Production or Procurement Cost

Production cost consists of:

• Investments to procure tooling and equipments to make components/systems
• Piece cost required to procure components/system (labor & materials)

Typically, the tooling costs are non-recurring and piece costs are recurring costs.

The production cost is the cost incurred by the manufacturer to produce the system and the procurement cost is the cost incurred by the customer to buy the system.

Typical production cost elements that should be considered during cost estimation process and where in the time continuum this cost occur are shown below.