The document discusses the process by which marketing, costing, procurement, production planning, and logistics departments collaborate to estimate and track costs for a manufacturing product. The marketing department obtains a purchase order from a customer. The costing department takes the purchase order cost and subtracts profit and overhead to determine the manufacturing cost, which is divided into procurement, machining hours, assembly hours, and packing/transportation costs. The procurement, planning, and logistics departments provide cost estimates to the costing department for these elements, which are tracked against actual costs achieved. Differences between planned and achieved costs are monitored to identify opportunities for cost reduction.

1. VALUE
ANALYSIS
Suresh T
ssuresh.t24@gmail.com

2. MARKETING
MARKETING
Purchase order (PO )
from the customer for the
Manufacturing product
Profit cost will be
subtracted from PO
cost and Some
excess overhead
percentage cost.
Then the
Manufacturing cost will
be submitted to
COSTING department

3. COSTING
COSTING
The cost from costing will be divided
as
Machining
Hours
Procureme
nt cost
Assembly
Hours
Packing and
Transportatio
n cost

4. PROCUREMENT COST
PROCUREME
NT
Cost finalization for
the procuring
material
Releasing PO to
procure material
Checking the budget
availability with
costing department
If Budget
exceeds, more
than available
procurement
cost. Then cost
will be adjusted
from various
department or
material
procuring cost.
Then need to find
a RCA and
Preventive action
. To be updated.
How costing department get this
cost?
• Reference of Previous
procured material PO. or
• Latest revision cost from
procurement department.
Procuring Material cost
need to be included with
overhead cost (Purchaser,
inspector etc.,) by costing
department.

5. MACHINING HOURS
Planning
Need to book the
M/c hours based on
operation carried
out.
Then, production
starts..,
The same hours to
be released to
production
department.
Planner May be
reduced the
percentage of
machining hours
but it to be checked
the possibilities with
production
department.
How costing department get this
hours?
• Proved cycle time or
• Theoretical calculation based
on experience.
Machining hours means it
consists of all the
overheads related to
machines.it will be arrived
by accounts department.

6. ASSEMBLY HOURS
Planning
Need to book the
Man hours based on
work carried out.
Then, assembly
starts..,
The same hours to
be released to
production
department.
Planner May be
reduced the
percentage of man
hours but it to be
checked the
possibilities with
production
department by
considering
ergonomics.
How costing department get this
hours?
• Proved “Man worked hours” or
• Theoretical calculation based
on experience.
Man hours means it
consists of all the
overheads related to
assembly works.it will be
arrived by accounts
department.

7. PACKING AND TRANSIT
COST
Logistics
Cost finalization for
packing and transit
Releasing PO to
Packing contractor
and Transporter.
The same cost to be
submitted to costing
department
Cost reduction
activities should be
more taken care.
Because the whole
effort will be
vanished
How costing department get this
hours?
• Probably, based on package
size.
• It will be differ based on
distance, fuel etc.., every time
to be updated from logistics.
Packing to be given to
specialist contractors in
packing

8. EXAMPLE PLANNED
Procurement cost:-
Nuts and grips =
Rs.50/set
Material for handle
& weight =
Rs.450/set
Assembly Hours:-
Weight lifter =
15mins/set
Machining hours:-
Handle 1st opr -
40mins/set
Handle 2nd opr –
20mins/set
Packing and transit
cost:-
= Rs.75 /set
Marketing get
the order of
500 Weight
lifting sets for
the price
Rs.2,900/set.
Then cost is
issued
Rs.2,500/Set
to costing
department.

9. EXAMPLE ACHIEVED
Procurement cost:-
Nuts and grips =
Rs.48.5/set
Material for handle
& weight =
Rs.452/set
Assembly Hours:-
Weight lifter =
17mins/set
Machining hours:-
Handle 1st opr -
39mins
Handle 2nd opr –
19mins
Packing and transit
cost:-
= Rs.72/sets
Planned -
Rs.2,500/Set
Achieved-
Rs.2,351/set
Monitor tool:-
EBS
MANUAL XLS
OEE
Etc..,