The formula
parts = Σ (qty in one × that part’s rate) per piece = parts + consumables + (minutes ÷ 60 × hour rate)
The whole difference from material costing is the first line. You are not converting a size into a weight and a weight into money. You are adding up things that already have their own price, because every part is a product in its own right.
Worked example: one hydraulic hose kit, 1.5 metres
- Hose 1/2 in, 1.5 m at ₹182 per metre → ₹273.00
- Female JIC end fitting × 1 at ₹96.00 → ₹96.00
- Male NPT end fitting × 1 at ₹88.50 → ₹88.50
- Ferrule × 2 at ₹24.75 → ₹49.50
- Parts: 273.00 + 96.00 + 88.50 + 49.50 = ₹507.00
- Consumables: 8 g of grease at ₹240/kg = ₹1.92, plus 0.08 m of sleeve at ₹35/m = ₹2.80 → ₹4.72
- Labour: 6 minutes ÷ 60 × ₹300 per hour = ₹30.00
- Cost to build one: 507.00 + 4.72 + 30.00 = ₹541.72
Prices here are illustrative. The shape of the sum is the point. Notice that the hose entered by the metre inside a kit that is sold by the piece, and that the same hose keeps being sold by the metre off the same rack on the same day.
What counts as a part and what does not
- A part: the bearing, the motor, the castor wheel, the metre of hose, the litre of oil you fill it with
- A consumable: the gum, the strapping, the label, the carton. Too small to be worth its own product record and too real to leave out.
- A shape: the rib on the body, the hole through the flange, the chamfer. It has no life outside the piece it belongs to.
The test takes one second. Can you hold that piece in your hand, keep it on a rack and sell it on its own? Then it is a part and your product is an assembly. If it only exists as a feature of one moulding, it is a shape and your product is drawn.
Where the number goes wrong in real factories
- The kit is priced at last year’s parts. Bearings went up in March and the kit rate has not moved since. Each part should carry its own dated rate so the kit re-prices itself the day one part changes.
- Labour hidden inside an overhead percentage. Six minutes at the bench is ₹30 whether the kit costs ₹500 or ₹5,000, and a percentage gets both of them wrong.
- The same part counted twice. If the kit is stocked as a kit and its parts are also stocked, only one of the two can be sold. Parts must leave the rack when the kit is built.
- A part spoiled at the bench treated as a reject of the kit. A fitting crushed while crimping is a part you paid for and did not sell. Count it apart from a kit that failed testing.
- The spare is not in any list. The customer who bought the machine wants one bearing three years later, and that bearing was never a product of its own. In a parts list it always was.
Kits inside kits
A pump set is built from a pump, a motor, a base frame and fasteners. The pump is itself built from an impeller, a shaft, a seal and a casing. Nothing new is needed for the second level. The pump has a cost because its own parts have costs, and the pump set reads that cost the way it reads the price of a bought bolt.
Questions people also ask
What is a BOM and is it the same as a recipe?
A bill of materials is the list of what one piece is built from. It plays the same role as a compound recipe, with one difference that changes everything downstream. A recipe names materials, a parts list names products, and a product has stock, a rate history and a life of its own as a spare.
How do you price an assembled product for a customer?
Build the cost per piece first, then add your margin to that number rather than to a remembered old price. The value of doing it this way is that the day a supplier raises one fitting, every kit that uses it tells you the new floor without anyone rebuilding a sheet.
Can a part be measured in metres, kilos or litres instead of pieces?
Yes, and it should be. The hose enters the kit as 1.5 metres and the oil as 0.4 litres. Both are the same products that sell by the metre and by the litre from the same stock, so building a kit simply takes that much off the rack.
Do I need a different parts list for each finish or size?
Usually not. One parts list can serve every variant when only a few parts change with the finish, and each variant then prices itself from the parts it actually takes.
Stop calculating this by hand
Aakar One does this arithmetic for every product and every size, then carries the result into the quote, the job card, stock and GST. Manufacturing ERP with CAD built in, made in India.