# Break Even Point Calculation - PowerPoint by vhx13074

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```									Costs
Fixed Costs               Those where amounts can not be
changed in the short run (e.g. building
mortgage, building heat, equipment,
insurance costs, bond interest)…

Variable Costs              Costs whose total amount goes
up or down when volume goes up or
down (also called - direct costs,
incremental costs, or marginal costs), (e.g.
raw materials, shielding gas, electrodes,
some energy costs, labor)
Opportunity Costs

Profits which a foregone choice of action would have
earned but which are lost because another choice is made.
    A person who keeps money in a mattress incurs
opportunity costs - loss of interest - because of the decision
    VW introduced rabbit - sold out immediately - loss
opportunity cost of several million dollars because not enough
supply
    Cabbage Patch Kids
    Tickle-me Elmo
    Time value of money
Time Value of Money                   \$1 on hand today is
worth more than \$1 in future by
amount of interest it could earn
Future Value of Present Money (with interest
compounded)
Example
fu  pr (1  i)n                     You have \$100 and can
invest it at 10% per year
fu  future  value                  and invest for 3 years:
pr  present amount              fu  100 (1  0.1)3  133 .10
i  int erest decimal
Therefore, the opportunity
n  number  periods                cost of not investing is
\$33.10
Sunk Cost

a) Money lost in bad investments (e.g.
plant abandoned before production)
b) Money tied up in a plant where it could
have earned higher return on some other venture.
BREAK EVEN ANALYSIS

P x Q = F + (V x Q)             →   Q = F/(P-V)
P = price per unit
Q = quantity
F = fixed costs
V = variable costs per unit
BREAK EVEN ANALYSIS

P x Q = F + (V x Q)             →   Q = F/(P-V)
P = price per unit            P=\$100
Q = quantity                F=\$20,000/mo
F = fixed costs              V=\$80
V = variable costs per unit

Example
We are making all welded bicycles. They sell at
\$100/bike. Material and labor costs are \$80 per unit.
Equipment and building mortgage per month is \$20,000.
What is the break-even quantity which must be sold each
month?
Q = \$20,000/(\$100 - \$80)
Q = 1000 units

Amount by which the selling price/unit exceeds the variable costs/unit:

Contribution = (P-V)
P=\$100
F=\$20,000/mo
V=\$80

Contribution = \$20

Contribution offsets fixed costs until 1000 units are sold
(break-even point).
Profit begins after break-even point.
CALCULATION CONSIDERING DESIRED PROFIT

Q = (F + desired profit) / (P - V)

In our example, if we           P=\$100
want to make \$5000 profit:         F=\$20,000/mo
V=\$80
Q = (20,000 + 5,000) / (100 - 80) = 1250 units

CALCULATION CONSIDERING TAX

Q = {F + (desired profit)/(1- tax rate)}/(P-V)
If the tax rate is 40%
Q = {20,000 + 5000/(1-0.4)} / (100 - 80) = 1417 units
CONTRIBUTION RATIO

CR = {(P-V) X 100} / P
P=\$100
F=\$20,000/mo   CR = {(100-80) X 100} / 100 = 20%
V=\$80

Comparing contribution ratios of various
products we produce allows us to select the
items to “push” in sales.
Cost of Welding                 Cost of Weldment
(\$/ft) Cost
incurred to make a weld                       (\$/piece) Cost
(includes joint prep,            incurred to make entire
consumables, labor,              structure (includes all of
overhead, pre- & post-weld       above plus summation of all
treatment, etc.)                 the weldments and raw
 Used to compare cost           material costs)
advantages of weld vs. Other      Used to bid on a welding
manufacturing processes          job
 Used to decide on the most
cost effective joint design or
most cost effective welding
process to use
 Used as a basis for
investment in new automated
equipment
Welding Procedure
This is the starting point for cost
estimating. Procedure should include:
 Joint details
 Welding process
 Type of filler
 Type of gas/fluxes
 Welding current
 Position (operator factor)
 Travel speed
 Post weld treatment
INDIVIDUAL PART OF
ESTIMATE
(Look at each item individually)
   Cost of Joint Prep
   Cost of Materials (Consumables)
   Cost of Materials (Flux & Shielding)
   Labor Costs
   Power Costs
   Post Weld Costs
INDIVIDUAL PART OF
ESTIMATE
(Look at each item individually)
    Cost of Joint Prep
    Cost of Materials (Consumables)


Cost of Materials (Flux & Shielding)
Labor Costs                                 COST OF JOINT PREPARATION
    Power Costs
    Post Weld Costs

Methods of Joint Prep                                Machined Joints - (most
expensive)
Flame or Plasma Cut Joints
Square Butt w/o Surface Prep -
(least several joint
A) Do cost analysis on expensive) designs to minimize joint prep
cost:
Note:        If a non-prequalified joint is used, you may incur the
B) Trade off reduced costs to prepare joint with amount of weld
metal to fill joint.
Example: A submerged arc joint can be flame cut (inexpensive)
but may require a lot of weld metal to fill the joint (expensive). {see
“cost of welding”}
INDIVIDUAL PART OF
ESTIMATE
(Look at each item individually)
    Cost of Joint Prep
    Cost of Materials (Consumables)
    Cost of Materials (Flux & Shielding)
    Labor Costs
    Power Costs
    Post Weld Costs

