ABSTRACT
Cost estimation is often confused with costing. Cost estimation is one of the important facets of manufacturing costing. It plays a vital role in production planning and planning of operations. While estimates are arrived at prior to actual production, cost estimation offers a window into the different costs that are likely to be encountered during manufacturing. This chapter considers the different types of cost estimates. Five types of cost estimates are commonly used. They are overall factor method, material cost method, function method, cost indexes, and cost capacity method. The overall factor method can also be used to estimate the cost of a plant. The total cost of the plant can be estimated by using the equation for the factor method. The following methods are commonly used to improve business profitability: raise selling price per unit of product, increase the volume of sales, optimize the product mix, and minimize cost per unit of product.
