# What You Need to Know about Cost Per Part

Knowing your cost per part is critical to ensuring your machine shop is operating efficiently. But how do you calculate this?

## Total fixed costs + Total variable costs ÷ Total units produced

Here is a simple equation to calculate cost per part.

Fixed costs include things like building rent, insurance for employees, and other overhead costs. These are costs that do not increase or decrease based on other activities. Variable costs, however, do change based on production volume or services provided. Variable costs include things such as direct materials. Dividing these two combined costs by the total units produced should give you an accurate cost per part.

Let’s look at an example:

\$30,000 Fixed costs + \$50,000 variable costs ÷ 10,000 units = \$8 cost per unit

If you are not carefully monitoring your cost per part, you may develop an inaccurate understanding of your facility’s profitability. Having an accurate understanding of your cost per part will ensure that you are making smart decisions for your business.

## Several other things to consider when evaluating and calculating your cost per part:

• Number of parts produced per minute, hour or day.
• Cost of perishable tooling
• Labor costs
• Uptime of your machine tool
• In process gauging
• Cost or percentage of scrap parts produced
• Cost of energy used

## Other factors that can affect your ability to make parts efficiently:

• Capability of the machine tool
• Workholding fixture design
• Automation to allow for less reliance on an operator to load and unload parts.

Perishable tooling cost is also very important. Specifically with inserts, the following are some factors that allow you to remove material faster or allow the tooling to last longer:

• Coatings
• Rake angles
• New substrates that the insert is made from
• Overall new, constantly improving designs

## Have you considered how the geometric alignment of your machine tool is affecting your throughput, along with your perishable tool cost?

• Have you checked your machine to be sure that it is still level?
• This can change over time as the machine settles or even can change with a substandard foundation.

Acoem geometric laser machine tools can help you optimize your machine’s alignment. Machine accuracy and repeatability are important to your machine’s throughput. When calculated over weeks or months, the cost of producing scrap parts and machine downtime are critical to your bottom line. Ultimately, these steps will affect your customer’s satisfaction and on-time delivery.

Let our Acoem laser tools help you to keep you machines in alignment and maximize your uptime.

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by Acoem contributor | September 6, 2022
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