Manufacturing Cost Calculation / Production Cost Calculation Phase 1 ( Raw Material Cost Calculation )

Manufacturing cost or Production Cost 

maybe defined as the total cost imposed by a manufacturer in manufacturing a particular product and today, we will learn about calculating that amount imposed.

It is basically the sum of all types of costs including material cost, process cost, and other overhead costs.

Manufacturing cost = 

Material Cost + Process Cost + Overhead and other costs 

For Calculating Material cost, firstly we should know about 
Material name, we should know about Material cost/Kg in 
market, we should know about Material Density to find out 
the weight, we should know about Scrap Cost in market, we
should know about the formula to calculate the weight of the
material used for making a specific product.

In this chapter, we will discuss about finding out the material cost.
Let us understand with an example
We have Raw material in the form of Pipe/Tube
	                Material cost/Kg in market   = Rs 50/kg
	                Material Density of MS Pipe = 7.85 gm/cm3
	                Scrap Cost in market = Rs 40/Kg
Now we should know about the formula to calculate the weight of 
the material used for making a specific product.
we can use the standard formula to calculate the weight of the 
material used for making a specific product and can also make it
in short form for regular use.

            Weight = Volume X Density of material

Weight = Volume X Density of material
Weight = Volume X 7.85 gm/cm3
Volume of Pipe/Tube = π/4 X ((O.D)2-(I.D)2) X L

Let us assume the size of the pipe as
Outer Diameter (O.D) = 10 mm     
Thickness = 1 mm      and      Length = 1000 mm

As O.D = 10 mm and thickness = 1 mm then
internal Diameter (I.D) will be = 8 mm

Now using the formula of
Volume of Pipe/Tube = π /4 ((O.D)2-(I.D)2) X L
Volume of Pipe/Tube = 3.14 /4 X ((10)2-(8)2) X 1000
         = 3.14 /4 X (100-64) X 1000
         = 3.14 /4 x 36 X 1000
         = 113040/4 mm3
         = 28260 mm3   
         = 28.26 cm3

As Weight = Volume X Density
And now we have both
volume and density
Now using the formula of
weight = Volume X Density
                   Weight = 28.26 x 7.85
                               = 221.841 grams 
                               = .222 kg

 so, R/M cost = Weight X Cost/Kg = .222 kg x Rs 50 = Rs 11.09





So now, we have understood to calculate the raw material cost 

Step to remember: - 

Reduce the scrap weight from the total weight of the raw material 

used. Suppose we have drilled a hole in that pipe, so by calculating

 the volume and density of the material removed, we can easily 

calculate its weight by the same procedure above done and subtract 

it from the raw material used, then our exact weight will be calculated

 and exact amount can be calculated as shown in the sheet.

To download costing format in excel sheet , click here

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For next part, follow the net part of the blog

https://batramechanicalclub.blogspot.com/2021/11/process-cost-calculation-formula.html