2. CONTENTS
PRODUCT PLANNING AND PROGRESS
INDUSTRIAL ENGINEERING DEPARTMENT
WHAT IS AN ESTIMATE?
PURPOSE OF ESTIMATE
FUNCTIONS OF AN ESTIMATE
PREPARATION OF ESTIMATE
REASONS FOR PREPARING A MATERIAL ESTIMATE
UNAVOIDABLE REJECTIONS
REVISION
COSTING
PIECE WORK
3. PRODUCTION PLANNING & PROGRESS
(P&P)
IED
(Industrial Engineering
Department)
WORK OFFICE
5. WHAT IS AN ESTIMATE..?
It’s a guess or judgment about the size, cost, etc. of something before you have
all the facts of the figures.
In other words – “ An estimate is a document which indicates the requirement
of direct material and requirement of labour with trade and grade along with time
in hours for each operation based on some specific unit. This enables the
management to determine the final estimated cost after adding different
allowances, variable charges, and fixed charges”.
6. PURPOSE OF ESTIMATE
1. Estimate helps in arriving at the requirement of manpower to
achieve the target.
2. Std. estimates help in the study of the efficiency of operations
and control of expenditure.
3. Where there are no established data, estimating helps to arrive
at the price setting.
4. Cost estimating aims at giving decisions to make or to buy.
5. Introduction of alternative design to effect the possibility of
cost reduction if the cost of original design is found not
acceptable by the management.
7. FUNCTIONS OF ESTIMATE
• Estimates are required to deal with an enquiry preparatory
to acceptance of new contact to submit tenders.
• Estimates are required for furnishing a basis for control of
manufacture.
• Estimates are required for the purpose of fixing the selling
price of the regular product, based on minimum &
maximum cost prices.
8. PREPARATION OF ESTIMATES
Present Estimates Form Comprises 3 Parts.
Cover Of The Estimate
• Name of the factory
• Estimate no. & Date
• Std. nomenclature
• Unit of estimates
• Total labour hours
• Drawing specification
Material Form
• All recovery which gives relief
to production cost
• % of UAR
• Ledger folio/Epi code
• Unit codes for weight, length,
etc.
• Row material quantity for tool
settings etc.
Operation And Labour Form
• Operation no.
• Operation
• Class of labour
• Man hour
• rate per hour (including 25%
bonus)
• Rate
9. • To initiate procurement action of the required material.
• To determine shape , dimension & tolerance of direct material.
• To determine the specification details of the direct material for primary as well as
for suitable substitute/alternative.
• To determine the package & packing fitments required for the method of packing.
UNAVOIDABLE REJECTION
REASONS FOR PREPARATION OF MATERIAL PORTION OF THE ESTIMATE
• Normal unavoidable rejections inherent in the manufacturing of an article should
always be included in the std. estimates.
• Rejection% to be included in the std. estimates are to be based on past facts.
• Example - Tools or Machinery.
10. REVISION
Material Revision Rate ( Labour) Revision
• Change in design
• Change in material specifications
• Change in machinery/equipment
• Change in UAR %
• Change in proof requirements
• Change in process/operation
schedule
• Change in the process due to
changes in machinery/equipment
• Change in the permanent design
• Change in method of the process
due to the effect of work study/
value engineering techniques
11. COSTING
“It Is A Strategy Of Establishing The Cost Of Service And Product”
Material cost Labour cost
• SMH (as per PW
card)
• Total SMH
• Direct labour rate
per hour
Variable
overheads
• Coolants,
• indirect labour or
material
• Communication
(telephone)
• Consumable
Store /medicine
/milk
Fixed overheads
• Machinery,
• building
• workers salary
• Salary of hospital
staff
• Transportation
• Pay or OT, trainers
Direct
expenses
• Electricity
• water
12. • Material cost
• Labour rate
• Fixed overheads rate
• Variable overheads rate
• Direct expenses rate
PIECE WORK
TOTAL COST -
• P W. Hourly rate is calculated taking the average minimum pay of all piece
workers in the factory.
• This PW hourly rate is used as a multiplying factor to the time estimated for
the production of components.
• 25% is added to the hourly wage as an element of profit.
