate how to calculate prime cost, factory cost, production cost, total cost and selling price.
The document discusses process planning, which involves translating design requirements into manufacturing process details. It describes process planning as a bridge between design and manufacturing. The document then discusses several key aspects of process planning including analyzing part requirements, selecting materials and operations, interpreting designs, choosing equipment, and creating work instructions. Finally, it compares manual and computer-aided process planning (CAPP) methods, with CAPP helping to reduce time/costs and increase consistency and accuracy compared to experience-based manual methods. CAPP approaches include variant, generative, and automatic planning.
This document discusses the calculation of machining time for various operations. It begins by explaining why machining time calculation is important for cost estimation. It then provides formulas and factors to consider for calculating machining time for lathe operations like turning, drilling and boring. Similar information is provided for operations like milling, shaping, planning and grinding. The key factors discussed are tool travel, feed, depth of cut, rpm, cutting speed, setup time and allowances for factors like fatigue. The document emphasizes the importance of accurately estimating machining time for determining production costs.
This document discusses process planning and cost estimation. It covers topics such as process planning activities like drawing interpretation, material evaluation, process selection, and production equipment selection. It also discusses computer aided process planning approaches like retrieval and generative CAPP. For cost estimation, it covers importance of estimation, types of estimates, elements of estimation, estimating procedure, importance of costing, methods of costing, and calculation of costs.
Gauges are precision measurement tools used to ensure dimensional accuracy and interchangeability of manufactured components. There are several types of gauges classified by their design, including plug, ring, snap, and thread gauges. Key materials for gauges include high carbon steel and cemented carbides due to their hardness and wear resistance. Proper design of limit gauges involves allocating tolerances for manufacturing variability and wear over the gauge's lifespan.
What is process planning .Difficulties in traditional process planning,CAPP Model,Types of CAPP ,1.Retrieval type CAPP (variant) systems.
2.Generative CAPP systems.
3.Hybrid CAPP systems.
Process planning system , Machinability data systems , Benefits of CAPP
This document discusses group technology and computer aided process planning. It defines group technology as identifying and grouping similar parts to take advantage of their common design and production characteristics. The key benefits of group technology are outlined. Implementation involves identifying part families and rearranging production machines into cells dedicated to each family. Various part classification and coding systems used in group technology are also described.
Tool life is measured by the time period from when a tool starts cutting until failure or until it needs resharpening. Tool life can be measured in units of time, number of pieces cut, volume of material removed, or length of cut. Tools typically fail due to high temperatures, mechanical impacts, or gradual wear. Wear occurs on the flank and crater faces of tools and is caused by abrasion, diffusion, electrochemical reactions, and other mechanisms. Factors like cutting speed, workpiece properties, tool geometry, and cooling influence tool life.
The document discusses process planning, which involves selecting and sequencing manufacturing processes and operations to transform raw materials into finished components. It covers manual and computer-aided process planning methods. The key steps in manual process planning are interpreting drawings, selecting processes and operations, choosing tools and equipment, and documenting the plan. Computer-aided process planning can retrieve existing plans or generate new optimized plans. Important considerations in process planning include equipment selection, tooling selection, and interpreting engineering drawings and specifications.
Computer-Aided process planning (CAPP) aims to capture the logic, judgements, and experience required for process planning and incorporate them into computer programs that can automatically generate manufacturing operation sequences. There are three main approaches to CAPP: retrieval systems that retrieve standardized process plans, generative systems that create plans through decision logic and algorithms, and hybrid systems that combine aspects of both. CAPP reduces routine work for manufacturing engineers and aims to standardize and optimize the process planning procedure.
The document discusses various metal forming processes. It describes hot working and cold working of metals, where hot working involves shaping metals above their recrystallization temperature and cold working is below this temperature. Specific metal forming processes covered include forging processes like open die forging, closed die forging, and roll forging. Other forming methods discussed are drawing, extrusion, and bending. The advantages and limitations of hot and cold working are also compared.
Non-traditional machining techniques remove material using various energy sources besides traditional cutting tools. They are divided into mechanical, electrical, thermal, and chemical techniques. Non-traditional techniques are needed for hard or complex materials, and can machine intricate shapes and deep holes. Selection depends on the part geometry, material properties, machining capabilities, and cost effectiveness. While more expensive initially than traditional techniques, non-traditional machining offers higher precision, surface finish, and ability to machine difficult materials.
This document discusses different coordinate systems used in geometric modeling:
1. The model coordinate system (MCS) is the reference space where all model geometric data is stored.
2. The working coordinate system (WCS) is user-defined to facilitate geometric construction.
3. The screen coordinate system (SCS) is device-dependent with its origin at the lower left display corner.
Geometric modeling refers to techniques for efficiently representing a design's geometric aspects. Approaches include wireframe modeling using points and curves, surface modeling defining objects by bounding faces, and solid modeling representing objects as solids.
This document provides information on measuring various geometric features of screw threads and gears. It discusses measuring the major diameter, minor diameter, pitch, and other elements of threads using instruments like micrometers, thread gauges, and comparators. For gears, it describes measuring runout, pitch, profile, backlash, tooth thickness, and alignment using devices like dial indicators, involute measuring machines, and angular measurement techniques. The document also defines common terminology for screw thread and gear geometry.
COMPUTER AIDED PROCESS PLANNING (CAPP)KRUNAL RAVAL
Computer-aided process planning (CAPP) helps determine the processing steps required to make a part after CAP has been used to define what is to be made. CAPP programs develop a process plan or route sheet by following either a variant or a generative approach.
This document discusses different layout configurations for flexible manufacturing systems (FMS). It describes five types of FMS layouts: progressive or line type, loop type, ladder type, open field type, and robot centered type. For each type, it provides a brief explanation of the layout and flow of parts. It also lists some factors that influence the selection of an FMS layout, such as availability of materials and labor, transportation infrastructure, and local business conditions.
