business senarios advanced

Scenario 3          15/10/15    Product and Price

Following your conversation with Bill you have realised that you need to think seriously about your product. You have had some advice from an experienced engineering manager who told you.


“In designing an engineering product the project engineer must also be able to cost it. He/she must ensure that when it is manufactured there will be sufficient margin above the direct costs of assembly, labour and bought in materials to pay for the indirect employees and overheads of the company as well as generate a profit. The project engineer should be able to calculate a minimum selling price for the new product that will meet these criteria………… Remember that in the real world, selling price bears no relation to production cost, it is the market that ultimately sets the price it is prepared to pay for a product.”                                                                                    (A Lamming)


So how much will your product cost to produce?

How can you minimise production costs?


Learning Outcomes

Following this PBL cycle you should be able to:


  • Explain what is meant by the terms
    • minimum selling price
    • margin
    • overheads
    • indirect labour
  • Calculate the costs associated with materials and assembly of your product.
  • Discuss the contribution of ‘overheads’ to product cost.
  • Discuss methods for assessing the cost of overheads for your product.
  • Explain the contribution of fixed costs and variable costs and their relationship with production volume and unit production cost.



Library Catalogue

Engineering Management (Mazda, Addison Wesley) or similar




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