Budgeting Costing and Estimating for the Injection Moulding Industry By Peter Jones Book

Introduction

The topics of budgeting, costing and estimating for injection moulding are the source of much confusion in the plastics industry and from the research carried out by the author, there does not appear to be any kind of authoritative published work that addresses these topics. This book addresses them head-on to explain in detail all the stages involved from budgeting to the final estimate. This book discusses and defines the different methods of budgeting, costing and estimating that are normally used in the injection moulding industry. In order to establish the costing system, the operating costs first have to be identified and quantified by means of a budget. Based on the budget, a costing system can then be developed that can be applied to determine the manufacturing cost of each product a company manufactures. The underlying theme of this book is the maximization of profits through the control of costs. Hence, the emphasis is placed on ensuring the understanding of costing and estimating models through discussion and examples. This book will be of considerable value to managers of injection moulding companies, to accountants who work in these companies and users of the equipment who may have involvement in the costing and budgeting of new projects.

Content

Introduction ……………………………………………………………………………………………..1

Terms and Definitions …………………………………………………………………………5

1.1 Injection Moulding …………………………………………………………………….5

1.1.1 Customer ………………………………………………………………..5

1.1.2 In-House …………………………………………………………………5

1.1.3 Moulder …………………………………………………………………5

1.1.4 Toolmaker ………………………………………………………………5

1.1.5 Mould, Tool and Mould Tool …………………………………….6

1.2 Costing Terminology ………………………………………………………………….6

1.2.1 Capital Costs …………………………………………………………..6

1.2.2 Depreciation ……………………………………………………………6

1.2.2.1 Straight-line Basis ……………………………………..7

1.2.2.2 Reducing-balance Basis ……………………………..8

1.2.3 Book Value (or Present Value) ………………………………….11

1.2.4 Utilisation ……………………………………………………………..11

1.2.5 Utilisation Factor (UF) …………………………………………….12

1.2.6 Efficiency Factor (EF) ……………………………………………..12

1.3 Accountancy Terminology …………………………………………………………13

1.3.1 Assets …………………………………………………………………..13

1.3.1.1 Fixed Assets ……………………………………………13

1.3.1.2 Current Assets ………………………………………..13

1.3.2 Capital Employed …………………………………………………..14

1.3.3 Direct Costs …………………………………………………………..14

1.3.4 Fixed Costs ……………………………………………………………14

1.3.5 Indirect Costs ………………………………………………………..14

1.3.6 Variable Costs ……………………………………………………….15

1.3.7 Turnover……………………………………………………………….15

1.3.8 Profit ……………………………………………………………………15

1.3.9 Loss ……………………………………………………………………..16

1.3.10 Return on Investment (ROI) …………………………………….16

Planning and Budgeting ……………………………………………………………………..17

2.1 Planning …………………………………………………………………………………17

2.1.1 Long-term Planning ………………………………………………..18

2.1.2 Medium-term Planning ……………………………………………18

2.1.3 Short-term Planning ……………………………………………….18

2.1.4 Discussion …………………………………………………………….19

2.1.5 Planning for the Injection Moulding Industry ……………..20

2.2 Forecasting ……………………………………………………………………………..21

2.3 Budgeting ……………………………………………………………………………….21

2.3.1 Budget Revisions ……………………………………………………23

2.4 Budgets for Injection Moulding ………………………………………………….25

2.4.1 Material Shrinkage …………………………………………………25

