Manufacturing Costs. Influences of Cost Two Types of Cost 1.Fixed: Unchanging –Rent, heat, light, etc. 2.Variable: Changes with production rate –Labor,

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Presentation transcript:

Manufacturing Costs

Influences of Cost Two Types of Cost 1.Fixed: Unchanging –Rent, heat, light, etc. 2.Variable: Changes with production rate –Labor, raw material, energy, etc. Factors Affecting Costs –Material goods –Labor rate (wage) –Time (urgency) –Shipping

Material Goods Cost Machinery (including tools) –Machine may cost more but also produces more Raw materials costs vary by market

Labor Cost Wages vary based on skill and experience Overtime is more expensive Value-added versus non-value-added tasks

Time Cost Customer deadlines must be met Worker hours increase when production slows Materials wasted due to shelf life

Shipping Cost Cost per unit affected by mode Trains and boats cost less but are slower Distance to plant

Image Resources Microsoft, Inc. (2008). Clip Art. Retrieved March 10, 2008, from