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Costs
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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)
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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
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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)You have
$100 and can invest it at 10% per year and invest for 3
years:Therefore, the opportunity cost of not investing is
$33.10Example
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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.
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BREAK EVEN ANALYSISP x Q = F + (V x Q) Q = F/(P-V)P = price per
unitQ = quantityF = fixed costsV = variable costs per unit
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BREAK EVEN ANALYSISP x Q = F + (V x Q) Q = F/(P-V)P = price per
unitQ = quantityF = 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
unitsP=$100F=$20,000/moV=$80
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CONTRIBUTION TO OVERHEAD OR PROFITAmount by which the selling
price/unit exceeds the variable costs/unit:Contribution =
(P-V)P=$100F=$20,000/moV=$80Contribution = $20Contribution offsets
fixed costs until 1000 units are sold (break-even point). Profit
begins after break-even point.
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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=$80Q = (20,000 + 5,000) / (100 - 80) =
1250 unitsCALCULATION CONSIDERING TAXQ = {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
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CONTRIBUTION RATIO CR = {(P-V) X 100} /
PP=$100F=$20,000/moV=$80CR = {(100-80) X 100} / 100 = 20%Comparing
contribution ratios of various products we produce allows us to
select the items to push in sales.
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Cost of Welding ($/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 equipmentCost 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
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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
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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
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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}
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
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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 CostsCOST 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 costsProcedure
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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 CostsCalculation 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 Losses2) Automated Method c)
Calculate the electrode costs
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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 CostsCalculation 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 = 100 Tubular-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% lossWt
Weldment (lbs) = total wt deposit (lbs) / (1- total electrode
loss)Wt Weldment (lbs) = total wt deposit (lbs) / {filler metal
yield (%) / 100}orEstimating Losses Calculate the theoretical
weight of weld metal required to fill the weld joint Calculate the
weight of filler actually consumed (spatter etc. included)1)
Estimating Losses2) Automated Method Calculate the electrode
costs
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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 CostsCalculation 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 TableKnowing 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) Calculate the theoretical weight of weld metal required to
fill the weld joint Calculate the weight of filler actually
consumed (spatter etc. included)1) Estimating Losses2) Automated
Method Calculate the electrode costsWt Weldment (lbs)={wire feed
(ipm) * Hrs of Run * 60 (min/hr)}/wire per wt (in/lb)
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Calculate the theoretical weight of weld metal required to fill
the weld joint Calculate the weight of filler actually consumed
(spatter etc. included)1) Estimating Losses2) Automated Method
Calculate the electrode costs 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 CostsWeld Electrode Cost
($/ft) = {elect price ($/lb) * Wt Weld (lb/ft)}/filler yield
(%)Weldment Electrode Cost ($) = elect price ($/lb) * Wt Weldment
(lbs)Calculation of Electrode Cost
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INDIVIDUAL PART OF ESTIMATE (Look at each item individually)
Cost of Joint Prep Cost of Materials (Consumables) Cost of
Materials (Flux & Shielding) Labor Costs Power Costs Post Weld
Costs Overhead CostsCOST OF MATERIALS (FLUX AND
SHIELDING)Calculation of Flux CostsWeld Flux Cost ($/ft)=flux price
($/lb) * Wt Weld (lb/ft) * flux ratioWeldment Flux Cost ($)=Weld
Flux Cost ($/ft) * feet of weld Flux RatioSub Arc = 1-1.5 (approx.
1 lb flux/ 1 lb wire)Electroslag = 0.05-0.10Calculation of
Shielding gas and Backing gas Costs Gas Cost ($/ft)={gas price
($/ft3)*flow rate (ft3/hr)}/{Travel (ipm) *1/12(ft/in)*60(min/hr)
Weldment Gas Cost ($) = Weld Gas Cost ($/ft) * feet of weldOr =
{Gas price ($/ft3) * flow rate (ft3/hr) * weld time (min)} / 60
(min/hr)Guide tubes Studs / Ferrules Spot-weld electrode
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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 CostsCOST 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
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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 CostsCOST 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
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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 CostsCOST 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 ($/kWh)*volts*amps*Wt Weld
(lb/ft)}/{1000*dep rate (lb/hr)*OpFact (%)*PowSource Eff (%)}
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INDIVIDUAL PART OF ESTIMATE (Look at each item individually)
Cost of Joint Prep Cost of Materials (Consumables) Cost of
Materials (Flux & Shielding) Labor Costs Power Costs Post Weld
Costs Overhead Costs POST WELD COSTSFinal
MachiningGrinding/PolishingHeat TreatingShot
BlastingStraighteningInspectionOVERHEAD COSTS Salaries: executives,
supervisors, inspectors maintenance people, janitor, etc. (those
costs which can not charge directly to weldment costs) Rent /
Depreciation of plant Taxes Maintenance supplies and costs
Utilities (not charged to weldment) i.e. light, plant heat, etc.
Employee benefits Insurance Overhead cost ($/ft) = {overhead rate
($/hr)*Wt Weld (lb/ft)}/ {dep rate (lb/hr)*OpFact (%)}Overhead
costs are usually apportioned pro rata among all work going through
the plant and the overhead rate assigned.
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Sheet1
Welding Cost - Per Foot Analysis
Cost of Joint Prep ($/ft)
Cost of Weld Metal
Flux Cost
Gas Cost
Misc. guide tubes etc.
Labor Cost ($/ft)
Power Costs
Overhead Costs
TOTAL
Welding Cosxt - Per Piece Analysis
Base Material Cost ($/pc)
Cost of Joint Prep
Cost of Weld Metal
Flux Cost
Gas Cost
Misc. guide tubes etc.
Labor Cost ($/pc)
Power Cost
Post Weld Costs
Overhead Costs ($/pc)
TOTAL
Sheet2
Sheet3
Sheet1
Welding Cost - Per Foot Analysis
Cost of Joint Prep ($/ft)
Cost of Weld Metal
Flux Cost
Gas Cost
Misc. guide tubes etc.
Labor Cost ($/ft)
Power Costs
Overhead Costs
TOTAL
Welding Cost - Per Piece Analysis
Base Material Cost ($/pc)
Cost of Joint Prep
Cost of Weld Metal
Flux Cost
Gas Cost
Misc. guide tubes etc.
Labor Cost ($/pc)
Power Cost
Post Weld Costs
Overhead Costs ($/pc)
TOTAL
Sheet2
Sheet3
