Short answer. The cost price of a production order is dynamic: material, processing times, setup times and hidden costs such as logistics and quality control together determine what an order really costs. Pre-calculation sets the price up front, post-calculation checks afterwards whether that was right. If you only do the post-calculation at the final settlement, the price is already fixed and you can no longer adjust anything.
You quote a price on the offer. Whether it was right is something you only find out once the order is finished and you put the actual costs next to it. By that time the price has already been agreed and delivered.
Why the cost price per order is so slippery
The cost price of a manufactured product is dynamic, with dozens of variables. Material and processing times are the familiar ones. The setup times, the programming and the resetting of the machine weigh heavily on the price per unit for single pieces or small batches, while for large batches the cycle time becomes the deciding factor.
If you calculate with a fixed rate and a rough estimate, your price happens to be right for one order and wrong for another. And you don't know which.
The hidden costs you forget
The biggest mistake is forgetting the hidden costs. Besides purchasing, logistical handling and quality control belong in the full cost price, and it is precisely those that are often skipped.
Those costs then disappear into a general pot instead of into the order where they belong. Your margin per order looks healthier than it is.
Pre-calculation and post-calculation belong together
Pre-calculation sets the price up front. Post-calculation checks afterwards whether it came out right, and makes the return at order level visible. One without the other leaves you rudderless: you quote prices without learning whether they were right.
The goal of calculation is twofold: a good price for the customer, and insight into what an order really delivered. That only works if you record actual hours, material and hidden costs per order, not as a total at the end of the month.
Where standard calculation falls short
Calculation software exists, and fits your process into it, so use it. The limit lies where your cost price has to follow your own routing, setup times and hidden costs, and where the actual figures come from separate sources (the shop floor, the planning, the purchasing) that do not come together.
The goal is a grip on your margin per order, with figures that are correct and less manual work. That is why I first go through your calculation process, because some assumptions have grown that way and can be sharper. What remains, a cost price and post-calculation that take your hidden costs and routing into account and run along per order, I build. This has to be calculated one way or another. The question is whether it cannot be done more smartly today than only at the final settlement. The same logic as with real margin per product and channel.
Frequently asked questions
How do I calculate the cost price per order?
By allocating material, processing times, setup times and hidden costs (logistics, quality control) to that specific order. For single pieces, setup times weigh heavily; for large batches the cycle time becomes the deciding factor.
What is the difference between pre- and post-calculation?
Pre-calculation sets the price up front based on estimated costs. Post-calculation compares the actual costs against that estimate afterwards, so you can see whether the order was profitable and your next calculations get sharper.
Which hidden costs do I often forget in my cost price?
Mainly logistical handling, quality control and setup times. These belong in the full cost price but are often skipped, which makes your margin per order look too rosy.
How do I know whether an order was profitable?
By putting the actual hours, material and hidden costs per order next to your pre-calculation once it is finished. That only works if you record those costs per order instead of as a total.
Further reading
- From quote to invoice you re-enter everything
- definitief_v12 turns out not to be current after all: how version chaos works
- Real margin per product, channel and supplier
I'm Ricardo Theijs of RNT Projects. With a background in enterprise process management, I build cost price and post-calculation logic that makes your actual costs per order visible. I'll tell you honestly when a standard package is enough.
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