costs. fixed costs those where amounts can not be changed in the short run (e.g. building mortgage,...

Fixed Costs Those where amounts can not be changed in the short run (e.g. building mortgage, building heat, equipment, insurance costs, bond interest)…

Variable Costs Costs whose total amount goes up or down when volume goes up or down (also called - direct costs, incremental costs, or marginal costs), (e.g. raw materials, shielding gas, electrodes, some energy costs, labor)

Opportunity Costs

Profits which a foregone choice of action would have earned but which are lost because another choice is made. A person who keeps money in a mattress incurs opportunity costs - loss of interest - because of the decision VW introduced rabbit - sold out immediately - loss opportunity cost of several million dollars because not enough supply Cabbage Patch Kids Tickle-me Elmo Time value of money

Time Value of Money $1 on hand today is worth more than $1 in future by amount of interest it could earn and inflation adjustments

Future Value of Present Money (with interest compounded)

periodsnumbern

decimalerestinti

amountpresentp

valuefuturef

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You have $100 and can

invest it at 10% per year and invest for 3 years:

10.133)1.01(100f 3u

Therefore, the opportunity cost of not investing is $33.10

Example

Sunk Cost

a) Money lost in bad investments (e.g. plant abandoned before production) b) Money tied up in a plant where it could have earned higher return on some other venture.

BREAK EVEN ANALYSIS

P x Q = F + (V x Q) → Q = F/(P-V)

P = price per unitQ = quantity

F = fixed costsV = variable costs per unit

BREAK EVEN ANALYSIS

P x Q = F + (V x Q) → Q = F/(P-V)

P = price per unitQ = quantity

F = fixed costsV = variable costs per unit

ExampleWe are making all welded bicycles. They sell at

$100/bike. Material and labor costs are $80 per unit. Equipment and building mortgage per month is $20,000. What is the break-even quantity which must be sold each month?

Q = $20,000/($100 - $80)Q = 1000 units

P=$100F=$20,000/moV=$80

CONTRIBUTION TO OVERHEAD OR PROFIT

Amount by which the selling price/unit exceeds the variable costs/unit:

Contribution = (P-V)

P=$100F=$20,000/moV=$80

Contribution = $20

Contribution offsets fixed costs until 1000 units are sold (break-even point). Profit begins after break-even point.

CALCULATION CONSIDERING DESIRED PROFIT

Q = (F + desired profit) / (P - V)

In our example, if we want to make $5000 profit:

P=$100F=$20,000/moV=$80

Q = (20,000 + 5,000) / (100 - 80) = 1250 units

CALCULATION CONSIDERING TAX

Q = {F + (desired profit)/(1- tax rate)}/(P-V)

If the tax rate is 40%

Q = {20,000 + 5000/(1-0.4)} / (100 - 80) = 1417 units

CONTRIBUTION RATIO

CR = {(P-V) X 100} / P

P=$100F=$20,000/moV=$80

CR = {(100-80) X 100} / 100 = 20%

Comparing contribution ratios of various products we produce allows us to select the items to “push” in sales.

Cost of Welding

($/ft) Cost incurred to make a weld (includes joint prep, consumables, labor, overhead, pre- & post-weld treatment, etc.) Used to compare cost advantages of weld vs. Other manufacturing processes Used to decide on the most cost effective joint design or most cost effective welding process to use Used as a basis for investment in new automated equipment

Cost of Weldment

($/piece) Cost incurred to make entire structure (includes all of above plus summation of all the weldments and raw material costs) Used to bid on a welding job

Welding Procedure

This is the starting point for cost estimating. Procedure should include: Joint details Welding process Type of filler Type of gas/fluxes Welding current Position (operator factor) Travel speed Post weld treatment

INDIVIDUAL PART OF ESTIMATE (Look at each item individually) Cost of Joint Prep Cost of Materials (Consumables) Cost of Materials (Flux & Shielding) Labor Costs Power Costs Post Weld Costs Overhead Costs

COST OF JOINT PREPARATION

Methods of Joint Prep

Machined Joints - (most expensive) Flame or Plasma Cut Joints Square Butt w/o Surface Prep - (least expensive) A) Do cost analysis on several joint designs to minimize joint prep

cost: Note: If a non-prequalified joint is used, you may incur the added cost of procedure qualification.

B) Trade off reduced costs to prepare joint with amount of weld metal to fill joint. Example: A submerged arc joint can be flame cut (inexpensive) but may require a lot of weld metal to fill the joint (expensive). {see “cost of welding”}



COST OF MATERIALS (CONSUMABLES)

a) Calculate the theoretical weight of weld metal required to fill the weld joint

b) Calculate the weight of filler actually consumed (spatter etc. included)

1) Estimating Losses2) Automated Method

c) Calculate the electrode costs

Procedure


Calculation of Theoretical Weight of Deposit

Wt Weld (lb/ft) = CSA (in2) * density (lbs/in3) * 12 (in/ft)Wt Weldment (lbs) = Wt Weld (lb/ft) * Total ft of weld (ft)

+ =

a) Calculate the theoretical weight of weld metal required to fill the weld joint b) Calculate the weight of filler actually consumed (spatter etc. included)

1) Estimating Losses

2) Automated Method c) Calculate the electrode costs


Calculation of Weight of Filler Metal Actually

Consumed:

