Do DFMA results include profit?

The result of an analysis in our DFMA software is an estimate of the direct manufacturing costs and overhead with no allowance for profit included in the software's estimates. Some of our software users are interested in estimating the price of a purchased component and do end up adding a profit allowance to their analyses. Typically, this is done in one of two ways. Some users use a custom defined library operation to add a fixed percentage to the manufacturing cost of the analyzed item. Other users look at part manufacturing as though they are renting a supplier's labor and machinery at so many dollars per hour and profit is included in those hourly rates. These users would increase the material, labor, and machine rates within the software by a fixed percentage to account for profit.

The fixed percentage used in making these adjustments can vary quite a bit depending on the items purchased and your company. However, some of our customers have engaged in negotiations with suppliers and have agreed upon profit percentages in the neighborhood of 15 to 20 percent.

Last edited: Monday, 28 March 2005