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1
Importance Of Costing & Constituents
Prepared by
Naresh Kumar S
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2
01
Definition
and
meaning of
Estimation
Chapter 1 – Recap of previous Session
Aims of
Estimation
& functions
of
Estimating
Department
02
Understand
the
difference
and effects
of Over and
Under
Estimation
03
Qualities
and
functions
of a
Estimator
04
Sources for
avoidable
and
unavoidable
errors in
estimation
05
Last class we have learned and understood
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3
01
Definition
and
meaning of
Costing
Chapter 2 – Importance Of Costing & Constituents
Aims of
Costing
02
Different
Constituents
of Estimate
03
Different
Time
Allowances
04
Differences
between
Estimation
and
Costing
05
At the end of this session, you will be able to understand
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2.1 Costing - Definition
Determination of an actual cost of an
article, after adding different expenses
incurred in various departments.
“The system, which systematically
records all the expenditure to determine
the cost of manufactured products after
manufacturing
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To give information to Compare between the Estimated and Actual Cost
To help in detecting and avoiding unwanted expense and wastages
Actual amount spent on each operation
Determination of actual cost of each product manufactured
Aims
1.2 Aims of Costing
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To help determine the allowable discount on the catalogue price
To help in detecting and avoiding unwanted expense and wastages
To help determine the percentage of profit.
To help in making the necessary changes in the design or material or the
method to reduce the cost.
Aims
1.2 Aims of Costing
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1.2 Constituents of Estimates
Design cost
Drafting cost
Time and Motion studies cost
Production Planning & control Cost
Cost of arrangement of special items
Cost of Experimental work
Material cost
Cost Estimation has to be as
accurate as possible.
To make this more accurate,
standard elements of Estimations
are derived.
Estimator can use these
constituents to calculate the
estimate accurately.
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1.2 Constituents of Estimates
Design cost
Drafting
cost
Time and
Motion
studies cost
Production
Planning &
control Cost
Cost of
arrangement of
special items
Cost of
Experimental
work
Material
cost
Labour cost Overheads
Time
allowances
Profit
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Time allowances
Time
Allowances
Setup Time
Operation
time
Handling Time Machine Time
Tear Down
time
Miscellaneous
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Miscellaneous Allowances
Personal
5% of
total
time
Fatigue
5% of
total
time
Tool
changing
and
Grinding
Allowances
5 to 10%
of total
Time
Measurem
ent and
Checking
Allowance
2 to 3%
of Total
time
Other
allowances
15 to
20% of
Total
time
Miscellaneous Allowances
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Estimation Costing
To help in deciding the Manufacturing
and Selling policies
To help in filling up the tenders
To decide whether a particular item
should be purchased or to be produced
To decide about the wage rates of
workers
To determine the exact cost of each
article
To determine the cost incurred during
each operation
To provide information to fix the selling
price of product
To supply information for detection of
wastages
It helps in reducing the total cost of
manufacture
1.4 Difference between Estimation & Costing
It suggests changes in design when the
cost is higher