2.4.2 Flow Behaviour ……………………………………………………..26

2.4.3 Observation …………………………………………………………..26

2.5 Preparing a Budget for an Injection Moulding Operation ……………….27

2.5.1 Long-term Planning (Years 5 to 10) …………………………..28

2.5.2 Medium-term Planning (Years 2 to 5) ………………………..28

2.5.3 Short-term Planning (Forthcoming Year) ……………………28

2.5.4 Working Budget ……………………………………………………..28

Methods of Costing …………………………………………………………………………..33

3.1 Standard Costing ……………………………………………………………………..34

3.2 Absorption Costing ………………………………………………………………….35

3.2.1 Steps in Introducing an Absorption Costing System …….35

3.2.2 Absorption Rate …………………………………………………….37

3.2.2.1 Percentage of the Selling Price …………………..39

3.2.2.2 Rate Per Unit ………………………………………….40

3.2.2.3 Percentage of the Manufacturing Cost ………..40

3.3 Marginal Costing ……………………………………………………………………..41

3.4 Machine Hourly Rates ………………………………………………………………47

3.4.1 Computation of the MHR ……………………………………….47

3.4.1.1 Capital Cost Method ……………………………….51

3.4.1.2 Machine Lock Method …………………………….51

3.4.1.3 Book Value Method (or Depreciation Method) . 51

3.4.1.4 kVA Rating Method ………………………………..52

3.4.2 Selecting the Best Method ………………………………………..55

3.4.2.1 Capital Cost Method ……………………………….55

3.4.2.2 Machine Lock Method …………………………….55

3.4.2.3 Book Value Method…………………………………56

3.4.2.4 kVA Rating Method ………………………………..56

3.5 Adjusting the MHR ………………………………………………………………….56

3.5.1 Normal Difficulty Work Mix ……………………………………57

3.5.2 Varied Difficulty Work Mix ……………………………………..57

3.6 Discussion ………………………………………………………………………………58

3.6.1 Varying MHR System ……………………………………………..58

3.6.2 Observation …………………………………………………………..58

3.7 Checking the Calculated MHR …………………………………………………..59

3.8 Observation …………………………………………………………………………….59

3.9 Summary ………………………………………………………………………………..59

3.9.1 Standard Costing ……………………………………………………59

3.9.2 Absorption Costing ………………………………………………..60

3.9.3 Marginal Costing …………………………………………………..60

3.9.4 Machine Hourly Rate ……………………………………………..60

3.10 Combined Costing Systems ………………………………………………………..61

Job Costing ……………………………………………………………………………………..65

4.1 Discussion ………………………………………………………………………………65

4.2 Job Costing for Trade and Custom Moulding ……………………………….66

4.2.1 Stage A …………………………………………………………………66

4.2.1.1 Machine-based Operations ……………………….66

4.2.1.2 Materials ……………………………………………….68

4.2.1.3 Assembly Operations ……………………………….68

4.2.1.4 Support Services ……………………………………..68

4.2.2 Stage B …………………………………………………………………69

4.2.3 Stage C …………………………………………………………………69

4.2.4 Stage D …………………………………………………………………69

4.2.5 Stages E and F ……………………………………………………….69

4.2.6 Stage G …………………………………………………………………69

4.3 Job Costing for Trade/Custom Moulding……………………………………..70

4.3.1 Supplementary Notes ……………………………………………..70

Overlooked Costs ……………………………………………………………………………..73

5.1 Introduction ……………………………………………………………………………73

5.1.1 Poor Electrical Power Factor ……………………………………74

5.1.2 Rejects Occurring During Production ………………………..74

5.1.3 Material Spillages …………………………………………………..75

5.1.4 Failure to Identify Difficult Work ……………………………..75

5.1.5 Excessive Breakdowns of Plant …………………………………76

5.1.6 Repairs to Plant and Equipment ……………………………….76

5.1.7 Repairs to Tools, Jigs and Dies (Tooling) ……………………76

5.1.8 Poor Housekeeping ………………………………………………..78

5.1.9 Overtime ………………………………………………………………79

5.1.10 Tooling Changes, Colour Changing and Purging …………82

5.1.10.1 Non-productive Machine Time ………………….83