Unit 2 Machinability, Cutting Fluids, Tool Life & Wear, Tool MaterialsMechbytes
Concept of machinability, machinability index, factors affecting machinability
Different mechanism of tool wear types of tool wear (crater, flank etc.), Measurement and control of tool wear
Concept of tool life, Taylor's tool life equation (including modified version)
Different tool materials and their applications including effect of tool coating
Introduction to economics of machining
Cutting fluids: types, properties, selection and application methods
This document provides an overview of group technology (GT) in manufacturing. It defines GT as an approach that groups similar parts into families to take advantage of their common design and production processes. The key benefits of GT include reduced setup times and inventory costs through specialized machine cells for each part family. While identifying appropriate part families and rearranging production equipment into cells can be challenging initially, GT aims to improve manufacturing efficiency through standardization and reduced material handling.
This document provides information about cost estimation. It defines cost estimation and discusses its purpose and importance. It outlines the key elements involved in cost estimation like direct labor cost, material cost, and overhead charges. It also describes different types of estimates and the typical cost estimating procedure. Common costing methods like job costing, process costing, and uniform costing are defined. Examples are provided to demonstrate how to calculate prime cost, factory cost, production cost, total cost and selling price.
The document discusses cost estimating and costing. It defines cost estimating as determining the probable cost of manufacturing a product before production starts. This involves estimating costs for materials, labor, overhead etc. Costing determines the actual costs incurred during production. It provides information for setting prices, cost control, make-or-buy decisions and more. The document outlines different types of costing systems used such as job costing, batch costing and process costing.
The purpose of cost estimating is to find the cost of the manufacturing operations and to assist in setting the price for the product
Costing is the determination of an actual cost of a component after adding different expenses incurred in various departments
This document provides an overview of cost estimation and costing. It defines estimation as calculating expected costs before production, while costing determines actual costs after production. The key stages of estimating procedure are discussed, including determining design, materials, labor, overhead costs, and profit. Objectives of estimating include establishing policies and prices. Factory overheads, administrative expenses, and selling expenses are also explained. Methods of costing and important elements of cost like materials, labor, and expenses are outlined.
importance of estimation power point presentationniyatishah939575
The document discusses cost estimating and costing. It defines cost estimating as determining the probable cost of manufacturing a product before production starts. Costing is defined as accurately recording the actual costs incurred during production. The key purposes of cost estimating include setting selling prices, evaluating designs, and making manufacturing decisions. Costing provides actual costs for profit/loss analysis, price fixing, and cost control. Different costing methods like job costing, batch costing, and process costing are used depending on the type of production.
Process planning and cost estimation unit iiis Kumaravel
This document provides information about cost estimation, including definitions, reasons for doing estimates, components of a cost estimate, and methods of estimating costs. It defines cost estimation as predicting the expected cost of producing a product before actual production. Estimates are done to assist management in deciding whether to produce a product and help set a selling price. A cost estimate includes costs of design, materials, labor, tools/fixtures, overhead, etc. Methods of estimating include the conference, comparison, and detailed analysis methods. The document also outlines the general procedure for cost estimation.
This document discusses different costing techniques used in various industries and businesses. It provides examples of four costing techniques - marginal costing, standard costing, budgetary costing and how they help in decision making, cost control and cost reduction. Marginal costing helps management take short-term decisions and control variable costs. Standard costing enables cost control and performance evaluation by comparing actual and standard costs. Budgetary costing facilitates achieving organizational goals through periodic review of actual performance against budgets.
The document discusses various cost accounting methods like standard costing, marginal costing, and absorption costing that are used to record, classify, and summarize costs to determine product or service costs. It also outlines different costing techniques like job costing, process costing, and contract costing. Finally, it defines the key elements of cost accounting like direct and indirect materials, direct and indirect labor, expenses, and overheads.
4methods of costing in cost accounting.pdfNeha234608
The document discusses various methods of costing including unit costing, job costing, contract costing, batch costing, operating/service costing, process costing, multiple costing, and uniform costing. It provides examples of different industries that use each method. It also discusses other costing techniques like marginal costing, absorption costing, standard costing, and historical costing. The document outlines the need for reconciliation when cost and financial accounts are maintained separately.
This document discusses cost estimation for process planning and manufacturing. It defines cost estimation as predicting production costs before actual manufacturing. The key steps in cost estimation are: 1) Analyzing product requirements and specifications, 2) Preparing a bill of materials, 3) Estimating material, labor, tooling and purchased part costs, 4) Calculating prime cost by adding direct costs, 5) Applying factory overhead costs, 6) Adding administrative and selling expenses to get total cost, and 7) Factoring in profit to determine selling price. Common cost estimation methods include factor method, material cost method, and function method. The document outlines elements of cost like material, labor, overhead and provides examples of cost estimation calculations.
This document discusses cost estimation for process planning and manufacturing. It defines cost estimation as predicting production costs before actual manufacturing. The key steps in cost estimation are: 1) Analyzing product requirements and specifications, 2) Preparing a bill of materials, 3) Estimating material, labor, tooling and purchased part costs, 4) Calculating prime cost by adding direct costs, 5) Applying factory overhead costs, 6) Adding administrative and selling expenses to get total cost, and 7) Factoring in profit to determine selling price. Common cost estimation methods include factor method, material cost method, and function method. The document outlines elements of cost like material, labor, overhead and provides examples of cost estimation calculations.
This document discusses cost estimation for manufacturing processes. It defines cost estimation as predicting production costs before actual manufacturing. The key steps in cost estimation are: 1) Analyzing the product and creating a bill of materials, 2) Estimating material, labor, tooling and purchased part costs, 3) Calculating direct costs, overhead costs and profit to determine a selling price. Common cost estimation methods include factor analysis, material cost ratios, and detailed analysis of each manufacturing operation and cost element. Accurate cost estimation allows companies to set prices, evaluate product feasibility, and make production planning decisions.
Cost accounting is used to track the various costs of production and services. It involves maintaining detailed records of materials, labor, and expenses for products. This allows businesses to understand per-unit costs, control costs, and provide reliable cost data for decision making. Cost accounting techniques include standard costing, marginal costing, single costing for uniform products, process costing for multi-step production, and departmental costing for multiple products. Key factors for an effective cost accounting system include timely cost information, cooperation across departments, efficient production processes, qualified accounting staff, and honest management.
