Graphic Arts Budgeting & Cost Estimation Guide

Posted on Oct 26, 2024 in Economy

Management Fees and Budget Development in Graphic Arts

4.1 Budget Objectives

The main objective of the budget is to provide a reliable and accurate estimate of production costs. This includes material costs, subcontracting expenses, and the overall cost of labor. The production cost should be as economical as possible for the workshop and its business environment. The budget department must understand the production sequence and available resources to determine the most economically viable approach.

The first step in budgeting is defining the work process. This requires information about the processes involved in the project. Accurate data on time, hourly costs, and equipment characteristics is crucial. Real costs are essential for ensuring a realistic margin, even if you choose not to win a particular job (http://momento.se). Costing should prioritize the ability to choose which jobs to pursue.

4.2 Budgeting Systems

A company’s default budgeting system determines job pricing. Often, various budgeting methods are combined depending on the product. All systems must use data reflecting the company’s reality, not just “market prices.” Different budgeting methods include:

  • By nutrition
  • Depending on work performance
  • After work completion
  • Systems with paper or other
  • As competitive prices
  • Based on previous work
  • List price
  • Cost estimates (manual or computerized)

The most accurate budgeting system, with proper preparation, is cost estimation.

4.3 Cost Estimates

The cost and budget department resides within the engineering department. Key terms:

  • Costs: Quantifiable material costs (paper), external costs, and internal production costs (requiring timetables, transaction costs, and schedules for each section).
  • Hourly cost per operation: Derived from the proper use of equipment, based on real data, not fictitious information. Cost analysis considers the hourly operating cost of machines and other contributing elements.
  • Budget: Pricing all research operations based on process time, features, and cost schedules. Budgeting considerations include material costs, client costs, suppliers, computerized information gathering and processing, production sequences, production itself, and drawing conclusions to improve costs.

4.4 Budgeting System for Estimating Costs

Study the work and identify realistic production methods.

Calculation structure:

  1. Cost of labor = (number of operations x cost per operation x time in hours) + material + external operations. Hourly rates may vary depending on machinery, processes, or personnel.
  2. Budgets for clients must cover expenses and include profit.
  3. Sometimes, budgets use values similar to competitors to maximize jobs.
  4. Always track the deviation between budgeted and actual costs.
  5. Areas, Centers, and Sub-centers: Three areas exist: Functional (company-wide costs), Structural (non-productive departments), and Production (production departments). Centers within the Structural area include Administration, Storage, and Business Department. The Production area includes Prepress, Printing, and Finishes. Sub-centers exist only in Production areas, representing individual machines or workstations (e.g., offset machine, scanner).
  6. Personnel can be direct (involved in the work) or indirect (in structural and functional areas).
  7. To calculate hourly cost, consider: Sub-center, Area, Hours worked per sub-center, Installed electrical power per sub-center, Printable area per pass, Work volume per sub-center, Production per sub-center, Expenses of indirect personnel, Energy consumption, and Consumption in the center.

4.5 Company Expenses

  1. Fixed costs (not directly related to production): Salaries (functional area), Office materials and other consumption, Depreciation and rentals, and Taxes.
  2. Variable expenses (related to graphic production): Production salaries, Materials and consumables, Repairs, Electricity, and Other.

4.6 Classification of Hours and Impact on Hourly Cost

  • Presence hours: Total personnel time in the sub-center. Includes:
    • Effective hours: Billable uptime. Excludes unexpected time (e.g., plate change). Includes:
      • Preparation hours (not actual production)
      • Production hours (actual production, e.g., printing, finishing)
    • Non-effective hours: Not billable. Due to inefficiency or normal company operations. Includes:
      • Functional hours (maintenance, training)
      • Stoppage hours (inefficiencies, errors, power failures)

The goal is to maximize production hours.

4.7 Representing these Aspects

While manual calculations are possible, spreadsheets (Excel, Lotus) are recommended. Structure the company by departments, areas, and sub-centers in the table’s rows. Expenses and other information go in the first column. Include information for allocating indirect expenses, such as effective hours, installed electrical power, and production capacity per sub-center. Allocate costs to functional, structural, and production areas. Differentiate between indirect and direct costs. Include overhead for prepress, printing, and finishing. Detailed cost descriptions are essential.

4.8 Distribution of Non-Production Costs

Allocate non-production costs based on effective hours, power consumption, and productivity indices. Distribute administration costs among sub-centers based on total costs.

4.9 Obtaining Production Department Costs

Divide allocated costs by billable hours. In some cases (e.g., imagesetter), determine cost per product (e.g., film surface). Example provided for calculating film cost.

4.10 Standard Production Times

Production cost calculation structure:

(Standard Production Time x Price/Time) + (for all operations) + Material Cost + External Work Price + Benefits = Selling Price

Standard production time is the time required for a specific task, influenced by machinery, staff quality, and machinery usage. Steps for determining standard production time are outlined.