The break even point is the number of items that need to be sold in order to repay Break even: the investment. For example: Whiz-Bang Pty Ltd makes a circuit for an electronically controlled slow combustion heater. It cost $60 000 to develop ready for production. Each unit costs $7.50. Hotshot Fires Pty Ltd buys them for $25. How many units need to be sold to cover the startup investment? $60 000 = 3429 units ($25.00-$7.50) In reality, break-even analysis can be more complex than this. Eg Not all the profit may go toward amortisation, costs may vary with quantity, there may be other uses for the circuit, cost differences between shifts, cost variations etc. 4.2 Economic Design Constraints Here are some pointers for keeping the cost of a manufactured product low: Keep the design simple Higher volumes are cheaper Minimise labour Use cheap materials Use standard components Use cheap manufacturing processes Keep to as few processes as possible Design for minimal costs after manufacture Avoid changes to the design once finalised 4.3 Design Checklist: Economic Factors The following for designing to save money are all competing against the pressure of safety, performance, appearance and reliability. They need to be read as follows: Without compromising on safety, performance, appearance or reliability ... Keep the design simple: Fewer parts, less moving parts, less motors or controlled mechanisms, smaller size. Don’t over-specify: Keep tolerances wide for easier production, trim down (sizes, welds, fasteners, components) minimise ratings, strengths, materials Higher volumes are cheaper: Aim for higher repetition, one type of design Minimise labour: Less assembly work, easier assembly, labour content as late as possible in the assembly (avoid having high value-added sub-assemblies sitting around, or scrapped by later mistakes)
Break even: The break even point is the number of items that need to be sold in order to repay the investment. For example: Whiz-Bang Pty Ltd makes a circuit for an electronically controlled slow combustion heater. It cost $60 000 to develop ready for production. Each unit costs $7.50. Hotshot Fires Pty Ltd buys them for $25. How many units need to be sold to cover the startup investment? $60 000 = 3429 units ($25.00-$7.50) In reality, break-even analysis can be more complex than this. Eg Not all the profit may go toward amortisation, costs may vary with quantity, there may be other uses for the circuit, cost differences between shifts, cost variations etc. 4.2 Economic Design Constraints Here are some pointers for keeping the cost of a manufactured product low: Keep the design simple Higher volumes are cheaper Minimise labour Use cheap materials Use standard components Use cheap manufacturing processes Keep to as few processes as possible Design for minimal costs after manufacture Avoid changes to the design once finalised 4.3 Design Checklist: Economic Factors The following for designing to save money are all competing against the pressure of safety, performance, appearance and reliability. They need to be read as follows: Without compromising on safety, performance, appearance or reliability ... Keep the design simple: Fewer parts, less moving parts, less motors or controlled mechanisms, smaller size. Don’t over-specify: Keep tolerances wide for easier production, trim down (sizes, welds, fasteners, components) minimise ratings, strengths, materials Higher volumes are cheaper: Aim for higher repetition, one type of design Minimise labour: Less assembly work, easier assembly, labour content as late as possible in the assembly (avoid having high value-added sub-assemblies sitting around, or scrapped by later mistakes)
EngDesConcepts.docx