The document describes various methods of costing used in cost accounting including: unit costing, job costing, contract costing, batch costing, operating/service costing, process costing, multiple costing, and uniform costing. It provides examples of different industries that use each method and brief descriptions of how each method works.
The document outlines lecture 1 of a textile costing and management course, which introduces important concepts such as defining costs and their components, the role and advantages of cost accounting, classifying costs as fixed, variable, or semi-variable, and how to summarize total manufacturing costs by nature, department, or in a combined format. The lecture also discusses learning outcomes around understanding cost and management techniques, evaluating waste costs, and developing documentation for fabric cost sheets.
This document provides an introduction to cost estimation. It defines cost estimation as estimating the expected cost of producing a job or product before production begins. It also defines cost accounting as determining the actual cost of a product after adding expenses from various departments.
The document outlines several objectives of cost estimation such as determining if a project will be economical, helping to set the selling price, and enabling management to plan financing and procurement. It also describes different types of costs that make up total estimated costs like material, labor, overhead costs. Finally, it discusses different cost estimation methods used like job costing, process costing, and departmental costing.
The document discusses various methods and concepts in cost accounting, including:
1. Different types of costing methods like unit costing, job costing, contract costing, batch costing, operating costing, process costing, and multiple/uniform costing.
2. The need to reconcile cost and financial accounts when they are maintained separately, to check for differences in reported profit/loss.
3. Key aspects of cost sheets like classifying cost components, ascertaining product costs, fixing selling prices, and aiding cost control and management decisions.
Product cycle- Design process- sequential and concurrent engineering- Computer aided design – CAD system architecture- Computer graphics – co-ordinate systems- 2D and 3D transformations- homogeneous coordinates - Line drawing -Clipping- viewing transformation-Brief introduction to CAD and CAM – Manufacturing Planning, Manufacturing control- Introduction to CAD/CAM –CAD/CAM concepts ––Types of production - Manufacturing models and Metrics – Mathematical models of Production Performance
Pneumatic Drives-Hydraulic Drives-Mechanical Drives-Electrical Drives-D.C. Servo Motors, Stepper Motors, A.C. Servo Motors-Salient Features, Applications and Comparison of all these Drives, End Effectors-Grippers-Mechanical Grippers, Pneumatic and Hydraulic- Grippers, Magnetic Grippers, Vacuum Grippers; Two Fingered and Three Fingered Grippers; Internal Grippers and External Grippers; Selection and Design Considerations.
Requirements of a sensor, Principles and Applications of the following types of sensors- Position sensors - Piezo Electric Sensor, LVDT, Resolvers, Optical Encoders, pneumatic Position Sensors, Range Sensors Triangulations Principles, Structured, Lighting Approach, Time of Flight, Range Finders, Laser Range Meters, Touch Sensors ,binary Sensors., Analog Sensors, Wrist Sensors, Compliance Sensors, Slip Sensors, Camera, Frame Grabber, Sensing and Digitizing Image Data- Signal Conversion, Image Storage, Lighting Techniques, Image Processing and Analysis-Data Reduction, Segmentation, Feature Extraction, Object Recognition, Other Algorithms, Applications- Inspection, Identification, Visual Serving and Navigation.
ROBOTICS-ROBOT KINEMATICS AND ROBOT PROGRAMMINGTAMILMECHKIT
Forward Kinematics, Inverse Kinematics and Difference; Forward Kinematics and Reverse Kinematics of manipulators with Two, Three Degrees of Freedom (in 2 Dimension), Four Degrees of freedom (in 3 Dimension) Jacobians, Velocity and Forces-Manipulator Dynamics, Trajectory Generator, Manipulator Mechanism Design-Derivations and problems. Lead through Programming, Robot programming Languages-VAL Programming-Motion Commands, Sensor Commands, End Effector commands and simple Programs
A review on techniques and modelling methodologies used for checking electrom...nooriasukmaningtyas
The proper function of the integrated circuit (IC) in an inhibiting electromagnetic environment has always been a serious concern throughout the decades of revolution in the world of electronics, from disjunct devices to today’s integrated circuit technology, where billions of transistors are combined on a single chip. The automotive industry and smart vehicles in particular, are confronting design issues such as being prone to electromagnetic interference (EMI). Electronic control devices calculate incorrect outputs because of EMI and sensors give misleading values which can prove fatal in case of automotives. In this paper, the authors have non exhaustively tried to review research work concerned with the investigation of EMI in ICs and prediction of this EMI using various modelling methodologies and measurement setups.
KuberTENes Birthday Bash Guadalajara - K8sGPT first impressionsVictor Morales
K8sGPT is a tool that analyzes and diagnoses Kubernetes clusters. This presentation was used to share the requirements and dependencies to deploy K8sGPT in a local environment.
ACEP Magazine edition 4th launched on 05.06.2024Rahul
This document provides information about the third edition of the magazine "Sthapatya" published by the Association of Civil Engineers (Practicing) Aurangabad. It includes messages from current and past presidents of ACEP, memories and photos from past ACEP events, information on life time achievement awards given by ACEP, and a technical article on concrete maintenance, repairs and strengthening. The document highlights activities of ACEP and provides a technical educational article for members.
International Conference on NLP, Artificial Intelligence, Machine Learning an...gerogepatton
International Conference on NLP, Artificial Intelligence, Machine Learning and Applications (NLAIM 2024) offers a premier global platform for exchanging insights and findings in the theory, methodology, and applications of NLP, Artificial Intelligence, Machine Learning, and their applications. The conference seeks substantial contributions across all key domains of NLP, Artificial Intelligence, Machine Learning, and their practical applications, aiming to foster both theoretical advancements and real-world implementations. With a focus on facilitating collaboration between researchers and practitioners from academia and industry, the conference serves as a nexus for sharing the latest developments in the field.