5.1.10.2 Material Costs ………………………………………..83

5.1.10.3 Technician Costs ……………………………………..84

5.1.10.4 Use of Reprocessed Materials ……………………84

5.1.10.5 Material Contamination …………………………..85

5.1.10.6 Running Production on Machines Rated at a Higher MHR Cost …………………………………..85

Controlling the Costs: Measuring the True Cost of a job …………………………93

6.1 Discussion ………………………………………………………………………………93

6.2 The Core System ………………………………………………………………………84

6.2.1 Material Cost ………………………………………………………..94

6.2.2 The Machine Cycle …………………………………………………95

6.2.3 Machine Time Used ………………………………………………..95

6.2.4 Production Rate …………………………………………………….95

6.2.5 Secondary Production Processes ……………………………….95

6.2.6 Delivery and Packaging Costs …………………………………..95

6.3 Discussion ………………………………………………………………………………96

6.4 Monitoring Procedures ……………………………………………………………..96

6.4.1 In-production Monitoring ……………………………………….96

6.4.2 Post-production Monitoring …………………………………….98

6.4.3 Global Monitoring …………………………………………………98

6.5 Observations …………………………………………………………………………..99

6.6 Summary ………………………………………………………………………………100

6.7 Material Usage Factor …………………………………………………………….100

6.7.1 Discussion …………………………………………………………..100

6.7.2 In-production Monitoring of Material Usage ……………101

6.7.3 Post-production Monitoring …………………………………..102

6.7.4 Global Monitoring ……………………………………………….102

6.7.5 Remedial Action …………………………………………………..102

6.7.5.1 In-production and/or Post-production

Check Negative …………………………………….102

6.7.5.2 Global Monitoring Check Negative ………….103

6.8 Observations …………………………………………………………………………104

6.9 Summary ………………………………………………………………………………106

Reducing the Costs of Production ……………………………………………………..107

7.1 Discussion …………………………………………………………………………….107

7.2 The Cost of Producing Scrap ……………………………………………………107

7.2.1 Mould Related …………………………………………………….108

7.2.2 Machine Related ………………………………………………….108

7.2.3 Post-moulding Operations ……………………………………..108

7.2.4 Housekeeping ………………………………………………………108

7.3 Discussion …………………………………………………………………………….109

7.4 Observations …………………………………………………………………………109

7.5 Discussion …………………………………………………………………………….110

7.6 Observations …………………………………………………………………………111

7.7 Summary ………………………………………………………………………………111

7.8 Reducing the Material Cost ……………………………………………………..112

7.9 Cost Reduction Techniques ………………………………………………………112

7.9.1 Wastage ………………………………………………………………113

7.9.2 Rejects ………………………………………………………………..113

7.9.3 Just-in-Time (JIT) Techniques …………………………………113

7.9.4 Reducing the Shot Weight………………………………………114

7.9.5 Use of Reprocessed Material ………………………………….115

7.10 Reduction of Part Volumes ………………………………………………………115

7.10.1 Large Diameter (Cavity Size) ………………………………….117

7.10.2 Smaller Diameter (Core Size) ………………………………….118

7.10.3 Depth …………………………………………………………………118

7.10.4 Calculating the Saving in Material …………………………..119

7.10.5 Procedure Summary ……………………………………………..120

7.10.5.1 For Cavities ………………………………………….120

7.10.5.2 For Cores …………………………………………….120

7.11 Summary ………………………………………………………………………………121

7.12 Effect of Blanking Off Impressions ……………………………………………121

7.12.1 Cycle Required to Achieve Original Profit Level ………..125

7.12.2 Cycle Required to Break Even ………………………………..126

7.12.3 Observations ……………………………………………………….126

7.12.4 Summary …………………………………………………………….127

7.13 Effect of Processing Parameters…………………………………………………127

7.13.1 Discussion …………………………………………………………..127

