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3 Cost Estimation
Pages 24-37

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From page 24...
... cost of decreasing fuel consump and capital; tion includes not only changes in manufacturing costs but also • Judgments about the changes in other vehicle compoany induced changes in indirect costs and profit. nents required to implement a given technology; Most methods for estimating manufacturing costs begin • Definitions of "manufacturing cost" and what items are by identifying specific changes in vehicle components or included in it; and designs, and they then develop individual cost estimates for • Assessments of the impacts of technologies on indirect each affected item.
From page 25...
... Manufacturing cost estimates gencost reductions occur over time.
From page 26...
... chaser. A key issue for cost estimates based on Tier 1 Variable manufacturing costs of components include ma supplier costs is the appropriate markup to RPE.
From page 27...
... . relatively expensive metals whose prices can be volatile, If supplier cost estimates truly represent fully learned significantly impacting manufacturing costs.
From page 28...
... report on the CAFE standards; trucks was based on structural and design considerations • The NESCCAF (2004) study on reducing light-duty vehicle greenhouse gas emissions; • The California Air Resources Board study in support 5 Not only the progress ratio, but also the assumed initial cumulative of its greenhouse gas regulations; production (or threshold volume)
From page 29...
... key issues are, therefore, the accuracy of the supplier price Unit costs are composed of direct manufacturing costs (mateestimates and the accuracy of the markup factor(s)
From page 30...
... B-10. Figure 3-1.eps low-resolution bitmap Net Component/Assembly Cost Impact To OEM = + + Total Manufacturing Mark -up Cost Packaging Cost Cost = = Raw Material In Process Scrap End Item Scrap Material + Purchased Parts + Sell, General & Administrative Direct Labor Costs + Indirect Labor Labor Maintenance, Repair, Other Profit + Fringe + Engineering, Design Manufacturing and Testing/R&D Overhead/Burden FIGURE 3.2 Unit cost model.
From page 31...
... uses total markup on manufacturing costs is just over 20 percent. markup factors ranging from 10.3 percent to 17.7 percent, Figure 3.4 shows the same total cost broken down by engine depending on the complexity of the component (Table 3.4)
From page 32...
... Figure 3-4.eps bitmap RETAIL PRICE EQUIVALENT MARKUP FACTORS which may or may not induce other changes in the cost of manufacturing. These integration costs can be substantial for Markup factors relating component costs to RPE add major components, such as engines, or when, as is more often significantly to the estimated costs of automotive technolo the case than not, many changes are made simultaneously.
From page 33...
... This can have a very large impact on dealer costs, including profit, amount to about 4 percent of the appropriate RPE of a given fuel economy technology. manufacturing costs, not considering any dealer incentives Some studies use a single, average RPE markup factor (e.g., provided by OEMs.
From page 34...
... One notable difference is that the cerns that markup factors on piece or supplier costs tended estimates shown in Table 3.6 attempt to exclude legacy health to overestimate the costs of most fuel economy technologies: care costs, estimated at 45 percent of total health care costs, "Our first preference is to make an explicit estimate of all which in turn were estimated to be 3 percent of fully burindirect costs rather than rely on general markup factors" dened manufacturing costs. This would lower the estimated (EPA, 2008b, slide 4)
From page 35...
... existing transmission but does require redesign and TABLE 3.7 Weighted Industry Average RPE Components reintegration with other components. Omitting Return on Capital • Differential innovation involves significant changes Cost Contributor Light Car Industry Average in the core concepts of vehicle components, as well as Production Overhead their integration.
From page 36...
... Presenta amortization, a reasonable average RPE markup factor is tion to Committee on Assessment of Technologies for Improving Light2.0. In applying such markup factors, it is essential that the Duty Vehicle Fuel Economy, January 25, Detroit, Mich.
From page 37...
... 2008b. The use of markup factors to estimate indirect costs.


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