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Elements and Performance Criteria

1. Gather and diagnose information
   • Obtain details of the particular product and competitors’ products.
   • Obtain and analyse details of proposed production operation.
   • Access information on labour unit cost projections.
   • Source and analyse details of logistic support contracts and supply agreements.
   • Access details of proposed warehousing, physical distribution systems and related cost factors.
   • Analyse all production cost factors for establishing supply cost.
2. Estimate materials and labour
   • Estimate and record types and quantities of material required for production.
   • Estimate and record lead times and time requirements for production activities.
   • Estimate and record labour requirements for direct production and handling operations.
3. Calculate and document production cost
   • Determine production components contributing to overhead costs.
   • Determine type and percentage of overhead costs to be attributed to production in line with commercial and organisational procedures.
   • Calculate material, labour and overhead costs to determine total production costs.
   • Apply mark-up, in line with organisational procedures, and determine supply cost in conjunction with marketing and sales personnel.
   • Document details of calculations and supply cost in line with organisational formats.
4. Check and document details of production and supply costs.
   • Check costs and calculations against production requirements.
   • Report calculation processes and organise checking by relevant personnel for final authorisation.
   • Complete and maintain accurate records of production and supply costs in line with organisational procedures.

Range Statement

Not Applicable

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Performance Evidence

A person demonstrating competency in this unit must satisfy all of the elements, performance criteria and foundation skills of this unit. If a specific volume or frequency is not stated below, then evidence must be provided that the following requirements have been performed on at least one occasion:

diagnose and calculate production costs for at least two product ranges selected from this list:

pallets

crates

trellises

stairs

doors

windows

frames

beams

roof trusses

floor systems

wall frames.

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Knowledge Evidence

A person competent in this unit must be able to demonstrate knowledge of:

competitors’ current products and services and price structure

sources of negotiated cost of supply, contractual arrangements and preferred supplier arrangements

sources of organisational costs for:

materials specific to production operations

labour unit costs specific to production operations

particular construction methods

complying with environmental protection practices

warehousing and distribution

business overheads and how overheads are applied to individual production operations

desired profit margins and appropriate commercial mark-ups to suit market acceptance

organisational procedures for documenting calculations, communicating costs to relevant personnel and maintaining records.

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