COST OF MATERIALS (CONSUMABLES)
Procedure
a)           Calculate the theoretical weight of weld metal
required to fill the weld joint
b)           Calculate the weight of filler actually
consumed (spatter etc. included)
1) Estimating Losses
2) Automated Method
c)           Calculate the electrode costs
INDIVIDUAL PART OF                                                      a) Calculate the theoretical weight of weld
ESTIMATE                                                                 metal          required to fill the weld joint
(Look at each item individually)


Cost of Joint Prep
Cost of Materials (Consumables)
Calculation of Theoretical    b) Calculate the weight of filler actually
consumed       (spatter etc. included)
1) Estimating


Cost of Materials (Flux & Shielding)
Labor Costs                            Weight of Deposit            Losses
2) Automated
    Power Costs
    Post Weld Costs                                                     Method
    Overhead Costs                                                       c) Calculate the electrode costs

Wt Weld (lb/ft) = CSA (in2) * density (lbs/in3) * 12 (in/ft)
Wt Weldment (lbs) = Wt Weld (lb/ft) * Total ft of weld (ft)

+              =
INDIVIDUAL PART OF                                                               Calculate the theoretical weight of weld metal
ESTIMATE                                    Calculation of Weight of Filler                     required to fill the weld joint
(Look at each item individually)                                                Calculate the weight of filler actually


Cost of Joint Prep
Cost of Materials (Consumables)
Metal Actually Consumed:           consumed         (spatter etc. included)
    Cost of Materials (Flux & Shielding)
1) Estimating
    Labor Costs                                                               Losses


Power Costs
Post Weld Costs
“Estimating Losses”              Method
2) Automated

    Overhead Costs                                                                Calculate the electrode costs

Electrode Losses                                          Electrode Filler Metal Yield
(SUM)                                                           Covered Electrode
Stub Losses                                   SMAW 14” manual = 55-65% yield
  14” with 2” stub = 14% loss                       SMAW 18” manual = 60-70% yield
  18” with 2” stub = 11% loss                           SMAW 28” automatic = 65-75% yield
  28” with 2” stub = 7% loss                        • Solid Bare Electrode For
    Submerged arc = 95-100% yield
Coating or Slag Losses                                 Electroslag = 95-100% yield
  Thinner coating E6010 = 10%                           GMAW = 90-95% yield
loss                                                      Cold Wire = 100
  Heavy coating E7024 = 50%                         Tubular-flux Cored Electrodes For
loss                                                      Flux Cored Arc Welding = 80-85% yield
    Cold Wire = 100%
Spatter Losses
  Depends on technique, usually
= 5-15% loss
Wt Weldment (lbs) = total wt deposit (lbs) / (1- total electrode loss)
or
Wt Weldment (lbs) = total wt deposit (lbs) / {filler metal yield (%) / 100}
INDIVIDUAL PART OF                                                          Calculate the theoretical weight of weld metal
ESTIMATE                                                                                   required to fill the weld joint

(Look at each item individually)
Cost of Joint Prep                     Calculation of Weight of           Calculate the weight of filler actually
consumed         (spatter etc. included)
    Cost of Materials (Consumables)
    Cost of Materials (Flux & Shielding)   Filler Metal Actually         Losses
1) Estimating
    Labor Costs


Power Costs
Post Weld Costs
Consumed:                Method
2) Automated


“Automated Method”
Overhead Costs                                                           Calculate the electrode costs

Determine Wire Feed Speed From Graphs                        Determine length of wire per
weight (in/lb) - From Table
(Example at right)
 Knowing type of wire
 Knowing type of wire
Knowing diameter of wire
 Knowing diameter of
wire
 Knowing operating
current
Determine Hours of Run
(Operation)
 Use shift time if continuous
weld, or
 Hours = feet of weld (ft) /
travel speed (ipm) * 60 (min/hr) *
1/12 (ft/in)

Wt Weldment (lbs)={wire feed (ipm) * Hrs of Run * 60 (min/hr)}/wire per wt (in/lb)
INDIVIDUAL PART OF                                                 Calculate the theoretical weight of weld metal
ESTIMATE                                                                          required to fill the weld joint


(Look at each item individually)
Cost of Joint Prep
Cost of Materials (Consumables)
Calculation of            Calculate the weight of filler actually
consumed         (spatter etc. included)
    Cost of Materials (Flux & Shielding)
1) Estimating


Labor Costs
Power Costs
Electrode Cost       Losses
2) Automated
    Post Weld Costs                                             Method
    Overhead Costs                                                  Calculate the electrode costs

Weld Electrode Cost (\$/ft) = {elect price (\$/lb) * Wt Weld (lb/ft)}/filler yield (%)

