A manager is trying to estimate the manufacturing costs of a new product. The company makes several other products that utilize some of the same manufacturing procedures as the new product. Which cost estimation method would be the best method to determine the total cost of manufacturing the new product?

Question

Justin David

Business

2 November, 00:43

A manager is trying to estimate the manufacturing costs of a new product. The company makes several other products that utilize some of the same manufacturing procedures as the new product. Which cost estimation method would be the best method to determine the total cost of manufacturing the new product?

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Answers (1)

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Nick Galloway · Answer 1

Engineering estimates

Explanation:

Engineering cost estimating is used when a production process requires several stages or processes that are shared by different products. The production process is broken down into smaller processes, e. g. assembly, finishing, packaging, etc., and then the production costs are divided by each small process. Using the same examples:

assembly process is assigned specific direct labor costs, specific materials and components, and a specific overhead rate. finishing process is also assigned specific direct labor costs, specific materials and components, and a specific overhead rate. the same for packaging which also is assigned specific direct labor costs, specific materials and components, and a specific overhead rate. this repeats for every single process ...