Advanced control scheme of doubly fed induction generator for wind turbine us...IJECEIAES
This paper describes a speed control device for generating electrical energy on an electricity network based on the doubly fed induction generator (DFIG) used for wind power conversion systems. At first, a double-fed induction generator model was constructed. A control law is formulated to govern the flow of energy between the stator of a DFIG and the energy network using three types of controllers: proportional integral (PI), sliding mode controller (SMC) and second order sliding mode controller (SOSMC). Their different results in terms of power reference tracking, reaction to unexpected speed fluctuations, sensitivity to perturbations, and resilience against machine parameter alterations are compared. MATLAB/Simulink was used to conduct the simulations for the preceding study. Multiple simulations have shown very satisfying results, and the investigations demonstrate the efficacy and power-enhancing capabilities of the suggested control system.
Low power architecture of logic gates using adiabatic techniquesnooriasukmaningtyas
The growing significance of portable systems to limit power consumption in ultra-large-scale-integration chips of very high density, has recently led to rapid and inventive progresses in low-power design. The most effective technique is adiabatic logic circuit design in energy-efficient hardware. This paper presents two adiabatic approaches for the design of low power circuits, modified positive feedback adiabatic logic (modified PFAL) and the other is direct current diode based positive feedback adiabatic logic (DC-DB PFAL). Logic gates are the preliminary components in any digital circuit design. By improving the performance of basic gates, one can improvise the whole system performance. In this paper proposed circuit design of the low power architecture of OR/NOR, AND/NAND, and XOR/XNOR gates are presented using the said approaches and their results are analyzed for powerdissipation, delay, power-delay-product and rise time and compared with the other adiabatic techniques along with the conventional complementary metal oxide semiconductor (CMOS) designs reported in the literature. It has been found that the designs with DC-DB PFAL technique outperform with the percentage improvement of 65% for NOR gate and 7% for NAND gate and 34% for XNOR gate over the modified PFAL techniques at 10 MHz respectively.
CHINA’S GEO-ECONOMIC OUTREACH IN CENTRAL ASIAN COUNTRIES AND FUTURE PROSPECTjpsjournal1
The rivalry between prominent international actors for dominance over Central Asia's hydrocarbon
reserves and the ancient silk trade route, along with China's diplomatic endeavours in the area, has been
referred to as the "New Great Game." This research centres on the power struggle, considering
geopolitical, geostrategic, and geoeconomic variables. Topics including trade, political hegemony, oil
politics, and conventional and nontraditional security are all explored and explained by the researcher.
Using Mackinder's Heartland, Spykman Rimland, and Hegemonic Stability theories, examines China's role
in Central Asia. This study adheres to the empirical epistemological method and has taken care of
objectivity. This study analyze primary and secondary research documents critically to elaborate role of
china’s geo economic outreach in central Asian countries and its future prospect. China is thriving in trade,
pipeline politics, and winning states, according to this study, thanks to important instruments like the
Shanghai Cooperation Organisation and the Belt and Road Economic Initiative. According to this study,
China is seeing significant success in commerce, pipeline politics, and gaining influence on other
governments. This success may be attributed to the effective utilisation of key tools such as the Shanghai
Cooperation Organisation and the Belt and Road Economic Initiative.
Presentation of IEEE Slovenia CIS (Computational Intelligence Society) Chapte...University of Maribor
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PPCE unit 3 (ME8793 – PROCESS PLANNING AND COST ESTIMATION)
1. WELCOME
UNIT III - INTRODUCTION TO COST ESTIMATION
ME8793 – PROCESS PLANNING AND
COST ESTIMATION
Mr. TAMIL SELVAN M, A/P, MECH, KIT.
2. UNIT III INTRODUCTION TO COST
ESTIMATION
Importance of costing and estimation –methods of costing-
elements of cost estimation –Types of estimates – Estimating
procedure- Estimation labor cost, material cost- allocation of
over head charges- Calculation of depreciation cost
3. COST ESTIMATION
Define
Cost estimating may be defined as the process of determining
the probable cost of the product before the start ofmanufacture
Purpose
The purpose of cost estimating is to find the cost of the
manufacturing operations and to assist in setting the price for the
product
4. FEATURES OF COST ESTIMATION
Important activity in engineering design and production
It is forecasting the future cost
Cost estimating & process planning are prominent activities in the
manufacturing system
It considers all the expenditures involved like engineering,
administration, etc
It requires high technical knowledge
5. IMPORTANCE OF COST ESTIMATION
The only accurate estimating can enable the leaders to make
vital decisions such as manufacturing, selling policies
Case1
If job is over estimated,
The firm will not be able to compete with its competitors
If the job is under estimated,
The firm will face huge financial loss
6. AIMS OF COST ESTIMATION
To establish the selling price of a product, so as to ensure
reasonable profit to the company
To determine the most economical process
To make/buy decisions
To evaluate the alternate designs
To prepare production budget
To initiate the cost reduction in existing facilities
7. COSTING
Define
Costing is the determination of an actual cost of a component after
adding different expenses incurred in various departments
Costing may be defined as a systematic procedure for recording
accurately every item of expenditure incurred on the manufacture of a
product by different sections of any manufacturing concern
9. 1.Unit Costing
This method also called 'Single output Costing’.
This method of costing is used for products which can be expressed in
identical quantitative units and is suitable for products which are
manufactured by continuous manufacturing activity.
Costs are ascertained for convenient units of output.
Examples: Brick making, mining, cement manufacturing, dairy, flour
mills etc.
10. 2. JOB COSTING
Under this method costs are ascertained for each work order
separately as each job has its own specifications and scope.
Examples: Painting, Car repair, Decoration, Repair of building
etc.
11. 3. CONTRACT COSTING
Under this method costing is done for big jobs which involves
heavy expenditure and stretches over a long period and often it is
undertaken at different sites.
Each contract is treated as a separate unit for costing.
This is also known as Terminal Costing.
Construction of bridges, roads, buildings, etc. comes under
contract costing.
12. 4. BATCH COSTING
This methods of costing is used where the units produced in a
batch are uniform in nature and design.
For the purpose of costing each batch is treated as a job or
separate unit.
Industries like Bakery, Pharmaceuticals etc. usually use
batch costing method.
13. 5. OPERATING COSTING OR SERVICE
COSTING:
Where the cost of operating a service such as nursing home, Bus,
railway or chartered bus etc. this method of costing is used to
ascertain the cost of such particular service.
