Should-cost calculator. Know the fair price first.
Should-cost is the price a well-run factory could reasonably charge for a part, built up from material, machine time, tooling, finishing, packaging, overhead and a fair margin. Enter your part's weight, material and cycle time and this calculator gives a should-cost per part and the gap to your current quote.
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Three steps. One clear answer.
- 01
Pick the material and production country, then check the indicative price per kg and machine rate against today's figures.
- 02
Enter net weight, yield, cycle time, tooling, finishing, packaging, overhead and margin.
- 03
Read the should-cost per part, what drives it, and how far your current quote sits above it per year.
Gross material = net weight ÷ yield; material cost = gross weight × price per kg. Conversion = machine and labour rate per hour × cycle time in minutes ÷ 60. Setup and tooling per part = cost per order ÷ order quantity. Overhead is a percentage of material, conversion, tooling, finishing and packaging; supplier margin is a percentage of that subtotal plus overhead. Should-cost = subtotal + overhead + margin. The gap to your quote = (quote − should-cost) ÷ should-cost, and the annual gap = (quote − should-cost) × annual volume. Material prices and hourly rates are indicative starting points for India, China and Vietnam; replace them with current figures for your grade and process.
Results are estimates to support your decisions. For binding figures, ask our team or your customs broker.
Straight answers.
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anirudh@sourcesquid.coWhat is a should-cost model?
A should-cost model estimates what a product ought to cost by adding up its material, conversion (machine and labour), tooling, finishing, packaging, overhead and profit. Buyers use it to set target prices and to negotiate on facts rather than percentages.
How accurate is a should-cost estimate?
With good inputs, a should-cost estimate is usually within 10 to 15% of a competitive quote. The biggest sources of error are cycle time and material yield, so ask the supplier for those two figures.
What overhead and margin should I assume for a supplier?
Overhead of 8 to 20% of cost and a margin of 8 to 15% are common for repeat industrial parts from Asian suppliers. New, complex or low-volume parts often carry more.
What is material yield?
Yield is net part weight as a share of the material bought. A part machined from bar may use only 50 to 70% of the material, a pressed part 70 to 85%, and an injection-moulded part 95% or more.
How do I use should-cost in a negotiation?
Share the structure, not a demand: show your estimate for each cost element and ask the supplier where their figures differ. Focus on the biggest element first, and agree to index material to a published price so both sides share market moves fairly.
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