Environmental, social and economic challenges - EdexcelCost and manufacturing capability

The cost of making any new product is affected by many different elements, and consideration should be given to each of these during design:

• labour
• equipment and manufacturing processes
• materials, ie quality and finish
• energy
• overheads, eg rent, utilities, marketing, storage and business rates
• environmental, eg how much is recycled and reused and the disposal of any waste both during and at the end of production

From this consideration a designer can set a realistic price for their product. If the price doesn't cover the costs to produce it won’t be viable as businesses can only make a profit if the price charged covers the production costs.

Example

To make a batch of garden sheds, a joiner has these costs to consider:

• labour = 40 hours at £10.00 per hour = £400.00 per week
• energy for the workshop = £95.00 per week
• materials = £120.00 per shed

If one shed sells for £250.00, how many sheds need to be sold for the joiner to break even in one week?

Weekly costs = labour + energy

= £400.00 + £95.00 = £495.00

= £250.00 - £120.00 = £130.00

= 495 ÷ 130

= 3.8

Therefore, four sheds need to be sold to cover costs and show a small profit:

£130.00 × 4 = £520.00

£520.00 - £495.00 = £25.00

This yields a profit of £25.00 each week.