ABSTRACT
This chapter overviews cost recovery and estimating systems typically used by manufacturing organizations. The chapter begins by overviewing conventional manufacturing-cost estimating systems. Cost centers are described, as are types of costs and use of performance standards in making cost estimates. Conventional cost recovery systems are next described. In these systems direct labor is used as a recovery basis variable. Concepts of capital budgeting are introduced as are subsequent adjustments of obtained labor/overhead rates. Cost estimating may be described as the process by which a forecast of costs required to manufacture a product or complete a specified task can be made. The estimate consists of the costs of people, materials, methods, and management. Engineers have had historically a limited role in the cost estimating process. Few engineering curricula have formal courses on this subject. Good estimating skills require detailed knowledge of an organization’s product line, production facilities, and manufacturing processes.
