How to Calculate the Manufacturing Cost of Sheet Metal Fabrication?

2021-05-11

In the daily work, many customers ask how our quotation is calculated, and many of our new employees also consult how the sheet metal cost is composed, so we summarize the cost composition into the following parts based on our production process and procedures.

1. Material cost
2. Cost of standard parts
3. Process processing cost
4. Packaging cost
5. Shipping cost
6. Administration cost
7. Profit

The cost components of sheet metal parts are generally divided into the following sections.

1. Material cost
It refers to the net material cost as required by the drawings = material volume * material density * material unit price.

2. Cost of standard parts
It refers to the cost of standard parts required by the drawings.

3. Process processing cost
It refers to the processing cost of each process required for processing into products. The composition of each process is detailed in the <Cost Accounting Format> and <Cost Composition of Each Process Table>.

The main process cost components are listed for explanation.
     a. CNC blanking
     Cost = Equipment depreciation and amortization + Labor costs + Auxiliary materials
     Equipment depreciation is calculated on the basis of 5 years, 12 months per year, 22 days per month, 8 hours per day.
     For example: 
     Equipment costs for CNY2,000,000.00, hourly equipment depreciation = 200 * 10000 / 5 / 12 / 22 / 8 = CNY189.40/ hour

    Labor cost, each CNC needs 3 technicians to operate, the average monthly salary of each technician = CNY5000, 22 days a month, 8 hours a day, that is, the cost per hour = 5000 * 3 / 22 / 8 = CNY85.23/hour.

    Cost of auxiliary materials, refers to the auxiliary production materials such as lubricant and volatile liquid needed for the work of equipment, each equipment needs about CNY1000.00 per month, according to 22 days per month, 8 hours per day. Hourly cost = 1000 / 22 / 8 = CNY5.68/hour.

     b. Bending
     Cost = Equipment depreciation and amortization + Labor costs + Auxiliary materials
     Equipment depreciation is calculated on the basis of 5 years, 12 months per year, 22 days per month, 8 hours per day.
     For example: 
     Equipment costs for CNY500,000.00, equipment depreciation per minute = 50 * 10000 / 5 / 12 / 22 / 8 / 60 = CNY0.79/ minute.
     Bending a bend generally spend 10 seconds to 100 seconds, so each bend equipment depreciation = CNY0.13 ~ 1.30/knife.

    Labor cost, each device requires a technician to operate, the average monthly salary of each technician = CNY5000, 22 days a month, 8 hours a day, that is, the cost per minute = 5000 / 22 / 8 / 60 = CNY0.47/minute. Each minute on average can be folded 1 ~ 2 bends, so the labor cost of each bend = CNY0.23 ~ CNY0.47/knife.

    Cost of auxiliary materials, each bending machine monthly cost of auxiliary materials is about CNY600.00, according to 22 days per month, 8 hours per day. Each minute cost = 600 / 22 / 8 /60 = CNY0.06/minute.

     c. Surface treatment
     Outsourcing according to the buying cost, such as plating, oxidation.
     Spraying cost = Powder material cost + Labor cost + Auxiliary material cost + Equipment depreciation.

     Powder material cost is generally calculated by square meters, price per kilogram of powder in CNY25.00 ~ CNY60.00, mainly related to customer requirements. Each kilogram powder can generally spray 4 ~ 5 square meters, so powder material cost = CNY6.00 ~ CNY15.00/square meter.
     Labor cost, spraying line requires 15 workers, the average monthly salary of each worker = CNY5000, 22 days a month, 8 hours a day, each hour can spray 30 square meters, so labor cost = 15 * 5000 / 22 / 8 / 30 = CNY14.20/square meter.
    Auxiliary material cost mainly refers to the pre-treatment liquid, fuel cost for curing oven, CNY50,000 per month, 22 days a month, 8 hours a day, 30 square meters per hour, auxiliary material cost = CNY9.47/square meter.
    Equipment depreciation, spraying line costs for CNY1,000,000, according to 5 years depreciation, 12 months per year, 22 days per month, 8 hours per day, 30 square meters per hour, equipment depreciation cost = 100 * 10000 / 5 / 12 / 22 / 8 / 30 = CNY3.16/square meter.

    Total spray cost = CNY22.00 ~ CNY33.00/square meter. If requires partially protect spraying, cost will be higher.

4. Depending on different product, different packaging requirements, generally in CNY20.00 ~ CNY30.00/cubic meter.

5. Shipping cost is amortized into each product.

6. There are two parts of administration cost, plant rental, utilities and finance cost.
Plant rental & utilities, monthly cost is CNY150,000, and monthly output value is CNY4,000,000, so the cost should account for the proportion of output value = 15 / 400 = 3.75%.
Finance cost, due to the mismatch of receivable and payables cycle (we buy materials in cash, customer monthly settlement), we need to press about 2 ~ 3 months of funds, according to the bank interest rate of 1.25% ~ 1.5%. Therefore, the overhead should be about 5% of total sales price.

7. Considering long-term development of the company and better customer service, our profit is 10% ~ 15%.

Hope this article can help customers understand our business clearly. Welcome to order from Minzim Hardware.