Light Duty Technology Cost Analysis, Power - US Environmental ...

For this cost analysis study, four (4) mark-up sub-categories are used in determining an
overall mark-up rate: (1) end-item scrap allowance, (2) SG&A expenses, (3) profit, and
(4) ED&T/R&D expenses. Additional details for each subcategory are discussed
following.
The layout of the Mark-up Database is similar to the Manufacturing Overhead Database
in that the first tier of the Mark-up Database is arranged by the primary manufacturing
process groups (e.g., thermoplastic processing, thermoset processing, casting, etc.). The
second tier subdivides the primary manufacturing process groups into primary processing
equipment groups (e.g., thermoplastic processing is subdivided into injection molding,
blow or rotational molding, and pressure or vacuum form molding). The third and final
tier of the database increases the resolution of the primary processing equipment groups
and defines the applicable mark-up rates. Similar to the overhead manufacturing rates,
size and complexity of the parts being manufactured will direct the process and
equipment requirements, as well as investments. This, in turn, will have a direct
correlation to mark-up rates.
C.4.5.2 Mark-up Rate Contributors and Calculations
Mark-up, in general, is an added allowance to the Total Manufacturing Cost to cover enditem
scrap, SG&A, profit and ED&T expenses. The following are additional details on
what is included in each mark-up category:
End-Item Scrap Mark-up is an added allowance to cover the projected manufacturing fallout
and/or rework costs associated with producing a particular component or assembly.
In addition, any costs associated with in-process destructive testing of a component or
assembly are covered by this allowance. As a starting point, scrap allowances were
estimated to be between 0.3% and 0.7% of the TMC within each primary manufacturing
processing group The actual assigned value for each category is an estimate based on size
and complexity of the primary processing equipment as shown in Table C-1.
When published industry data or consultation with an industry expert improves estimate
accuracy for scrap allowance associated with a generic manufacturing process (e.g., 5%
for sand casting, investment casting), the Mark-up Database is updated accordingly. In
cases where the manufacturing process is considered generic, but the component
performance requirements drive a higher fall-out rate (e.g., 25% combined process fallout
on turbocharger turbine wheels), then the scrap mark-up rate would only be adjusted in
the Manufacturing Assumption Quote Summary (MAQS) worksheet.
Selling, General, and Administrative (SG&A) Mark-up is also referred to as corporate
overhead or non-manufacturing overhead costs. Some of the more common cost elements
of SG&A are:
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