MISys Manufacturing – Using Manufacturing Orders to estimate the sales price for large volumes.
A new Bill of Material provides cost for a single build unit, but how about large volumes where economies of scale would factor in? One solution is to use inactive manufacturing orders to simulate those costs because the setup for an MO operation is amortized over the volume of parts per setup. For example, 60 minutes of labor to setup would apply to a single build unit in a new Bill of Material but would be only .06 minutes per unit for a production run of 1000 in a Manufacturing Order.
In the following example, a Fluorescent Lamp is manufactured in a qty of 1. The total cost per unit is estimated at $68.41 and sell price at a 2X markup of $136.82.
In the next example, the same Fluorescent Lamp is manufactured in a qty of 1000. The total cost per unit is estimated at $63.31 ($63,305/1000) and sell price at a 2X markup of $126.61. This results in a difference of more than $10,000 in a 10000 unit batch of lamps when compared to multiplying the single unit cost by 1,000. The difference is due to economies that can be found in larger scale production.
If you have any questions about using Manufacturing Orders to calculated the cost and price of products in MISys, feel free to get in touch with us here at Central Nervous Systems.