Each particular service is treated as separate units in operating
costing.
In the case of a Nursing Home, a unit is treated as the cost of a
bed per day and for buses operating cost for a kilometer is treated as
a unit.
14. 6. PROCESS COSTING
This kind of costing is used for the products which go through different
processes.
For example, manufacturing cloths goes through different process.
Fist process is spinning.
The second step is the weaving process.
The third process is converting cloth in to finished product such as shirt
or trouser etc.
15. 7. MULTIPLE COSTING
When the output comprises many assembled parts or components such
as in television, motor Car or electronics gadgets, costs have to be
ascertained or each component as well as the finished product.
Such costing may involve different methods of costing for different
components.
Therefore this type of costing is known as composite costing or
multiple costing.
16. 8. UNIFORM COSTING
This is not a separate method of costing.
This is a system of using the same method of costing by a number of
firms in the same industry.
It is treated as a common system of using agreed principles and
standard accounting practices in the identical firms or industry.
This helps in fixation of price of the product and inter-firm
comparisons.
18. TYPES OF ESTIMATES
To fix the selling price of the product
To help the contractors to submit the accurate tenders
To forecast the progress of production and cost
To set the variousStandards
19. COST ESTIMATING PROCEDURE
Step 1
Study the cost estimation request thoroughly and understand it completely
Step 2
Analyze the product and decide the requirements and specifications of
the product
Step 3
Prepare the list of all the parts of the product and their bill of Materials
Step 4
Take make or buy decisions and prepare a separate list of parts to be
purchased &manufactured
20. Step 5
Estimate the materials cost for the parts to be manufactured in the plant
Step 6
Determine the cost of the parts to be purchased from outside
Step 7
Make a manufacturing process plan for the parts to be manufactured in
the plant
Step 8
Estimate the machining time for each operations listed in the
manufacturing process plan
Step 9
Determine the direct labour cost
21. Step 10
Determine the prime cost by adding direct expenses, direct material cost,
and direct labour cost
prime cost =direct expenses +direct material cost +direct labour cost
Step 11
Estimate the factory overheads, which include all indirect expenditure
incurred during production such as indirect material cost, indirect labour
cost, depreciation and expenditure on maintenance of the plant,
machinery, power, etc.
Step 12
Estimate the administrative expenses
Step 13
Estimate the selling and distribution expenses, which include packing
and delivery charges, advertisement charges, etc.
22. Step 14
Now calculate the total cost of the product
Total cost = Prime cost + Factory overheads + Administrative
expenses + Selling and distribution expenses
Step 15
Decide the profit and add the profit to the total cost to fix the selling price
of the part
Selling price = Total cost + Profit
Step 16
Finally estimate the time of delivery in consultation with the production
and sales department
23. ESTIMATION OF LABOUR COST
Following stepsinvolved
To estimate the labour cost, the estimator should have the
knowledge of various operations, machines, sequence, tools &
labour to be used.
Labour cost =Estimated labour time needed to the product
x Cost of the labour per hour
24. ESTIMATION OF MATERIAL COST
Following stepsinvolved
Prepare the list of all materials required to manufacture the product
Estimate the weight of all the materials expected (the allowance for the
material wastage, spoilage and scrap are also added )
Estimated materials cost =Estimated weight of each part x Estimated futureprice
Finally, the estimated cost of all the parts is added to get the total
estimated material cost of the product
25. ALLOCATION OF OVER HEAD CHARGES
Thiscan not be charged directly
All expenses other than direct cost are known as overhead cost or
Indirect expenses, ex:- Administrative expenses, selling and distribution
expenses,etc.
Itcan be estimated by referring the previous records
26. FORMULA
Prime cost = Direct material cost + Direct labour cost + Direct expenses
Factory cost = Prime cost + Factory expenses
Production cost = Factory cost + Administrative expenses
Total or Ultimate cost = Production cost + Selling and distribution
expenses.
Selling price = Total cost + Profit
27. Example 1: Calculate prime cost, factory cost, production cost, total cost and
selling price per item from the data given below for the year 2019-2020.
Rs.
Cost of raw material in stock as on 1-04-2019 25,000
Raw material purchased 40,000
Direct labour cost 14,000
Direct expenses 1,000
Factory/Works overhead 9,750
Administrative expenditure 6,500
Selling and distribution expenses 3,250
No. of items produced 650
Cost of raw material in stock as on 31-03-2020 15,000
Net profit/item is 10 percent of total cost of the product.
28. Solution : For 650 units produced during 2019-2020
(i) Direct material used = Stock of raw material on 1-04-2019 + raw
material purchased – stock of raw material on 31-03-2020
= 25,000 + 40,000 – 15,000
= Rs. 50,000
(ii) Direct labour = Rs. 14,000
(iii) Direct expenses = Rs. 1,000
Prime cost = 50,000 + 14,000 + 1,000
= Rs. 65,000
Factory cost = Prime cost + Factory expenses
= 65,000 + 9,750
= Rs. 74,750
30. Example 2 : From the following data for a sewing machine
manufacturer, prepare a statement showing prime cost, Works/factory
cost, production cost, total cost and profit.
Description Rs.
Value of stock of material as on 1-04-2003 26,000
Material purchased 2, 2,74,000
Wages to labour 1,20,000
Depreciation of plant and machinery 8,000
Depreciation of office equipment 2,000
Rent, taxes and insurance of factory 16,000
General administrative expenses 3,400
31. Water, power and telephone bills of factory 9,600
Water, lighting and telephone bills of office 2,500
Material transportation in factory 2,000
Insurance and rent of office building 2,000
Direct expenses 5,000
Commission and pay of salesman 10,500
Repair and maintenance of plant 1,000
Works Manager salary 30,000
Salary of office staff 60,000
Value of stock of material as on 31-03-2004 36,000
Sale of products 6,36,000
32. Solution :
(i) Material cost = Opening stock value + Material purchases – Closing
balance
= 26,000 + 2,74,000 – 36,000
= Rs. 2,64,000
Prime cost = Direct material cost + Direct labour cost + Direct expenses
= 2,64,000 + 1,20,000 + 5,000
= Rs. 3,89,000
(ii) Factory overheads are :Rs.
