Costs

Fixed Costs

Variable Costs

Those where amounts can not be

changed in the short run (e.g. building
mortgage, building heat, equipment,
insurance costs, bond interest)

Costs whose total amount goes

up or down when volume goes up or
down (also called - direct costs,
incremental costs, or marginal costs), (e.g.
raw materials, shielding gas, electrodes,
some energy costs, labor)

Opportunity Costs
Profits which a foregone choice of action would have
earned but which are lost because another choice is made.

A person who keeps money in a mattress incurs

opportunity costs - loss of interest - because of the decision

VW introduced rabbit - sold out immediately - loss

opportunity cost of several million dollars because not enough
supply

Cabbage Patch Kids

Tickle-me Elmo

Time value of money

Time Value of Money

$1 on hand today is
worth more than $1 in future by
amount of interest it could earn
and inflation adjustments

Future Value of Present Money (with interest

compounded)
Example
fu pr (1 i)n
You have $100 and can
invest it at 10% per year
fu future value
and invest for 3 years:

pr present amount
i int erest decimal
n number periods

fu 100(1 0.1) 3 133.10

Therefore, the opportunity
cost of not investing is
$33.10

Sunk Cost

a) Money lost in bad investments (e.g.

plant abandoned before production)
b)
Money tied up in a plant where it could
have earned higher return on some other venture.

BREAK EVEN ANALYSIS

P x Q = F + (V x Q)
P = price per unit
Q = quantity
F = fixed costs
V = variable costs per unit

Q = F/(P-V)

BREAK EVEN ANALYSIS

P x Q = F + (V x Q)
P = price per unit
Q = quantity
F = fixed costs
V = variable costs per unit

Example

Q = F/(P-V)
P=$100
F=$20,000/mo
V=$80

We are making all welded bicycles. They sell at

$100/bike. Material and labor costs are $80 per unit.
Equipment and building mortgage per month is $20,000.
What is the break-even quantity which must be sold each
month?
Q = $20,000/($100 - $80)
Q = 1000 units

CONTRIBUTION TO OVERHEAD OR PROFIT

Amount by which the selling price/unit exceeds the variable costs/unit:

Contribution = (P-V)
P=$100
F=$20,000/mo
V=$80

Contribution = $20
Contribution offsets fixed costs until 1000 units are sold
(break-even point).
Profit begins after break-even point.

CALCULATION CONSIDERING DESIRED PROFIT

Q = (F + desired profit) / (P - V)
In our example, if we
want to make $5000 profit:

P=$100
F=$20,000/mo
V=$80

Q = (20,000 + 5,000) / (100 - 80) = 1250 units

CALCULATION CONSIDERING TAX

Q = {F + (desired profit)/(1- tax rate)}/(P-V)

If the tax rate is 40%

Q = {20,000 + 5000/(1-0.4)} / (100 - 80) = 1417 units

CONTRIBUTION RATIO

CR = {(P-V) X 100} / P
P=$100
F=$20,000/mo
V=$80

CR = {(100-80) X 100} / 100 = 20%

Comparing contribution ratios of various

products we produce allows us to select the
items to push in sales.

Cost of Welding
($/ft) Cost
incurred to make a weld
(includes joint prep,
consumables, labor,
overhead, pre- & post-weld
treatment, etc.)
Used to compare cost
advantages of weld vs. Other
manufacturing processes
Used to decide on the most
cost effective joint design or
most cost effective welding
process to use
Used as a basis for
investment in new automated
equipment

Cost of Weldment
($/piece) Cost
incurred to make entire
structure (includes all of
above plus summation of all
the weldments and raw
material costs)
Used to bid on a welding
job

Welding Procedure
This is the starting point for cost
estimating. Procedure should include:
Joint details
Welding process
Type of filler
Type of gas/fluxes
Welding current
Position (operator factor)
Travel speed
Post weld treatment

INDIVIDUAL PART OF
ESTIMATE

(Look at each item individually)

Cost of Joint Prep
Cost of Materials (Consumables)
Cost of Materials (Flux & Shielding)
Labor Costs
Power Costs
Post Weld Costs
Overhead Costs

INDIVIDUAL PART OF ESTIMATE

(Look at each item individually)

Cost of Joint Prep

Cost of Materials (Consumables)

Cost of Materials (Flux & Shielding)

Labor Costs

Power Costs

Post Weld Costs

Overhead Costs

COST OF JOINT PREPARATION

Methods of Joint Prep

Machined Joints - (most

expensive)
Flame or Plasma Cut Joints
Square Butt w/o Surface Prep (least
A) Do cost analysis
on expensive)
several joint designs to minimize joint prep
cost:
Note:
If a non-prequalified joint is used, you may incur the
added cost of procedure qualification.
B) Trade off reduced costs to prepare joint with amount of weld
metal to fill joint.
Example: A submerged arc joint can be flame cut (inexpensive)
but may require a lot of weld metal to fill the joint (expensive). {see
cost of welding}

