• LMFFT4010B - Identify and calculate production costs

Identify and calculate production costs

This unit covers the competency to estimate materials, labour and time requirements and establish costs for the provision of products, including all overheads.



Elements and Performance Criteria



1. Gather information

1.1. Details of the particular product and competition products are obtained

1.2. Details of the proposed production operation are obtained and analysed

1.3. Labour unit cost projections are obtained and agreed

1.4. Logistic support contracts, supply agreements or equivalent are obtained and analysed

1.5. Details of proposed warehousing and physical distribution systems and related cost factors are obtained

1.6. Information is converted to usable form and stored ready for retrieval and application

2. Estimate materials and labour

2.1. Types and quantities of materials required for production are estimated and recorded

2.2. Time requirements for production activities and other lead times are estimated

2.3. Labour requirements for direct production and handling operations are estimated and recorded

3. Determine/calculate overheads

3.1. Components contributing to overhead costs are identified

3.2. Overhead costs to be attributed to work in accordance with commercial and enterprise procedures are identified

4. Calculate costs

4.1. Total materials costs and labour costs are calculated in accordance with enterprise procedures

4.2. Total production cost is calculated, including overheads and mark-up percentages

4.3. Final cost to customer is calculated in conjunction with marketing/sales personnel

5. Document details and verify where necessary

5.1. Details of costs and charges are documented in accordance with enterprise practice

5.2. Costs, calculations or other details are verified by other enterprise personnel, as required

5.3. Details are documented for future reference in accordance with enterprise practice

Required Skills

Required skills

research, collect, organise and understand information related to production costing including the relevant technical, commercial, industrial and accounting requirements

communicate ideas and information to enable clarification of the production and related requirements and to present the outcomes in an appropriate manner

plan and organise activities to avoid backtracking and re-working of solutions

work with others and in a team by recognising dependencies and using cooperative approaches to optimise workflow and productivity

use mathematical ideas and techniques to correctly estimate and validate labour, materials and on-costs and calculate production costs

create and apply systematic problem solving techniques to anticipate costing problems, avoid re-working and avoid wastage

use the workplace technology related to costing, including calculators and measuring devices and computing/computer-aided systems

Required knowledge

production systems documentation processes

enterprise costing procedures

mathematical formulae and processes relevant to costing

components of labour costs

enterprise/commercial approach to overhead costs

enterprise/commercial approaches to warehousing and physical distribution costs

enterprise information management processes, including storage requirements

Evidence Required

The Evidence Guide provides advice on assessment and must be read in conjunction with the performance criteria, required skills and knowledge, range statement and the Assessment Guidelines for the Training Package.

Critical aspects of evidence

Apply safety requirements throughout the work sequence, including the use of personal protective clothing and equipment

For a significant mass production operation, determine the production and product costs using the following or equivalent steps:

obtain all information relevant to the determination of costs

interpret plans, specifications and instructions for production and materials to be used

estimate quantities of materials required

determine the types and amount of labour required to complete the work

estimate time required to complete the work

determine/calculate overheads

document the process and outcomes

Work effectively with others

Resource implications

Access is required to real or appropriately simulated situations involving estimation and costing of production operations and products.

Access is required to specifications and costs of relevant equipment and materials and information on labour costs and availability, on costs, safety costs, regulations, quality standards, and enterprise procedures.

Access is required to all necessary facilities and associated equipment, including calculators, computers and relevant software.

Method of assessment

Assessment methods must confirm consistency or the potential for consistency of performance over time and in a range of workplace relevant contexts.

Assessment should be by direct observation of performance and samples of work outcomes and questioning on underpinning knowledge.

Assessment may be conducted over time and may be in conjunction with assessment of other units of competency.

Context of assessment

Assessment may occur on the job or in a simulated workplace facility with a relevant scenario, simulated work instructions and deadlines.

Range Statement

The range statement relates to the unit of competency as a whole. It allows for different work environments and situations that may affect performance. Bold italicised wording, if used in the performance criteria, is detailed below. Essential operating conditions that may be present with training and assessment (depending on the work situation, needs of the candidate, accessibility of the item, and local industry and regional contexts) may also be included.

Unit scope

Work involves the estimating and costing of production and products in a significant mass production environment

Work may involve referral of matters to other enterprise personnel

Unit context

OHS requirements include legislation, building codes, material safety management systems, hazardous substances and dangerous goods codes and safe operating procedures

Work is carried out in accordance with legislative obligations, environmental legislation, relevant health regulations, authorised handling procedures and organisation insurance requirements

Work requires individuals to demonstrate organisational and administrative ability, discretion, judgement and problem solving skills

Workplace environment

Work undertaken in accordance with established procedures involving a range of products, equipment and installation sites

Interaction with customers and other personnel from the operator's workplace

Use of relevant tools, equipment and resources, including:

measuring equipment

product sales literature

product samples

Overhead costs

Overheads may be calculated for a specific product or be a constant component based on historical records and may include such costs as rental/lease costs, utilities, non-production resources, depreciation of plant and equipment, warehousing margins, physical distribution unit costs, insurance and other costs incurred by doing business

Information and procedures

Enterprise production plan and schedule

Enterprise financial management policy and procedures

Enterprise policy and procedures for cost and apportioning overheads

Labour employment costs (awards, EBA, contracts)

Material/supply costs (contracts, standing agreements, market rates, warehousing margins)

Physical distribution contracts or arrangements

Australian, international and enterprise quality standards and procedures


Unit sector

Furnishing Technology

Employability Skills

This unit contains employability skills.

Licensing Information

Not applicable.