Production Costs Analysis. In producing an estimate the contractor’s estimator will use a variety of sources of information to ensure that the estimate of cost is as realistic as possible.
Also referred to as the cost of production, production costs include expenditures relating to the manufacturing or creation of goods or services.
For a cost to qualify as a production cost, it must be directly tied to the generation of revenue for the company.
Manufacturers experience production costs relating to both the materials required to create an item as well as the labor need to create it.
Service industries experience production costs in regard to the labor required to provide the service.
In production, there are direct costs and indirect costs.
For example, direct costs for manufacturing an automobile are materials, such as plastic and metal materials and the labor required to produce the finished product.
Indirect costs include overhead, such as rent, administrative salaries, and utility expenses.
Discuss, using examples, the sources of cost data that could be available to assist in producing a cost estimate at tender stage
Your assignment should not exceed 1500 words.
Marking Scheme
Identification of sources of cost data – 20%
Discussion of sources of cost data – 50%
Use of examples – 20%
Presentation and referencing – 10%