INDIVIDUAL PART OF ESTIMATE

(Look at each item individually)

Cost of Joint Prep

Cost of Materials (Consumables)

Cost of Materials (Flux & Shielding)

Labor Costs

Power Costs

Post Weld Costs

Overhead Costs

COST OF MATERIALS (CONSUMABLES)

Procedure
a)

Calculate the theoretical weight of weld metal

required to fill the weld joint
b) Calculate the weight of filler actually
consumed (spatter etc. included)
1) Estimating Losses
2) Automated Method
c) Calculate the electrode costs

INDIVIDUAL PART OF ESTIMATE

(Look at each item individually)

Cost of Joint Prep

Cost of Materials (Consumables)

Cost of Materials (Flux & Shielding)

Labor Costs

Power Costs

Post Weld Costs

Overhead Costs

Calculation of Theoretical
Weight of Deposit

a) Calculate the theoretical weight of weld

metal
required to fill the weld joint
b) Calculate the weight of filler actually
consumed
(spatter etc. included)
1) Estimating
Losses
2) Automated
Method
c) Calculate the electrode costs

Wt Weld (lb/ft) = CSA (in2) * density (lbs/in3) * 12 (in/ft)

Wt Weldment (lbs) = Wt Weld (lb/ft) * Total ft of weld (ft)

INDIVIDUAL PART OF ESTIMATE

(Look at each item individually)

Cost of Joint Prep

Cost of Materials (Consumables)

Cost of Materials (Flux & Shielding)

Labor Costs

Power Costs

Post Weld Costs

Overhead Costs

Calculation of Weight of Filler

Metal Actually Consumed:

Estimating Losses

Electrode Losses
(SUM)

Stub Losses
14 with 2 stub = 14% loss
18 with 2 stub = 11% loss
28 with 2 stub = 7% loss
Coating or Slag Losses
Thinner coating E6010 = 10%
loss
Heavy coating E7024 = 50%
loss

Calculate the theoretical weight of weld metal

required to fill the weld joint
Calculate the weight of filler actually
consumed
(spatter etc. included)
1) Estimating
Losses
2) Automated
Method
Calculate the electrode costs

Electrode Filler Metal Yield

Covered Electrode

SMAW 14 manual = 55-65% yield

SMAW 18 manual = 60-70% yield

SMAW 28 automatic = 65-75% yield

Solid Bare Electrode For

Submerged arc = 95-100% yield

Electroslag = 95-100% yield

GMAW = 90-95% yield

Cold Wire = 100

Tubular-flux Cored Electrodes For

Flux Cored Arc Welding = 80-85% yield

Cold Wire = 100%

Spatter Losses
Depends on technique, usually
= 5-15% loss

Wt Weldment (lbs) = total wt deposit (lbs) / (1- total electrode loss)

or
Wt Weldment (lbs) = total wt deposit (lbs) / {filler metal yield (%) / 100}

INDIVIDUAL PART OF ESTIMATE

(Look at each item individually)

Cost of Joint Prep

Cost of Materials (Consumables)

Cost of Materials (Flux & Shielding)

Labor Costs

Power Costs

Post Weld Costs

Overhead Costs

Calculation of Weight of
Filler Metal Actually
Consumed:

Automated Method
Determine Wire Feed Speed From Graphs

(Example at right)
Knowing type of wire
Knowing diameter of
wire
Knowing operating
current

Calculate the theoretical weight of weld metal

required to fill the weld joint
Calculate the weight of filler actually
consumed
(spatter etc. included)
1) Estimating
Losses
2) Automated
Method
Calculate the electrode costs

Determine length of wire per

weight (in/lb) - From Table
Knowing type of wire
Knowing diameter of wire

Determine Hours of Run

(Operation)
Use shift time if continuous
weld, or
Hours = feet of weld (ft) /
travel speed (ipm) * 60 (min/hr) *
1/12 (ft/in)

Wt Weldment (lbs)={wire feed (ipm) * Hrs of Run * 60 (min/hr)}/wire per wt (in/lb)

INDIVIDUAL PART OF ESTIMATE

(Look at each item individually)

Cost of Joint Prep

Cost of Materials (Consumables)

Cost of Materials (Flux & Shielding)

Labor Costs

Power Costs

Post Weld Costs

Overhead Costs

Calculation of
Electrode Cost

Calculate the theoretical weight of weld metal

required to fill the weld joint
Calculate the weight of filler actually
consumed
(spatter etc. included)
1) Estimating
Losses
2) Automated
Method
Calculate the electrode costs

Weld Electrode Cost ($/ft) = {elect price ($/lb) * Wt Weld (lb/ft)}/filler yield (%)

Weldment Electrode Cost ($) = elect price ($/lb) * Wt Weldment (lbs)

INDIVIDUAL PART OF ESTIMATE

(Look at each item individually)

Cost of Joint Prep

Cost of Materials (Consumables)