Rent, taxes and insurance of factory= Rs 16,000
Depreciation of plant and machinery = Rs 8,000
Water, power and telephone bill of factory= Rs 9,600
Material transportation in factory = Rs 2,000
33. Material transportation in factory = Rs 2,000
Repair and maintenance of plant = Rs 1,000
Work Manager salary = Rs 30,000
Factory overheads or Factory expenses= Rs 66,600
Factory cost = Prime cost + Factory expenses
= 3,89,000 + 66,600
= Rs. 4,55,600
(iii) Administrative/office expenses are :
Depreciation of office equipment= Rs 2,000
General administrative expenses= Rs 3,400
Water, lighting and telephone bills of office = Rs 2,500
Rent, insurance and taxes on office building= Rs 2,000
Salary of office staff = Rs 60,000
Total 69,900
34. Production cost = Factory cost + Office expenses
= Rs. 4,55,600 + Rs. 69,900
= Rs. 5,25,500
(iv) Selling overheads are :
Commission and pay to salesmen = Rs. 10,500
Total cost = Production cost + Selling expenses
= 5,25,500 + 10,500
= Rs. 5,36,000
(v) Profit = Sales – Total cost
= 6,36,000 – 5,36,000
= Rs. 1,00,000
35. Example 3 : Calculate the selling price per unit from the following data :
Direct material cost = Rs. 8,000
Direct labour cost = 60 percent of direct material cost
Direct expenses = 5 percent of direct labour cost
Factory expenses = 120 percent of direct labour cost
Administrative expenses = 80 percent direct labour cost
Sales and distribution expenses = 10 percent of direct labour cost
Profit = 8 percent of total cost
No. of pieces produced = 200
36. Solution :
Direct material cost = Rs. 8,000
Direct labour cost = 60 percent of direct material cost
=60 × 8,000/100
= Rs. 4,800
Direct expenses = 5 percent of direct labour cost
=4,800 × 5/100
= Rs. 240
Prime cost = 8,000 + 4,800 + 240
= Rs. 13,040
Factory expenses = 120 percent of direct labour cost
=4,800 × 120/100
= Rs. 5,760
37. Administration Expenses = 80 percent of direct labour cost
=4,800 × 80/100
= Rs. 3,840
Sales and distribution expenses = 10 percent of direct labour cost
=10 × 4,800/100
= Rs. 480
Total cost = Prime cost + Factory expenses + Office expenses + Sales and
distribution expenses
= 13,040 + 5,760 + 3,840 + 480
= Rs. 23,120
39. Example 4 : A factory is producing 1000 high tensile fasteners per hour on
a machine. The material cost is Rs. 375, labour cost is Rs. 245 and direct
expense is Rs. 80. The factory on cost is 150 percent of the total labour
cost and office on cost is 30 percent of the factory cost. If the selling price
of each fastener is Rs. 1.30, calculate whether there is loss or gain and
by what amount ?
40. Solution : For 1000 fasteners
Material cost = Rs. 375.00
Labour cost = Rs. 245.00
Direct expenses = Rs. 80.00
Factory on cost = 150 percent of labour cost
= 245 × 1.5
= Rs. 367.50
Factory cost = 375 + 245 + 80 + 367.50
= Rs. 1,067.50
Office on cost = 30 percent of factory cost
=1,067.50 × 30/100 = Rs. 320.25
41. Total cost for 1000 fasteners = 1,067.50 + 320.25
= Rs. 1387.75
Cost per fastener =1387.75/1000
= Rs. 1.387 = Rs. 1.39
Selling price = Rs. 1.30
As selling price is lower than total cost per fastener, the management will
suffer a loss.
Loss per fastener = (1.39 – 1.30) = Rs. 0.09 Loss per
1000 fastener = 0.09 × 1000 = Rs. 90
42. Example 5 : A certain product is manufactured in batches of 100. The
direct material cost is Rs. 50, direct labour cost in Rs. 80 and factory
overhead charges are Rs. 65. If the selling expenses are 45 percent
of factory cost, what should be selling price of each product so that
the profit is 10 percent of the total cost ?
43. Solution : Batch size = 100
Direct material cost = Rs. 50
Direct labour cost = Rs. 80
Factory overheads = Rs. 65
Factory cost = 50 + 80+ 65 = Rs. 195
Selling expenses = 45 percent of factory cost
=45 × 195/100
= Rs. 87.75
Total cost = 195 + 87.75
= Rs. 282.75
44. Profit = 10 percent of total cost
=282.75 × 10/100
= Rs. 28.28
Selling price of 100 components = 282.75 + 28.28
= Rs. 311
Selling price per component =311/100
= Rs. 3.11 = Rs. 3.15
45. Example 6 : A factory owner employed 50 workers during the month of
November 2004, whosedetailed expenditure is given below :
Material cost = Rs. 30,000
(i)Rate of wage for each worker = Rs. 6 per hour
(ii)Duration of work = 8 hours per day
(iii)No. of holidays in the month = 5
(iv)Total overhead expenses = Rs. 15,000
If the workers were paid over time of 400 hours at the rate of Rs. 12 per
hour, calculate
(a)Total cost, and
(b)Man hour rate of overheads.
46. Solution : (a) Material cost = Rs. 30,000 No. of workers= 50
Duration of work = 8 hrs/day
No. of working days = 30 – 5 = 25
Total no. of work hours for the month of November 2004
= 25 × 8 × 50 = 10,000 hrs
Wage rate = Rs. 6 per hour
Labour cost = 10,000 × 6 = Rs. 60,000
47. Overtime paid = No. of overtime hours × hourly rate
= 400 × 12 = Rs. 4800
Total labour cost = 60,000 + 4800 = Rs. 64,800
Overhead expenses = Rs 15,000
Total cost = 30,000 + 64,800 + 15,000 = Rs. 1,09,800
(b) Total no. of man hours = 10,000 + 400 = 10,400
Man hour rate of overheads =Total overheads/Total no. of man hours
=15,000/10,400 = Rs. 1.44
48. Example 7 : The catalogue price of a certain gadget is Rs. 1,050, the
discount allowed to distributors being 20 percent. Data collected for a
certain period shows that the selling price and factory cost are equal. The
relation between material cost, labour cost and factory oncost (overhead
expenses) are in the ratio 1 : 2 : 3. If the labour cost is Rs. 200, what profit
is being made on the gadget ?
