COST MODELING

The relative importance of cost and performance to various sectors of the composites market is shown in Figure 7.12.

Given the specific uses of composites as "materials-by-design," it does not make sense to compare costs derived from the fabrication of a structure from composites with one from traditional materials (unreinforced polymers, metals, etc.) on the basis of absolute as-fabricated costs, without taking into consideration other benefits. Costs need to be compared on the basis of total value added as delivered to the customer. This brings up the concept of "life-cycle-cost", i.e., the cost/benefit ratio as perceived by the customer over the entire lifetime of the product or structure. This is especially important for composites, where the initial cost estimates may be higher than those of the incumbent metallic structures, but offer a longer and higher performance commitment to the customer.


Figure 7.12. Cost-Benefit Plot (The areas may overlap and are not linear in correspondence.)

Table 7.3 gives a comparison of cost levels between metals and composites for various stages in fabrication and use. It is evident that if a comparison were made merely on the basis of material costs, composites would not win. However, their superiority is seen when their inherent advantages are used, such as their very low assembly costs (due to the high potential for parts consolidation), and their significantly lower life-cycle costs. It is thus essential that the accounting information system (AIS) used for advanced materials systems (as for any other rapidly advancing technology) be capable of giving information that correctly interprets cost versus value. Cost and accounting information should be such that decision makers can make projections on future costs of existing and immature, as well as new or modified technologies, based on assumptions about existing technologies. This emphasizes the use of an AIS for the purposes of both profitability and strategic planning. Using traditional costing approaches a large amount of work has been conducted by Krolewski (1989), Robinson (1991), Ramkumar (1991), and others. Economic models developed by investigators at MIT and Draper labs have provided detailed quantitative evaluation of costs, and emphasize the mistakes made in moving towards automation due to misleading indications of labor rates resulting from the mode of costing. In a recent development (Karbhari and Jones 1992), attempts are being made to use activity- based costing procedures to derive strategic cost information from a process rather than just accounting information which is of use in balancing budgets but not of use in design.

Table 7.3
Comparison of System Costs


Published: April 1994; WTEC Hyper-Librarian