Cost audit calculations

The Cost Audit is intended as a cost of manufacture guide only and does not include profit margin or retail cost markup. As a consequence, the estimated product cost will be significantly lower than retail prices.

The product definition and calculations for cost follow the same format as those for embodied energy and CO2 footprint:

• Material Cost
• Primary Process Cost
• Secondary Process Cost
• Joining and Finishing Cost
• Transport Cost
• Use Phase Cost
• End of Life Cost

Material phase - Cost (C_m)

Cost of virgin material and grades with user-specified recycled contents

The price quoted on a material datasheet in MaterialUniverse represents the cost of a standard grade. This means the price sometimes relates to virgin material (e.g. polymers) or, in cases where the use of recycled material is integrated into the supply chain (e.g. metals, glasses), a blend of virgin and recycled material. As a result the first step in determining material cost is to determine the price for virgin material

When the material is not a metal or a glass

C_virgin = C_m

where:

C_m = material price ($/kg)

If the material type is a metal or a glass

where:

C_m = material price ($/kg)

R_f = Recycle fraction in current supply

f_rm = Price of recycled material as fraction of virgin price

Having determined the price for virgin material, it is possible to calculate the price for a user specified ‘recycled content’ (C grade)

where:

R_c = Recycled content

Cost of reused part

If a part has more value as scrap, then it is unlikely to be reused. The cost of a reused part will be higher than the cost of recycled material. In the Eco Audit Tool, the material cost for a reused part is 0.6 x the material datasheet price. 0.6 is the minimum ratio of material prices when calculating the cost of using recycled materials in the Eco Audit Tool.

For a reused part, other costs are likely to be incurred, but these have not been included in the total cost. These include: the cost of storage, which can vary depending on part size and geographical location; and profit, especially if there is a third-party involved with collection or storage. The cost of collection and sorting is included in the disposal phase of the product from which the reused part came. The cost of a reused part is therefore likely to be an underestimate in most cases.

Incorporating manufacturing waste into material cost

As the mass specified in the bill of materials represents that of the finished component, there is a need to correct its value to account for material that is removed in both the primary and secondary processes. This influences both the material and manufacturing life phases.

To account for this, both the amount of starting material and the waste produced need to be known. These are calculated by applying the mass correction factor (M_cf)

where:

% removed = amount of material removed by secondary process

This correction factor is applied to the component mass in the calculation for material cost (Cm-t).  

where:

C_m-t = material cost (including waste) ($)

m= (mass of final component x Qty) (kg)

M_cf = mass correction factor

C_grade = material cost ($/kg)

f_p = ‘Material utilization fraction’ for primary process – the Max Range Value taken from the Process datasheet

if ‘Recycle’ logical = TRUE

M_cfw = M_cf

if ‘Recycle’ logical = FALSE

M_cfw = 0

f_rm = price of recycled material as fraction of virgin price

f_sm = value of manufacturing scrap as fraction of virgin price

The second term represents the credit, or refund, given back to the component manufacturer by the material supplier for the receipt of well sorted manufacturing waste. The model assumes, unless it is not technically viable, that all manufacturing waste is recycled and a credit is received.

Manufacture phase - Cost (C_p-t)

The manufacturing phase calculations can be split into two groups. The primary process is calculated based on an extended version of the ProcessUniverse cost model. The second group, which includes secondary, joining and finishing processes, are based on the process energy.

As labour rates have a significant contribution on the final part price, both sets of calculations account for country of manufacture and the associated differences in labour and overhead rates.  

Primary Process Cost (C_p1)

There are two main contributors to the cost of primary processes, tooling, and overhead costs.

where:

C_p-t = tooling cost
C_p-oh = overhead costs

Much of the data used for the primary process calculation is based on data quoted on the associated ProcessUniverse datasheet, shown in the table below.

Cost Audit Process	ProcessUniverse Datasheet
Casting	Investment casting, automated
Rough rolling	Hot shape rolling
Forging	Hot closed die forging
Extrusion, foil rolling	Hot metal extrusion
Wire drawing	Wire drawing
Metal powder forming	Powder metal forging
Vaporization	CVD
Polymer extrusion	Polymer extrusion
Polymer molding	Injection molding(thermoplastics)
Glass molding	Glass blow molding
Advanced composite molding	Hiping, large scale
Autoclave molding	Autoclave molding
Compression molding	SMC molding
Filament winding	Filament winding
Matched die (preform) molding	Thermoplastic composite molding
Pultrusion	Pultrusion
Resin spray-up	Spray-up
Resin transfer molding (RTM)	Resin transfer molding
Vacuum assisted resin infusion (VARI)	Vacuum assisted rtm

As the cost model values quoted on these datasheets cover the capabilities of a wide range of equipment (e.g. from the smallest to largest injection molding machines), the data needs to be normalized to fit with the component being manufactured. This is done by considering the part size and complexity.

Part size and complexity

The size and complexity of a part has a large influence on the cost of capital equipment, tooling costs, tool life, and production rate.  Increasing both the part size and complexity causes: 

• tool costs to increase - larger tools are more complex and need to resist higher temps and pressures.
• capital expenditure to increase - need bigger machines for larger parts and higher temperature and pressure for more complex parts.
• reduction in tool life - due to higher temperatures and pressures being required.
• production rates to decrease - larger parts take longer to fill/process and complex parts require closer control of the process parameters.

