Assigning Raw Material Cost to an Entity

Cost Modeling: The cost of doing business can be broken down into fixed and variable costs. Fixed or overhead costs remain constant from period to period, regardless of the amount and type of entities processed or services provided. Examples of fixed cost include rent, utilities and salaries. Variable costs are costs that are only incurred when processing entities or providing services, the more entities produced or services provided, the greater the variable costs. It can be very useful to know what the average variable cost is for a given type of product or service. It can also be nice to know the average unit cost, which is the average variable cost per unit plus the average fixed cost per unit where the average fixed cost is calculated using activity-based costing allocation method.

Process Simulator allows the modeler to determine either average variable cost or average unit cost. Cost can be accrued that are either time based (e.g., time spent using a resource or undergoing an activity) or event based (e.g., they are incurred whenever an entity arrives or when a resource is used). Thus Process Simulator considers both time-based and event-based cost drivers. When building a model, cost can be assigned to arriving entities, to activity times, or to the duration or times that a particular resource is used. Additional costs can be added (or deducted) in any Logic Builder using the IncCost command. This gives you complete control over when and how much cost should be added during a simulation.

Situation: Assign a raw material cost to an entity, which is the initial cost of the entity as it begins processing.

Example: Castings are processed through an engine line to produce car engines. The initial cost of the casting is $78.

Solution: The initial cost of the Casting (in Entity Properties) is set to $78.

If you are new to Process Simulator, you will first want to view our "Process Simulator Lite" Tutorial, available here: http://www.promodel.com/services/training/PCS/LiteTutorial/8.2/LiteTutorial.html

The model used for this example, as well as all of the modeling "how-to" examples, can be found in the ProModel Solutions Café (http://www.promodel.com/solutionscafe/howto/).

This video is part of our Process Simulator "How To" series, and is designed to accompany instructions available in our Process Simulator Help system. For more information, click here: http://www.promodel.com/onlinehelp/processsimulator/82/Process_Simulator_Help... and click on "Modeling How-Tos"

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