Weldment Electrode Cost (\$) = elect price (\$/lb) * Wt Weldment (lbs)
INDIVIDUAL PART OF
ESTIMATE

COST OF MATERIALS
(Look at each item individually)
    Cost of Joint Prep
    Cost of Materials (Consumables)


Cost of Materials (Flux & Shielding)
Labor Costs
(FLUX AND SHIELDING)
    Power Costs
    Post Weld Costs

Calculation of Flux Costs

Flux Ratio
Sub Arc = 1-1.5 (approx. 1 lb flux/ 1 lb wire)
Electroslag = 0.05-0.10

Weld Flux Cost (\$/ft)=flux price (\$/lb) * Wt Weld (lb/ft) * flux ratio
Weldment Flux Cost (\$)=Weld Flux Cost (\$/ft) * feet of weld

Calculation of Shielding gas and Backing gas Costs
Gas Cost (\$/ft)={gas price (\$/ft3)*flow rate (ft3/hr)}/{Travel (ipm)
*1/12(ft/in)*60(min/hr)
Weldment Gas Cost (\$) = Weld Gas Cost (\$/ft) * feet of weld
Or
= {Gas price (\$/ft3) * flow rate (ft3/hr) * weld time (min)} /
60 (min/hr)

Calculation of Miscellaneous Costs
Guide tubes    Studs / Ferrules   Spot-weld electrode
INDIVIDUAL PART OF
ESTIMATE
(Look at each item individually)


Cost of Joint Prep
Cost of Materials (Consumables)
COST OF LABOR
    Cost of Materials (Flux & Shielding)   (single greatest factor in


Labor Costs
Power Costs
total cost of weldment)
    Post Weld Costs

Operator Factor: percent of time that a
welder is actually making a useful weld.
 Semi-automatic and automatic plants
have higher operator factors
 Field welding / construction work with
small welds in scattered locations have low
operator factor
 Welding in the flat position has higher
operator factor than horizontal, vertical,
1. Faster travel speed
2. Fewer defects / fewer repairs
 Use of fixtures, positioners, and
handling equipment increases operator
factor
 Slag chipping, electrode changes,
moving from joint to joint all reduce
operator factor
INDIVIDUAL PART OF
ESTIMATE
(Look at each item individually)


Cost of Joint Prep
Cost of Materials (Consumables)
COST OF LABOR
    Cost of Materials (Flux & Shielding)   (single greatest factor in


Labor Costs
Power Costs
total cost of weldment)
    Post Weld Costs

Deposition Rate
(function of process and current)
 See graph attached, or
 Deposition rate (lb/hr)={wire speed
(in/min)*60(ipm)}/{wire per wt (in/lb)*filler yield
(%)/100}

Weld Labor (\$/ft)={welder pay (\$/hr)*Wt Weld (lb/ft)}/
{deposit rate (lb/hr)*OpFact(%)/100}
INDIVIDUAL PART OF
ESTIMATE
(Look at each item individually)


Cost of Joint Prep
Cost of Materials (Consumables)        COST OF POWER DURING
WELDING
    Cost of Materials (Flux & Shielding)
    Labor Costs
    Power Costs
    Post Weld Costs

Local Power Rate (\$/kWh) includes:

 Energy charge
 Taxes
 Demand charge (time of day)
 Power factor penalty
Power Source Efficiency (%)
See machine performance curves (see
attached)

Weld Power Cost (\$/ft)={local power rate (\$/kWh)*volts*amps*Wt Weld (lb/ft)}/
{1000*dep rate (lb/hr)*OpFact (%)*PowSource Eff (%)}
INDIVIDUAL PART OF
ESTIMATE
(Look at each item individually)
    Cost of Joint Prep
    Cost of Materials (Consumables)
    Cost of Materials (Flux & Shielding)
    Labor Costs
    Power Costs
    Post Weld Costs

 Salaries: executives, supervisors, inspectors
maintenance people, janitor, etc. (those costs which can
Final Machining                    not charge directly to weldment costs)
Grinding/Polishing                  Rent / Depreciation of plant
Heat Treating                       Taxes
Shot Blasting                       Maintenance supplies and costs
 Utilities (not charged to weldment) i.e. light, plant
Straightening                      heat, etc.
Inspection                          Employee benefits
 Insurance

{dep rate (lb/hr)*OpFact (%)}

Overhead costs are usually apportioned pro rata among all work
going through the plant and the overhead rate assigned.
Welding Cost - Per Foot Analysis
Cost of Joint Prep (\$/ft)
Cost of Weld Metal
Flux Cost
Gas Cost
Misc. guide tubes etc.
Labor Cost (\$/ft)
Power Costs
Welding Cost - Per Piece Analysis
Base Material Cost (\$/pc)
TOTAL
Cost of Joint Prep
Cost of Weld Metal
Flux Cost
Gas Cost
Misc. guide tubes etc.
Labor Cost (\$/pc)
Power Cost
Post Weld Costs