7.13.1.1 Original Cost Estimate …………………………..128

7.13.1.2 Experience ……………………………………………128

7.13.1.3 Information Provided …………………………….129

7.13.1.4 Discussion ……………………………………………129

7.13.1.5 Screw Forward Time ……………………………..130

7.13.1.6 Injection Speed ……………………………………..130

7.13.1.7 Screw Back Phase ………………………………….131

7.13.1.8 Melt Temperature ………………………………….131

7.13.1.9 Cooling Phase ……………………………………….131

7.13.1.10 Summary ……………………………………………..132

Maximum Metal Conditions and Operating Windows ………………………….135

8.1 Maximum Metal Conditions ……………………………………………………135

8.2 MMC Techniques …………………………………………………………………..136

8.2.1 Applying MMC to Cavity Dimensions …………………….136

8.2.2 Summary …………………………………………………………….138

8.3 Using MMC to Minimise the Moulding Weight …………………………..138

8.3.1 Observations ……………………………………………………….139

8.3.2 Summary …………………………………………………………….139

8.4 Achieving a Wide Operating Window (WOW) ……………………………140

8.4.1 Discussion …………………………………………………………..140

8.4.2 Factors Contributing to Narrow Operating Windows ..141

8.4.2.1 Mould Design ……………………………………….141

8.4.2.2 Mould Construction ………………………………142

8.4.2.3 Runner and Gate Geometry …………………….142

8.4.2.4 Cavity and Core Sizes …………………………….142

8.4.2.5 Cooling System ……………………………………..143

8.4.2.6 Materia ……………………………………………….143

8.4.2.7 Discussion ……………………………………………143

8.4.2.8 Observations ………………………………………..144

8.5 Achieving a Wide Operating Window ………………………………………..144

8.5.1 Mould Appraisal ………………………………………………….144

8.5.2 Sampling Procedures …………………………………………….145

8.5.3 Using MMC ………………………………………………………..145

8.5.4 Control ……………………………………………………………….145

8.5.5 Summary …………………………………………………………….146

The Cooling Cycle and Its Effect on Cost ……………………………………………147

9.1 Cooling Cycle ………………………………………………………………………..147

9.1.1 Safe Ejection ………………………………………………………..147

9.1.2 Minimising the Cooling Phase ………………………………..147

9.1.3 Observation …………………………………………………………148

9.2 Elements of Mould Temperature Control …………………………………..148

9.2.1 Amorphous Materials ……………………………………………148

9.2.2 Semi-crystalline Materials ………………………………………148

9.3 General Principles for Efficient Cooling ……………………………………..150

9.3.1 Observation …………………………………………………………150

9.4 Enthalpy Curves …………………………………………………………………….150

9.5 Calculating Water Channel Sizes ……………………………………………….151

9.6 Summary ………………………………………………………………………………154

The Loss Leader ……………………………………………………………………………..155

10.1 Discussion …………………………………………………………………………….155

10.2 Intentional Loss Leader Policy ………………………………………………….156

10.3 Unintentional Loss Leader ……………………………………………………….156

10.4 Discussion …………………………………………………………………………….156

10.5 Under-priced Jobs …………………………………………………………………..158

10.6 Observations …………………………………………………………………………160

10.7 Summary ………………………………………………………………………………160

The Estimating Function ………………………………………………………………….161

11.1 Background Required ……………………………………………………………..161

11.1.1 Plastic Material Properties ……………………………………..162

11.1.2 Toolmaking …………………………………………………………164

11.1.3 Injection Moulding ……………………………………………….166

11.1.4 Mould Design ………………………………………………………166

11.1.4.1 Two-plate Cold Runner Tool …………………..166

11.1.4.2 Hot Runner Mould ……………………………….167

11.1.4.3 Three-plate Tools …………………………………..169

11.1.4.4 Stack Moulds ……………………………………….171

11.1.4.5 Mechanical Engineering …………………………171

11.1.4.6 Basic Physics …………………………………………173

11.1.4.7 Basic Electronics ……………………………………173

11.1.4.8 Robotics ………………………………………………173

