You use this program to price made-in items and give a realistic manufacturing lead time. The rollup begins at the lowest level (raw materials), using the costs of the raw materials and the rates for labor and overheads as the basis of the calculation.
For each sub-assembly processed, the program calculates the value of any operations and subdivides this value into labor, fixed overhead, and variable overhead values. These values are then added to the parent part of the sub-assembly.
The Quotations Cost Implosion and Lead Time Calculation program can be accessed by selecting the Cost/Lead Time Rollup option from:
- the Functions menu of the Estimates program
- the Quotation Lines > Non-Stocked pane of the Quotation Entry program.
| Field | Description | ||||
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| Route |
Indicate the route to use for the rollup. Multiple routes are only available if they were selected when the non-stocked code was created.
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| Offer | Select the offer for which you need to calculate the costs and manufacturing lead time. This is only available when performing the rollup for a quotation. | ||||
| Quantity |
This indicates the quantity to use for the rollup. When the Quotations Cost Implosion and Lead Time Calculation program is accessed from the Estimates program, the quantity defaults to one. When the Quotations Cost Implosion and Lead Time Calculation program is accessed from the Quotation Entry program, then the quantity defined against the selected offer is used for the rollup. |
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| Column | Description |
|---|---|
| Description | Indicates the description of the material or operation for the parent non-stocked item. |
| Escalated extended cost |
Indicates the escalated unit cost of the materials and operations. This is calculated by adding all markups/margins to the unit cost. The markups/margins are defined in Estimates program as follows:
Your selections on the Pricing tab of the Quotation Setup program also affect the Escalated extended cost. |
The information displayed in these panes relates to the line currently highlighted in the Cost Implosion and Lead Time Calculation listview.
| Field | Description |
|---|---|
| Parent | Indicates the code of the parent item for the selected material allocation. |
| Stock code / Non-stocked code | Indicates the code and description for the item. The description for this field varies according to whether you are viewing information for a stocked or non-stocked item. |
| Fixed quantity | Indicates whether the quantity per is a fixed quantity. |
| Parent per fixed quantity | No progressive scrap calculations are applied to any component with a fixed quantity per. The fixed quantity per always works on the net quantity required. |
Material costs are established by accumulating the results of the following calculations:
- The quantity per is increased by the scrap percentage factor, and by the result of dividing the scrap quantity by the quantity on offer.
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When a component has a fixed quantity per and the parent quantity per is set to zero, the quantity per is not calculated, but is taken as the quantity per against the component.
- Multiply the cost of each first level component by its recalculated per and add the costs of all the operations on the part. If the quantity on offer is zero the program automatically assumes a quantity of 1.
Operation costs are established by accumulating the results of the following calculations:
- If the quantity on offer or productive units is zero, 1 is assumed.
- If the quantity on offer is less than the startup quantity x productive units, then the startup quantity x productive units is used as the quantity on offer.
Run value = {run time x run rate x [quantity on offer - (startup quantity x productive units)]} divided by quantity on offer.
Setup = (setup rate x setup time x productive units) divided by quantity on offer.
Startup = (startup rate x startup time x productive units) divided by quantity on offer.
Teardown = (teardown rate x teardown time x productive units) divided by quantity on offer.
Fixed overhead = (fixed overhead rate x ((run time x (quantity on offer - (startup quantity x productive units))) + (setup time x productive units) + startup time x productive units) + (teardown time x productive units))) divided by quantity on offer.
Variable overhead = (variable overhead rate x ((run time x (quantity on offer - (startup quantity x productive units))) + (setup time x productive units) + startup time x productive units) + (teardown time x productive units))) divided by quantity on offer
![[Note]](images/note.png)
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The dock-to-stock time of a part is not included in its lead time, but is incorporated into the lead time of that part's parent. |
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The lead time calculated is the cumulative and manufacturing lead times of an item.
Manufacturing lead time is the total time required to manufacture a made-in item.
Purchasing lead time is the total time required to obtain a bought out item.
Cumulative lead time is the longest path in the estimate which takes into account the purchasing and manufacturing lead time.
This example indicates the difference between how BOM and Estimates perform a cost rollup. In this example, this affects the labor costs of the items as they have a setup time.
Example
You have an operation with a startup time of 1 hour at a cost of 100.00 per hour and a unit run time of 0.5 hours at a cost of 50.00 per hour.
Estimating uses the actual quantity required to calculate the lower level costs whereas BOM calculates these costs according to the EBQ setup against the inventory master.
The structure itself has a total quantity required of 20.
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In BOM, the unit cost is calculated as follows (assuming an EBQ of 1):
(Setup Time * Setup Cost) + (Run Time * Run Time Cost * EBQ)
= (1 * 100) + (0.5 * 50 * 1)
= 125
Therefore the cost of the structure line (for a quantity of 20) = 20 * 125 = 2500.
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In Estimates it calculates the cost for the structure by using its quantity required as the EBQ.
(Setup Time * Setup Cost) + (Run Time * Run Time Cost * EBQ)
= (1 * 100) + (0.5 * 50 * 20) = 600
This is why it is important to ensure that your EBQs are accurate in Bill of Materials.