Cost of Materials (Flux & Shielding)

Labor Costs

Power Costs

Post Weld Costs

Overhead Costs

COST OF MATERIALS
(FLUX AND SHIELDING)

Calculation of Flux Costs

Flux Ratio
Sub Arc = 1-1.5 (approx. 1 lb flux/ 1 lb wire)
Electroslag = 0.05-0.10
Weld Flux Cost ($/ft)=flux price ($/lb) * Wt Weld (lb/ft) * flux ratio
Weldment Flux Cost ($)=Weld Flux Cost ($/ft) * feet of weld
Calculation of Shielding gas and Backing gas Costs
Gas Cost ($/ft)={gas price ($/ft3)*flow rate (ft3/hr)}/{Travel (ipm)
*1/12(ft/in)*60(min/hr)
Weldment Gas Cost ($) = Weld Gas Cost ($/ft) * feet of weld
Or

= {Gas price ($/ft3) * flow rate (ft3/hr) * weld time (min)} / 60

(min/hr)

Calculation of Miscellaneous Costs

Guide tubes

Studs / Ferrules Spot-weld electrode

INDIVIDUAL PART OF ESTIMATE

(Look at each item individually)

Cost of Joint Prep

Cost of Materials (Consumables)

Cost of Materials (Flux & Shielding)

Labor Costs

Power Costs

Post Weld Costs

Overhead Costs

COST OF LABOR

(single greatest factor in

total cost of weldment)

Operator Factor: percent of time that a

welder is actually making a useful weld.

Semi-automatic and automatic plants

have higher operator factors
Field welding / construction work with
small welds in scattered locations have low
operator factor
Welding in the flat position has higher
operator factor than horizontal, vertical,
overhead:
1. Faster travel speed
2. Fewer defects / fewer repairs
Use of fixtures, positioners, and
handling equipment increases operator
factor
Slag chipping, electrode changes,
moving from joint to joint all reduce
operator factor

INDIVIDUAL PART OF ESTIMATE

(Look at each item individually)

Cost of Joint Prep

Cost of Materials (Consumables)

Cost of Materials (Flux & Shielding)

Labor Costs

Power Costs

Post Weld Costs

Overhead Costs

COST OF LABOR

(single greatest factor in

total cost of weldment)

Deposition Rate
(function of process and current)
See graph attached, or
Deposition rate (lb/hr)={wire speed
(in/min)*60(ipm)}/{wire per wt (in/lb)*filler
yield (%)/100}

Weld Labor ($/ft)={welder pay ($/hr)*Wt Weld (lb/ft)}/

{deposit rate (lb/hr)*OpFact(%)/100}

INDIVIDUAL PART OF ESTIMATE

(Look at each item individually)

Cost of Joint Prep

Cost of Materials (Consumables)

Cost of Materials (Flux & Shielding)

Labor Costs

Power Costs

Post Weld Costs

Overhead Costs

COST OF POWER DURING

WELDING

Local Power Rate ($/kWh) includes:

Energy charge
Fuel adjustment charge
Taxes
Demand charge (time of day)
Power factor penalty
Power Source Efficiency (%)
See machine performance curves (see
attached)
Weld Power Cost ($/ft)={local power rate ($/kWh)*volts*amps*Wt Weld (lb/ft)}/
{1000*dep rate (lb/hr)*OpFact (%)*PowSource Eff (%)}

INDIVIDUAL PART OF ESTIMATE

(Look at each item individually)

Cost of Joint Prep

Cost of Materials (Consumables)

Cost of Materials (Flux & Shielding)

Labor Costs

Power Costs

Post Weld Costs

Overhead Costs

POST WELD COSTS

Final Machining
Grinding/Polishing
Heat Treating
Shot Blasting
Straightening
Inspection

OVERHEAD COSTS

Salaries: executives, supervisors, inspectors

maintenance people, janitor, etc. (those costs which can
not charge directly to weldment costs)
Rent / Depreciation of plant
Taxes
Maintenance supplies and costs
Utilities (not charged to weldment) i.e. light, plant
heat, etc.
Employee benefits
Insurance

Overhead cost ($/ft) = {overhead rate ($/hr)*Wt Weld (lb/ft)}/

{dep rate (lb/hr)*OpFact (%)}

Overhead costs are usually apportioned pro rata among all work
going through the plant and the overhead rate assigned.

Welding Cost - Per Foot Analysis

Cost of Joint Prep ($/ft)
Cost of Weld Metal
Flux Cost
Gas Cost
Misc. guide tubes etc.
Labor Cost ($/ft)
Power Costs
Overhead Costs
TOTAL

Welding Cost - Per Piece Analysis

Base Material Cost ($/pc)
Cost of Joint Prep
Cost of Weld Metal
Flux Cost
Gas Cost
Misc. guide tubes etc.
Labor Cost ($/pc)
Power Cost
Post Weld Costs
Overhead Costs ($/pc)
TOTAL