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Cost Estimation in a Capacitated Environment

Cost Estimation in a Capacitated Environment

Mark Eklin, Yohanan Arzi, Avraham Shtub
ISBN13: 9781605669748|ISBN10: 1605669741|EISBN13: 9781605669755
DOI: 10.4018/978-1-60566-974-8.ch002
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MLA

Eklin, Mark, et al. "Cost Estimation in a Capacitated Environment." Innovations in Supply Chain Management for Information Systems: Novel Approaches, edited by John Wang, IGI Global, 2010, pp. 16-88. https://doi.org/10.4018/978-1-60566-974-8.ch002

APA

Eklin, M., Arzi, Y., & Shtub, A. (2010). Cost Estimation in a Capacitated Environment. In J. Wang (Ed.), Innovations in Supply Chain Management for Information Systems: Novel Approaches (pp. 16-88). IGI Global. https://doi.org/10.4018/978-1-60566-974-8.ch002

Chicago

Eklin, Mark, Yohanan Arzi, and Avraham Shtub. "Cost Estimation in a Capacitated Environment." In Innovations in Supply Chain Management for Information Systems: Novel Approaches, edited by John Wang, 16-88. Hershey, PA: IGI Global, 2010. https://doi.org/10.4018/978-1-60566-974-8.ch002

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Abstract

In this chapter we discuss rough-cut cost estimation in a capacitated made-to-order environment. We develop models that analyze the effects of shop workload, machine loading, and outsourcing decisions on product unit cost estimation. A comparative study of five alternative rough-cut cost estimation methods is presented. An activity based cost estimation model, which takes into account stochastic process characteristics as well as setup time, machine failures and product yields, was developed. The activity based cost estimation was found to perform better than the traditional cost estimation. We found that by taking into account the capacity and stochastic nature of the parameters, the cost estimation accuracy is improved significantly.

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