Electrode Filler Metal Yield Covered Electrode SMAW 14” manual = 55-65% yield SMAW 18” manual = 60-70% yield SMAW 28” automatic = 65-75% yield• Solid Bare Electrode For Submerged arc = 95-100% yield Electroslag = 95-100% yield GMAW = 90-95% yield Cold Wire = 100Tubular-flux Cored Electrodes For Flux Cored Arc Welding = 80-85% yield Cold Wire = 100%

Electrode Losses (SUM)

Stub Losses 14” with 2” stub = 14% loss 18” with 2” stub = 11% loss 28” with 2” stub = 7% loss Coating or Slag Losses Thinner coating E6010 = 10% loss Heavy coating E7024 = 50% loss

Spatter Losses Depends on technique, usually = 5-15% loss

Wt Weldment (lbs) = total wt deposit (lbs) / (1- total electrode loss)

Wt Weldment (lbs) = total wt deposit (lbs) / {filler metal yield (%) / 100}

or

“Estimating Losses”

Calculate the theoretical weight of weld metal required to fill the weld joint

Calculate the weight of filler actually consumed (spatter etc. included)


2) Automated Method Calculate the electrode costs


Calculation of Weight of Filler Metal Actually

Consumed:

“Automated Method”

(Example at right) Knowing type of wire Knowing diameter of wire Knowing operating current

Determine Wire Feed Speed From Graphs

Determine length of wire per weight (in/lb) - From Table Knowing type of wire Knowing diameter of wire

Determine Hours of Run (Operation) Use shift time if continuous weld, or Hours = feet of weld (ft) / travel speed (ipm) * 60 (min/hr) * 1/12 (ft/in)





Wt Weldment (lbs)={wire feed (ipm) * Hrs of Run * 60 (min/hr)}/wire per wt (in/lb)






Weld Electrode Cost ($/ft) = {elect price ($/lb) * Wt Weld (lb/ft)}/filler yield (%)

Weldment Electrode Cost ($) = elect price ($/lb) * Wt Weldment (lbs)

Calculation of Electrode Cost


COST OF MATERIALS (FLUX AND SHIELDING)

Calculation of Flux Costs

Weld Flux Cost ($/ft)=flux price ($/lb) * Wt Weld (lb/ft) * flux ratio

Weldment Flux Cost ($)=Weld Flux Cost ($/ft) * feet of weld

Flux RatioSub Arc = 1-1.5 (approx. 1 lb flux/ 1 lb wire)Electroslag = 0.05-0.10

Calculation of Shielding gas and Backing gas Costs Gas Cost ($/ft)={gas price ($/ft3)*flow rate (ft3/hr)}/{Travel (ipm) *1/12(ft/in)*60(min/hr) Weldment Gas Cost ($) = Weld Gas Cost ($/ft) * feet of weld

Or = {Gas price ($/ft3) * flow rate (ft3/hr) * weld time

(min)} / 60 (min/hr)

Calculation of Miscellaneous Costs

Guide tubes Studs / Ferrules Spot-weld electrode


COST OF LABOR (single greatest factor in total cost of weldment)

Operator Factor: percent of time that a welder is actually making a useful weld.

Semi-automatic and automatic plants have higher operator factors Field welding / construction work with small welds in scattered locations have low operator factor Welding in the flat position has higher operator factor than horizontal, vertical, overhead:1. Faster travel speed2. Fewer defects / fewer repairs Use of fixtures, positioners, and handling equipment increases operator factor Slag chipping, electrode changes, moving from joint to joint all reduce operator factor


COST OF LABOR (single greatest factor in total cost of weldment)

Weld Labor ($/ft)={welder pay ($/hr)*Wt Weld (lb/ft)}/ {deposit rate (lb/hr)*OpFact(%)/100}

(function of process and current) See graph attached, or Deposition rate (lb/hr)={wire speed (in/min)*60(ipm)}/{wire per wt (in/lb)*filler yield (%)/100}

Deposition Rate


COST OF POWER DURING WELDING

Energy charge Fuel adjustment charge Taxes Demand charge (time of day) Power factor penaltyPower Source Efficiency (%)See machine performance curves (see

attached)

Local Power Rate ($/kWh) includes:

Weld Power Cost ($/ft)={local power rate ($/kWh)*volts*amps*Wt Weld (lb/ft)}/{1000*dep rate (lb/hr)*OpFact (%)*PowSource Eff (%)}


POST WELD COSTS

Final MachiningGrinding/PolishingHeat TreatingShot BlastingStraighteningInspection

OVERHEAD COSTS Salaries: executives, supervisors, inspectors maintenance people, janitor, etc. (those costs which can not charge directly to weldment costs) Rent / Depreciation of plant Taxes Maintenance supplies and costs Utilities (not charged to weldment) i.e. light, plant heat, etc. Employee benefits Insurance

Overhead cost ($/ft) = {overhead rate ($/hr)*Wt Weld (lb/ft)}/ {dep rate (lb/hr)*OpFact (%)}Overhead costs are usually apportioned pro rata among all work

going through the plant and the overhead rate assigned.

Welding Cost - Per Foot AnalysisCost of Joint Prep ($/ft)Cost of Weld MetalFlux CostGas CostMisc. guide tubes etc.Labor Cost ($/ft)Power CostsOverhead Costs

TOTAL

Welding Cost - Per Piece AnalysisBase Material Cost ($/pc)Cost of Joint PrepCost of Weld MetalFlux CostGas CostMisc. guide tubes etc.Labor Cost ($/pc)Power CostPost Weld CostsOverhead Costs ($/pc)

TOTAL

costs. fixed costs those where amounts can not be changed in the short run (e.g. building mortgage,...

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