50. Factory cost = 200 + 100 + 300 = Rs. 600
It is given that selling price = Factory cost
= Rs. 600
Selling price = Total cost + Profit 840 = 600 + Profit
Profit = 840 – 600
= Rs. 240
Profit = Rs. 240 per gadget
51. Definition :
Carter defines : Depreciation is the gradual and permanent
decrease in the value of an asset from any cause
Accounting point of view : Depreciation is an annual charge
reflecting the decline in value of an asset due to causes such as
wear and tear action of elements obsolescence.
DEPRECIATION
52. • Straight line method of depreciation
• Declining balance method
• Sum of years digits method
• Sinking fund method
• Service output method
METHODS OF DEPRECIATION
53. • In this method of depreciation a fixed sum is charged as
depreciation amount throughout the life time.
• At the end of the life of an asset the accumulated sum of
the asset is exactly equal to the purchase value of the
asset.
• Assumption : Inflation is absent
STRAIGHT LINE METHOD OF DEPRECIATION
54. t t
n
i1
B B D P t[P F ]
t
n
P= First cost of theasset
F= Salvage value of the asset
n = Life of the asset
Bt = Book value of the asset at the end of the periodti
Dt = Depreciation amount for the time period t
D
[P F]
STRAIGHT LINE METHOD OF DEPRECIATION
Rate of Deprecation = Dt/ P* 100
55. • A company purchased a machinery for Rs 8000, the useful life of
the machinery is 10 years and the estimated salvage value of the
machinery at the end of the lifetime is Rs 800. Determine the
depreciation charge and book value at the end of the various
years using the straight line method of depreciation.
57. • A machine costing Rs 24,000 was purchased on 1st December
1985. The installation and erection charges were Rs1000 and its
useful life is expected to be 10 years. The scrap value of the
machine at the end of the useful life is Rs 5000. Compute the
depreciation and the book value for the period 6
58. P= Rs24,000 + Rs1000 = 25000
F= Rs5000/-
n = 10years
Dt = (P-F)/n = (25000-5000)/10 = 2000
Bt = 25,000 – 6 × (25000-5000)/10
Bt= Rs.13,000/-
n
t i 1 t
B B D P t [ P F ]
59. A constant % of book value of the previous period of the asset will be charged
as the independent amount for the current period.
The book value at the end of the life of the asset may not be exactly equal to
the salvage value of the asset.
P= First cost of theasset
F= Salvage value of the asset
n= Life of the asset
Bt = Book value of the asset at the end of the periodt
K= a fixedpercentage
Dt = Depreciation amount at the end of the period “t”
60. FORMULA FORDECLINING BALANCE
METHOD
Dt K Bt1
Bt Bt1 Dt
Bt (1 K)Bt1
Dt K Bt1
Bt Bt1 Dt
Bt (1 K)Bt1
D K(1 K)t1
P
B (1 K)t
P
•If k = 2/n then it is called
as double declining balance
method
61. Glaxo company has purchased a machine for Rs 1,50,000. The plant
engineer estimates that the machine has a useful life of 10 years and a
salvage value of Rs 25,000 at the end of the useful life. Demonstrate the
calculations of the declining balance method of depreciation by
assuming 0.2 for K
P= Rs1,50,000.
F= Rs25,000
n= 10 years
K= 0.2
Using the
formula
t t1
D K B
Bt Bt1 Dt
62. End of year (n) Depreciation ( Dt) Book Value (Bt)
0 - 1,50,000.00
1 30,000.00 1,20,000.00
2 24,000.00 96,000.00
3 19,200.00 76,800.00
4 15,360.00 61,440.00
5 12,288.00 49,152.00
6 9830.40 39,321.60
7 7864.32 31,457.28
8 6291.45 25,165.83
9 5033.16 20,132.67
10 4026.53 16,106.14
63. Calculate the depreciation and book value for the period 5 using the
declining balance method of depreciation by assuming 0.2 for Kand Rs
1,20,000 for P and salvage value Rs10,000. The useful life of the
machinery is 10 years.
P= Rs1,20,000
F= Rs10,000
n= 10 years
K= 0.2
64. • Using the formula
• Dt = 0.2 (1-0.2)(5-1) × 1,20,000 = Rs98,430.40/-
• Bt = (1-0.2)5 × 1,20,000 = Rs39,321.60
t
D K(1 K)t1
P
t
B (1 K)t
P
65. The scrap value of the asset is deducted from its original cost and it is assumed that the
book value of the asset decreases at a decreasing rate.
Sum of the years = n (n+1)/2
Dt = Rate × (P-F)
Bt = Bt-1 – Dt
The formula for Dt and Bt for a specific year “t” are asfollows
t
n t 1
D (P F)
n(n 1) / 2
t
B (P F)
n t (n t 1)
F
n (n 1)
66. ABC company has purchased an equipment whose first cost is
Rs 2,00,000 with an estimated life of eight years. The estimated scrap
value of the equipment at the end of the lifetime is Rs 40,000/-.
Determine the depreciation charge and book value at the end of
various years using sum of the years digits method of depreciation.
67. P= Rs.2,00,000
F= Rs.40,000
n = 8 years
Sum = (8 × 9)/2 = 36
End of Year (n) Depreciation (
Dt)
Book Value (Bt)
0 - 2,00,000
1 35,555.55 1,64,444.44
2 31,111.11 1,33,333.33
3 26,666.67 1,06,666.66
4 22,222.22 84,444.44
5 17,777.77 66,666.67
6 13,333.33 53,333.34
7 8888.88 44,444.46
8 4444.44 40,000.02
68. Consider problem 1 and find the depreciation and book value for
the 5th year.
