Costing aircraft components
A British Aerospace case study

Page 1: Introduction

When we think about the cost of an aircraft, we tend to think of the cost of buying the product rather than the costs of running it! British Aerospace’s service to the customer does not stop at the aircraft acquisition stage, when the aeroplane is sold to the customer. If anything, this is when the customer relationship begins.This case study focuses upon the processes involved in costing...
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Page 2: Life-cycle cost analysis

The other cost reduction technique is Life Cycle Cost Analysis to influence design. To avoid products being developed with a low acquisition cost but high operation and support costs, or vice versa, life cycle cost analysis considers the full cost of ownership of the products in the engineering and decision making process, to establish the correct balance of acquisition and in-service cost, whilst...
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Page 3: Pricing

The Commercial directorate within Military Aircraft Division is responsible for the generation of sales campaigns, preparation of contracts, contract negotiation, contract administration, production of estimates and pricing analysis, as well as the preparation and management of industrial collaboration and offset strategies. As the commercial environment becomes increasingly competitive, the...
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Page 4: Labour costs

The planned method of manufacture, known as the process and mini statement of work, will form the basis of the labour cost. It will initially be generated in man-hours. This activity is undertaken via the Work Measurement Group who are part of the Production Engineering Department. Their task is to measure in man hours, the length of time required to complete the activity identified in each of the...
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Page 5: Other costs

Material scrap values - The allowance for scrap is usually estimated by referring to historical level of spend incurred. The introduction of Statistical Process Concept (SPC) should change this. The SPC approach is based on the prevention concept. Critical product characteristics are monitored during the manufacturing process. Excessive variation due to changing process elements such as tool...
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Page 6: Conclusion

Cost is the term used to describe the consumption of money. This case study provides a detailed analysis which identifies how information about costs are extracted from a business to produce a price for a customer. The use of costs in this way is necessary to provide information for control and decision making activities by senior management.
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