Exercise: Provide a quote with breakdown (price per piece).

- Your company produces aluminum headers. Located in Mexico city.

- Raw material type: Extruded Aluminum.
- Dimensions: 8.26 cms Large x 8.25 cms Width x 4 cms Height.
- Weight: 325 grams.
- Your customer located in Guatemala city requires 5.5 Million annual pieces, and
you have a safety stocking policy of 10% additional.
- INCOTERM: DAP Ciudad Hidalgo, Chiapas.
- 8 people used to fabricate one piece. 3 shifts per day (24 people).
- Tooling cost: 25,000 USD, to be amortized on the whole production lot.
- Daily production capacity: 18,673 pieces.
- Shipments required by customer: A weekly shipment.
- Your company works Mondays – Saturdays. Just for your reference you can
consider 4.5 active weeks/month.
- Quote required in USD (1 USD = 22 MXN).
- You have some material in stock purchased some months ago back on 2020.
Use the raw material price average from August 2019 to July 2020, as you have
some material in stock purchased during that time.
- Commonly you get a 20% profit on your products.
- No additional components are required on this piece.
- Raw material suggested source =
https://www.indexmundi.com/es/precios-de-mercado/?mercancia=aluminio&mes
 Example of breakdown
a) Please provide breakdown calculations.
b) Please provide unit price per piece.
c) If you need additional information you can assume it, but
please let me know what is the information you assumed.
d) Activity to be delivered in an Excel file (just one per team)
through CANVAS.
e) Additional hints:

a) Provide Price per unit in USD.

b) Material cost to be calculated based on the average
raw material prices from August 2019 – July 2020.
Take into account the part weight.
c) For processing cost, use the Daily Minimum Salary for
2022, and multiply by the total required # of workers
per day. Total cost should be divided by daily
production to get the labor portion per part.
d) No additional parts cost.
e) For packaging consider only a corrugated box and a
wooden pallet.
f) Amortize tooling cost in all the parts produced during
a year, including the additional parts required for
safety stock.
DAP (INSERT NAMED PLACE OF DESTINATION) INCOTERMS ® 2020

S = Seller
B = Buyer

• For this quoting exercise and in order to simplify calculations just consider
the following costs in your final Price per unit:

• Packaging.
• Freight charges to destination.
 Material Cost
• Material: Aluminum. Weight 325 gr per piece.
• Price average August 2019 – July 2020 = 1.664 USD/KG
• Price/325gr = 0.5410 USD/PC
 Processing Cost
• Annual Required Production = 5.5 M pcs
• Annual Required Production + 10% SS = 6,050,000 pcs
• Monthly Production = 504,167 pcs
• Weekly Production (4.5 weeks/month) = 112,038 pcs
• Daily Production (6 days per week) = 18,673 pcs
• Production / hours = 778 pcs (24 hours - 3 shifts – 8 hours each)
• Required Personnel per day = 24 persons.
* Personnel per shift* = 8
• Daily Minimum Salary DOF = 7.86 USD/ person (172.87 MXN/day)
• Total Daily direct labor = 188.59 USD (24 persons/day).
• Total Weekly direct labor = 1,131.51 USD (6 days a week).
• Daily Direct Labor / daily produced pieces = 0.01 USD (188.59 USD / 18,673 pcs).
a) Packaging Cost
 a) Packaging Cost
• L 490 x W 490 x H 300 mm (20” x 20” x 12”) –
- Cardboard size selected. Double Corrugated
• Approx recommended weight per box 70 Kgs
• https://es.uline.mx/Product/GuidedNav?t=184360&
dup=over
• 215 pcs/box (70 kgs / .325 kgs)
• 87 daily boxes (18,673 pcs / 215 pcs/box)
• Approximated Price / Box = 2.87 USD
• Daily cardboards spend = 249.69 USD (2.87 USD X
87)
• Daily cardboard spend /daily pieces = 0.0133 USD
(249.69 USD/ 18,673 pcs)
a) Packaging Cost

NMF-15 = Norma Internacional para Medidas

Fitosanitarias N° 15 que regula el embalaje de
madera utilizado en el comercio internacional y
que describe las medias fitosanitarias para
reducir el riesgo de introducción y/o dispersión de
plagas relacionadas con el embalaje de madera.
 a) Packaging Cost
- Considering an American pallet. Top view
- L 1,000 mm x W 1,200 mm

1m

- 4 cardboards placed through the skid.

