Lessons · Engineering · costing a bill of materials
Costing a bill of materials
Each line is quantity times unit price; the material cost is the sum; labour and overhead are added on top.
Hone is a place to practise a career, one idea a day. This is one of its lessons, written out in full and free to read without an account.
What it is for
The quote went out at $577 and the parts alone came to $640, because one line had a reel price where a per-metre price belonged. The BOM is where a job is won or lost before it starts, and every line is one multiplication.
How to think about it
Line by line: quantity in the same unit as the price, times the price. Add the lines. Then labour as hours times rate, then overhead or margin as a percentage of the total so far. Write each stage down.
Worked example
Cost = Σ (quantity × unit price), then the extrasThe shape of every BOM.
2 motors at $145.00 = $290.00; 6 m of cable at $3.25/m = $19.50; 1 enclosure at $88.00Three lines. Each is quantity times price, in matching units.
Material = 290.00 + 19.50 + 88.00 = $397.50The parts total.
Labour 3 h at $60/h = $180.00; total = $577.50; with 20 % margin = $693.00Labour on top, then margin on the whole.
Your turn
12 bolts at $0.80 and 4 brackets at $6.50. Write the material cost.
Cost = 12 × 0.80 + 4 × = $35.60
Solve one, graded on the server
The trap
Pricing cable per reel and counting it per metre. Quantity and unit price have to be in the same unit, and a BOM is where that mistake hides in the third decimal of a quantity column.