Materials
Match required raw-material and semi-finished quantities per model with planning prices.
ERP Guides
Production cost planning guide
How to Plan Model Costs
Model cost planning makes expected material and production expenses visible for a model and quantity before production begins. Recording price, quantity, period and allocation assumptions together shows what information supports quotation and production-budget decisions.
Cost structure
Separate the components of model cost
Labour
State the labour assumptions used for operations or production time.
Machine and energy
Document the allocation basis for production-related expenses such as machine time and energy.
Production overhead
Show the overhead pool and the allocation basis assigned to the model separately.
Building the plan
How do you prepare a pre-production cost view?
Set the planning basis
Record model code, production quantity, period, currency and valid product/recipe version so plans built on different assumptions remain distinct.
Add sources and assumptions
Specify the source and date of material prices and the allocation basis for labour, machine and overhead costs by item.
Compare unit and total cost
Review both total cost for the planned quantity and per-unit cost. Show how each component changes when quantity or price assumptions change.
Illustrative cost breakdown
Total and unit cost for a 500-unit plan
The values below are illustrative assumptions to show the calculation logic; they are not actual costs or pricing recommendations.
Materials
Per-unit assumption
420 currency/unit
For 500 units
210,000
Labour
Per-unit assumption
60 currency/unit
For 500 units
30,000
Machine and energy
Per-unit assumption
35 currency/unit
For 500 units
17,500
Allocated overhead
Per-unit assumption
45 currency/unit
For 500 units
22,500
Planned total cost
280,000
Planned cost per unit
560
Unit cost: 280,000 ÷ 500 = 560. If quantity rises to 600 units, recalculate total and unit cost while treating variable components and fixed overhead separately.
Which assumptions should be revisited when quantity changes?
Variable components
Costs that may rise with volume
Material consumption and time-based expenses may change with production quantity. Do not assume a linear increase where overtime, scrap or capacity thresholds apply.
Fixed or period-based components
Costs whose unit share varies with volume
Even when period overhead remains unchanged, its per-unit share may shift when allocated across a different production volume. State the allocation basis and capacity-utilisation assumption.
Frequently asked questions
Is planned model cost the same as actual cost?
No. A model cost plan is prepared before production using specified price, quantity and expense assumptions. Actual cost is based on material and expense records once production takes place.
Which expenses belong in a model cost plan?
Depending on scope, it can include materials, labour, machine/energy and production overhead. State the source, period and allocation basis for each item.
When should a model cost plan be updated?
Review the plan when material prices, product/recipe version, production quantity, exchange rates or expense-allocation assumptions change materially. Keep the effective dates of old and new assumptions.
Is this plan a final selling price?
No. A model cost plan shows production-cost assumptions. Selling price involves other decisions such as margin targets, commercial terms, taxes and customer agreements.