- 3 Stacking levels = 12 boxes / skid = 2,580 pcs / pallet (12 boxes x 215 pcs/box) 1.2 m
- 215 pcs / box * 0.325 Kgs / piece = 70 Kgs / box
- 840 Kgs / pallet (70 kgs / box * 12 boxes). Maximum weight per pallet accepted = 1000 Kgs.
- 7.24 skids required daily (18,673 pcs / 2,580 pcs). Lot of skids for 6 days = 44~49 skids (~ Will get 50
instead)
- Approximated Pallet Price = $350 MXN (1 USD=22 MXN) = 15.91 USD / pallet.
- Total Investment on skids = 795.45 USD (15.91 USD * 50 skids)
- Packaging cost per Unit (box + skid) / piece = (795.45 USD/112,038 pcs + 0.0133 USD / cardboard) =
0.02039 USD
 a) Packaging Cost
- Considering this standard pallet.
- L 1,000 mm x W 1,200 mm
- Lateral view of the pallet.
- Pallet Height = 17cm (pallet) + 49cm (1st box)+ 49 cm (2nd box) + 49 cm (3rd box) = 1.64 M

1.64 m
 b) Freight Cost & Cubic Analysis
• Daily Production = 18,673 pcs
• Weekly Production (6 days a week) = 112,038 pcs (need to send all of these pieces in
one shipment)
• Considering a 53’ ft truck:
• Maximum authorized weight = 59,000 Kgs
• Width 2.52 m X Height 2.8 m X Length 16.15 m
 b) Freight Cost & Cubic Analysis
• 52 ft box view from the top.
• 32 skids on 1st stacking level (12 boxes per skid) = 384 boxes = 82,560 pcs
• 17 skids on 2nd stacking level (8 boxes per skid) = 136 boxes = 29,240 pcs

17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32
1.2 m

2.52 m
Width 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
1.2 m

Total pieces = 111,800

Length 16.15 m
Total boxes = 520
Total Skids = 49 * Need to ship 112,038 PCS. Send 2 additional boxes for the remaining parts (238 pcs)
 b) Freight Cost & Cubic Analysis
• Width 2.52 m X Height 2.8 m X Length 16.15 m
• 52 ft box lateral view
• 1st stack - Pallet Height = 17cm (pallet) + 49cm (1st level)+ 49 cm (2nd level) + 49 cm (3rd level) = 1.64 M
• 2nd stack – Pallet Height = 17cm (pallet) + 49cm (1st level) + 49 cm (2nd level) = 1.15 M
1.15 m

8 Pallets
2.8 m Height

1.64 m

16 Pallets

16.15 m Length
 b) Freight Cost & Cubic Analysis
• Weight/cont = 32 pallets on 1st level * 860 Kgs + 17 pallets on 2nd level * 580 Kgs) = 37,380 Kgs vs
59,000 kgs that are the limit.
• Distance between Mexico City & Ciudad Hidalgo, Chiapas = 1,188 Kms
• Approximated Cost per shipment = 4,500 USD (no insurance included) – 3.36 USD/KM approx.
• Total pieces / cont = 112,038 pcs
• Freight cost / piece = 0.0401 USD
 Tooling Costs
• Annual Required Production + 10% SS = 6,050,000 pcs
- Estimated Tooling investment = 25,000 USD
- Tooling cost / piece = 0.0041 USD

Parts Cost
- No additional components are required for the clamp.
Cost Break Down

Purchase price

0.5410 USD Material cost

: Material unit price x amount used
+

Processing cost
0.01 USD
: Processing time x ratio or rate
+

Parts cost
0.0000 USD
: Part unit price x quantity used
+

16.25 MXN

0.02039 USD transportation , packing : There are both existence or nonexistence

0.0401 USD costs

Die cost (When die cost is added to parts cost ： In general,

0.0041 USD four years amortized for new press dies, and
accuracy life volumes amortization for casting and
0.6156 USD forging dies)

0.1231 USD Profit/management cost

In general,
0.7387 USD : (Material cost + Processing cost + parts cost) x 20%