Cost-Based Pricing

CHAPTER 3

Direct Material and Subcontract Costs

The starting point for estimating is, of course, the existing or prior bill of materials, a document that identifies the materials required to produce an item. The estimation of material and subcontract costs is significantly influenced by whether the product price being estimated has an established bill of materials or must be derived from an estimated bill of materials. Another fundamental concern is whether the item being priced is a product or a service. Generally, a bill of materials is not present for services because any purchases are incidental to production of the services.

MATERIAL QUANTITIES

The cost of materials and subcontracts consists of the quantities of goods and services to be ...