Using the formula
P= Rs. 2,00,000
F= Rs.40,000
n = 8years
t
n t 1
D (P F)
n(n 1) / 2
t
B (P F )
n t (n t 1)
F
n (n 1)
t
D
8 5 1
(2,00,000 40,000) Rs.17,777.78
8(81) / 2
t
8 81
B (2,00,00040,000)85 851
40,000 Rs.66,666.67
69. • In this method of depreciation a depreciation fund equal to actual
loss in the value of the asset is estimated for each year.
• This amount is invested outside the business in a separate account
sinking fund investment account and interest will be earned on
the fund.
• The sinking fund will rise year after year.
70. P= first cost of the asset
F= salvage value of the asset
n= life of the asset
i = Rate of return compounded annually
A = Annual equivalent amount
Bt = Book value of the asset at the end of the period ‘t’
Dt = Depreciation amount at the end of the period ‘t’.
The loss of value of the asset (P-F) is made available in the form of
cumulative depreciation amount
A = (P-F)[A/F, i, n]
The fixed sum depreciated at the end of every time period earns an interest at
the rate of i% compounded annually
Dt = (P-F)(A/F, i ,n)(F/P,i,t-1)
Bt = P-(P-F)(A/F, i,n)(F/P,i,t-1)
71. Find the depreciation annuity by annuity method after three years
when the initial cost of the machine is Rs.8,00,000 and the salvage
value at the end of three years is Rs. 4,00,000. Rate of interest is
10%.
72. P= Rs. 8,00,000
F = Rs.4,00,000
n = 3years
i = 10%
A = (P-F)[A/F, i, n]
A = (8,00,000-4,00,000) [A/F,10%,3] value from interest table is substituted
A = (8,00,000-4,00,000) x 0.3021 = Rs.1,20,840
Dt = (P-F)(A/F, i,n)(F/P,i,t-1)
Bt = P-(P-F)(A/F, i,n)(F/P,i,t)
73. Dt = (P-F)(A/F, i ,n)(F/P,i,t-1)
D2 =at the end of the second year (D2)
D2 = 1,20,840 + 1,20,840 x 0.10 = Rs.1,32,924.
End of the year ‘t’ Fixed Dt Net Dt Book Value Bt
0 1,20,840 - 8,00,000.00
1 1,20,840 1,20,840.00 6,79,160.00
2 1,20,840 1,32,924.00 5,46,236.00
3 1,20,840 1,46,216.40 4,00,019.60
74. ABC & Co has purchased a machinery and its first cost is Rs. 2,00,000 with an
estimated standard life of 8 years. The salvage value is Rs. 40,000 find D6 and
B7, rate of interest 12% compounded annually.
Solution :
P= Rs.2,00,000 F= Rs.40,000 n = 8 years i = 12%
D6= (P-F)(A/F,12%,8)(F/P,12%,5)**
** - From interest table
D6= (2,00,000-40,000) (0.0813)(1.762) = Rs.22,920
B7= P-(P-F)(A/F,12%,8)(F/A,12%,7)**
B7= 2,00,000-(2,00,000-40,000)(0.0813)(10.089)
= Rs.68,762.29
75. METHOD
• In this method the life of the machine is
expressed in terms of number of units that a
machine is expected to produce over the
estimated life
• P= first cost of the asset
• F= Salvage value of theasset
• X = Maximum capacity of service of the asset
during its lifetime
• x = Quantity of service rendered in aperiod
• Depreciation/unit of service = (P-F)/X
X
• Depreciation for x unit of service period = (P F)
(x)
76. M
• The first cost of a road laying machine is Rs 60,00,000/-.
Its salvage value after 5 years of service is Rs. 40,000/-.
The length of road that can be laid by the machine
during the lifetime is 55,000km. In its third year of
operation the length of road laid is 1500 km. Find the
depreciation of the equipment for that year
Solution:
• P = 60,00,000 F= 40,000 X = 55,000 km, x = 1500 km
• Depreciation for x unit of service in year 3 =
3
55,000
D
60,00,000 40,000
(1500) Rs.1,62,545.45
77. EVALUATION OF PUBLIC ALTERNATIVES
• Evaluation of public alternatives is selection of
best alternative from the available alternatives.
• The factor considered in selection is profit
maximization.
• For the evaluation of public alternatives the
benefit – cost ratio is used
• BCratio = EquivalentBenefits
EquivalentCosts
78. EVALUATION OF PUBLIC ALTERNATIVES
• P= initialinvestment
• C= Early cost of operation and maintenance
• PA = Annual equivalent of the initial investment
• PF = Future worth of the initial investment
• BP = Present worth of total benefits
• BF = Future worth of total benefits
• BA= Annual equivalent of total benefits
• CP= Present worth of yearly cost of operation
and maintenance.
• CF = Future worth of yearly cost of operation
BP BF BA
P CP PF CF PAC
and maintenance.
BCRATIO
79. PROBLE
M
• Project A1 and Project A2 are being considered
for investment. Project A1 requires an initial
investment of Rs 40,00,00 and net receipts
estimated as Rs10,00,000 per year for the next 5
years. The initial overlay for the A2 is Rs
70,00,000 and the net receipts have been
estimated as Rs. 16,00,000 per year for the next
seven years. There is no salvage value associated
with either of the projects. Using the benefit to
cost ratio which project would you select?
Interest rate = 10%
80. SOLUTION
Alternative 1 :
• P = Rs 40,00.000 B= Rs. 10,00,000 n = 5Years
i= 10%
BCRATIO AnnualequivalentBenefits
AnnualequivalentCosts
• Annual equivalent of initial cost = P(A/P,10%,5)
=40,00,000 x 0.2638
= Rs.10,55,200
10,55,200
BCRATIO 10,00,000
0.9476
81. N
Alternative 2 :
• P = Rs 70,00.000 B= Rs. 15,00,000 n = 7Years
i= 10%
BCRATIO AnnualequivalentBenefits
AnnualequivalentCosts
• Annual equivalent of initial cost = P(A/P,10%,7)
=70,00,000 x 0.2054 = Rs.14,37,800
14,37,800
• The benefit cost ratio of alternative 2 (i.e 1.0342 >1) is
more than alternative 1. Hence alternative 2 is selected
BCRATIO 15,00,000
1.0432