*Intended learning outcomes: Explain a graphical representation of the cost accumulation for a product. Disclose how to proceed if the entire line of products has to be recalculated.*

Figure 16.2.2.1 shows one possible
way of representing the results of the (single-stage) *cost accumulation* for an individual product. Here, again, the *ball bearing* product from Section 16.2.1 is used as an example.

**Fig. 16.2.2.1** Graphical representation of the cost accumulation for a product.

In this graphical representation, you
can see that this is an *estimated-cost accumulation*, as only the *target costs*
column has been completed. For *ongoing job-order cost accumulation*, we
would enter data collected from the shop floor into the *actual *column. Division by the batch size is performed only at the
very end. However, first the run load per unit must be multiplied by the batch
size. Compare the results of the calculation for batch size 5000 with the
calculation in Figure 16.2.1.3 (where batch size is 100).

If the bill of material for a product contains components produced in-house, the costs must be estimated for these items first. Only then should we calculate the costs for the product itself into which the components are built. This is best achieved by estimating the costs for all components, vertically along the tree structure, using a depth-first search. Once we have estimated the costs for all the components at one level, we can estimate the costs for the higher-level product when we return to the next highest level of the tree structure.

If the entire line of products has to be recalculated, it is more efficient to take the individual items in descending order of their low-level code. We start by calculating the costs for individual parts and subassemblies at the lowest possible level and end with the finished product. We can proceed in this order, because we have already calculated the level codes.

For components produced to order, which are produced on demand for the higher-level product rather than being stored, we can integrate the cost accumulation for each component directly into the cost accumulation for this product. Since the batch that is produced depends on the product batch, the result will be different every time.

If the end product is a product family with many variants, rather than a stock item, we can combine different parameter values in the cost estimation. In this way, we can calculate various points of support for product costs in the n-dimensional parameter space. These combinations of parameter values should then be stored in parameter value lists under the *item* object and introduced into the estimated-cost accumulation as shown in Figure 16.2.2.1.

## Course section 16.2: Subsections and their intended learning outcomes

##### 16.2 Cost Estimation

Intended learning outcomes: Present an algorithm for cost estimation of goods manufactured. Produce a representation of the cost accumulation and an overview of the comprehensive calculation for a product line.

##### 16.2.1 An Algorithm for Cost Estimation of Goods Manufactured

Intended learning outcomes: Present in detail a ball bearing as an example product. Describe the algorithm for estimation of the cost of a product (shown for three cost types). Explain the data flow of the cost-estimation algorithm.

##### 16.2.2 Representation of the Cost Accumulation and Comprehensive Calculation for a Product Line

Intended learning outcomes: Explain a graphical representation of the cost accumulation for a product. Disclose how to proceed if the entire line of products has to be recalculated.