These characteristics are incorporated in the cost calculation by applying a simple ranking for both part size and complexity, that enable the correct portion of the Capital cost (C_c), Tool cost (C_t), Tool life (n_t) and Production rate (ń) ranges to be applied.

The table below shows how these ranking could be applied to the Tooling cost (Ct) and Capital cost (Cc) range values:

Tooling cost		Part Complexity
(portion of range)		Simple	Average	Complex
Part Size	Small	high	high-mean	mean
	Medium	high-mean	mean	mean-low
	Large	mean	mean-low	low

In order to simplify the analysis, the part complexity is assumed to be 'average' and the part size is determined by comparing the specified component mass (including any manufacturing waste produced during the primary and secondary process) with the Mass Range value quoted on the ProcessUniverse datasheet.

Tooling cost (C_p-t)

For tooling, it is assumed that the process has been optimized to minimize the production costs, with the batch size, or production run, being equal to the tool life.

where:

C_t = Tool cost – value determined by part size and complexity

Tool life – value determined by part size and complexity

Coh country n = overhead rate for specified country

Coh USA = overhead rate for USA (reference country)

The second term is an overhead factor that adjusts the tooling cost for the country of manufacture.

Overhead costs (C_p-oh)

where:

Rate = Production rate – value determined by part size and complexity

C_c = Capital cost – value determined by part size and complexity

L = Load factor – the fraction of time for which the equipment is productive – default 0.5 (i.e. 12 hours a day)

t_wo = Capital write-off time – the period of time over which the capital cost of the equipment will be recovered – default 5 years

C_oh country n = Overhead rate ($/hr) – see below

Country Overhead rate estimation

In order to account for differences in labor and overhead rates on processing costs, it is necessary to estimate the overhead rate for different countries of manufacture. This is based on labor and electricity costs.

where:

Ef = Contribution of electricity costs to overhead rate = 0.3

L_cn = Labor cost in specified country, n ($/hr)

L_c USA = Labour cost in reference country, USA ($/hr) = 150$/hr

Coh(USA) = Overhead rate for reference country (USA) = 150 $/hr

C_eln = Cost of electricity in specified country, n, for commercial users ($/MJ)

Cel (USA) =Cost of electricity for reference country, USA, for commercial users ($/MJ)

Secondary Process Cost (C_p2)

The cost for secondary processes is based on the amount of material processed and the energy used to process the material. The amount of material processed is calculated using the Waste factor (W_f).

where:

M_cf = mass correction factor

where:

where:

W_f = waste factor

H_p2 = embodied energy, secondary process (MJ/kg)

P_cf = process cost conversion factor ($/MJ) – converts process energy to cost of energy

Conv = factor that accounts for the efficiency of energy source used by process (e.g. 3MJ of fossil fuel is required to produce 1MJ of electricity)

Cenergy = cost of energy source in specified country for commercial users

Lt = Labor time (h/kg)

Lc = Labor cost ($/h)

Joining and Finishing Cost (C_jf)

The cost for joining and finishing processes is calculated in a similar way to secondary processes.

where:

H_if = embodied energy for joining and finishing [Config file] (MJ/unit, MJ/kg, MJ/m or MJ/m²)

Amount = quantity specified by user (unit, kg, m, m²)

Transport Cost (C_trans)

Depending on the size and mass of the product, the cost of transportation is based on either its mass or volume. For each mode of transport there is a critical minimum density (CMD) below which the transport cost is based on volume rather than mass. The CMD is used to determine the volumetric weight (mv) for the product, where H, L and W represent the maximum dimensions of the ‘box’ used to ship the product.

where:

H = maximum height of the packaging (m)
L = maximum length of the packaging (m)
W = maximum width of the packaging (m)
CMD = critical min density
m = Final product mass

 

where:

T1, T2, T3 = transport model parameters

m = product mass – if m>mv then m = m otherwise m = mv

d = distance traveled – if d>SD then d=d otherwise d=SD

SD = Switch distance

Use Phase Cost (C_u)

The use phase costs are based on the amount of energy used over the product life. This accounts for the country of use, fuel rate (domestic or commercial usage) and the contribution from both static and mobile modes.

where:

H_use(s) = energy of static mode (MJ)

C_energy(s) = cost of energy in specified country (accounting for fuel rate) for static mode ($/MJ)

H_use(m) = energy of mobile mode (MJ)

C_energy(m) = cost of energy in specified country (accounting for fuel rate) for mobile mode ($/MJ)

Note that the use phase does not consider costs associated with maintenance of the product.

End of Life Cost

For the end of life phase, only the cost of disposal are considered. The costs, or cost savings, associated with End of Life potential are not currently calculated.

Disposal cost (C_d)

The cost of disposal is based on the energy used and includes the costs associated with collection, primary sorting, secondary sorting and, where appropriate, transport to landfill.

where:

H_collect = embodied energy, collection (MJ/kg)

D_cf = cost conversion factor for collection 0.0321 ($/MJ)

Note, the disposal cost does not include any taxes required for disposal in landfill.