Manufacturing Cost Estimation Design to Estimate the Production Cost of New Products

Abstract

The purpose of this research is to analyze the cost structure of the manufacturing and to estimate product costing system by using the normal costing method and applying activity-based costing (ABC) method. The rubber spare parts factory is used as a case study since a manufacturing process system of this factory is a make to order and there are various types of products depending on customer needs. The manufacturing cost of product in this research is approximated from the cost occurred in the one year past to estimate cost structure in process activities of production. This research develops a manufacturing cost calculation system for a variety of production activities using Microsoft Excel computer program and applies the designed program to calculate manufacturing costs of five example products. Then, the difference of the product costs between the activity-based costing method and the traditional cost estimation method for the five example products can be investigated. The results show that using the traditional method, the product costs of five example products of A, B, C, D and E are 8.1, 15.3, 63.0, 22.5 and 58.5 Baht per unit, respectively, while using the activity-based costing method, the estimated costs of products of A, B, C, D and E are 28.7, 15.2, 42.1, 23.4 and 49.5 Baht per unit, respectively. The results of this research using activity-based costing method can be used to estimate the manufacturing cost of new products according to customer needs that is able to quickly and accurately price new products.