It is important to generate sales for your business, but the sales must be profitable. To do this companies need to examine their costs up front, prior to committing to a customer and proceeding with production.
To this end, it is helpful to have an algorithm or template that assists the sales or customer service representative when computing the costs and profit when making a bid proposal.
A Product Cost Analysis determines all of the costs, especially when minimum order quantities for raw materials must be included. The Product Cost Analysis can also include any Engineering or development costs as well as the cost of additional items for a custom order, such as tooling.
The template builds the ‘field operation costs’ by taking into consideration the direct and indirect costs associated with the manufacture of a product. It is important to note that the tool allows for the inclusion of current raw material and component costs.
Below is a portion of Product Cost Analysis.
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