11.1.4.9 Moulding Machine Specifications …………….173

11.1.4.10 Understanding Engineering Drawings ……….174

11.4.1.11 Costing Techniques ………………………………..174

11.1.4.12 Jigs and Fixtures ……………………………………175

11.1.4.13 Packaging …………………………………………….175

11.1.4.14 Delivery Methods ………………………………….176

The Estimating Procedure …………………………………………………………………177

12.1 Information Required ……………………………………………………………..177

12.1.1 Estimating Checklist ……………………………………………..177

12.1.1.1 Engineering Drawing ……………………………..178

12.1.1.2 Part Suitability ………………………………………179

12.1.1.3 Materials ……………………………………………..180

12.1.1.4 Compounded Materials ………………………….180

12.1.1.5 Material Drying …………………………………….180

12.1.1.6 Material Colour ……………………………………181

12.1.1.7 Material Additives …………………………………181

12.1.1.8 Part Function ………………………………………..182

12.1.1.9 Tolerances ……………………………………………183

12.1.1.10 Finishes ……………………………………………….183

12.1.1.11 Number of Parts Required ………………………184

12.1.1.12 Number of Impressions ………………………….185

12.1.1.13 Type of Mould Tool ………………………………185

12.1.1.14 Machine Cycle ………………………………………185

12.1.1.15 Shot Weight ………………………………………….186

12.1.1.16 Machine Requirements …………………………..187

12.1.1.17 Gating …………………………………………………187

12.1.1.18 Mould Split Lines ………………………………….188

12.1.1.19 Ejection ……………………………………………….188

12.1.1.20 Robotics ………………………………………………189

12.1.1.21 Inserts ………………………………………………….189

12.1.1.22 Inspection/Quality Assurance ………………….190

12.1.1.23 Secondary Operations ……………………………190

12.1.1.24 Packaging …………………………………………….190

12.1.1.25 Delivery ……………………………………………….191

12.2 Using the Right Number of Impressions …………………………………….191

12.2.1 Quality versus Quantity ………………………………………..192

12.2.2 Appearance …………………………………………………………193

12.2.3 Part Geometry ……………………………………………………..193

12.2.4 Drawing Tolerances ………………………………………………193

12.2.5 Discussion …………………………………………………………..194

12.2.6 Summary …………………………………………………………….197

Estimating a Typical Job …………………………………………………………………..199

13.1 Estimate Example …………………………………………………………………..199

13.1.1 The Enquiry ………………………………………………………..199

13.1.2 Initial Evaluation ………………………………………………….200

13.1.2.1 Stage 1: Split Line Options ……………………..200

13.1.2.2 Stage 2: Gating Options …………………………200

13.1.2.3 Stage 3: Ejection Options ……………………….204

13.1.2.4 Stage 4: Resolving Outstanding Queries ……205

13.1.2.5 Stage 5: Customer Response ……………………207

13.1.2.6 Stage 6: Number of Impressions ………………208

13.1.2.7 Stage 7: Mould Layout …………………………..208

13.1.2.8 Stage 8: Calculating Material Weights ………210

13.1.2.9 Stage 9: Calculating the Projected Area …….211

13.1.2.10 Stage 10: Calculating the Locking Force ……212

13.1.2.11 Stage 11: Selecting the Machine ……………….214

13.1.2.12 Stage 12: Cycle Time ……………………………..214

13.1.2.13 Stage 13: Final Costing and Estimate ………..215

Estimating Mould Tool Costs ……………………………………………………………221

14.1 Universal Mould Costing Programs …………………………………………..221

14.1.1 Geographical Location ………………………………………….222

14.1.2 Work Loading ……………………………………………………..222

14.1.3 Plant Available …………………………………………………….223

14.1.3.1 General Trade Moulding Market ……………..224

14.1.3.2 Custom Moulding Market ………………………224

14.1.3.3 Specialist Moulding Market ……………………225

14.1.4 Customer Payment History ……………………………………225

14.1.5 Caution with New Customers ………………………………..225

14.1.6 Unfamiliar Mould Designs …………………………………….226

14.1.7 Degree of Difficulty ………………………………………………226