Should Cost Estimate Calculator

Work out should cost estimate instantly with clear inputs, formula shown and shareable results.

About Should Cost Estimate Calculator

Should-cost modelling builds a price from first principles: material, direct labour, a factory overhead recovery on labour, and a reasonable supplier margin. It gives a negotiating position grounded in the supplier's economics rather than in last year's price.

Formulas

Factory cost

Factory cost = Material + Labour + Overhead at 85% of labour

Should-cost price

Should cost = Factory cost / (1 - Supplier margin %)

Worked example

With the default values below, Should Cost Estimate Calculator returns Should-cost price of $2,070.00. Change any input above and every figure here is recalculated in your browser.

Inputs used

Material cost: 1,200
Labour minutes per unit: 42
Labour rate per hour: 480
Reasonable supplier margin: 12

Results

Should-cost price: $2,070.00
Factory cost: $1,821.60
Labour plus overhead: $621.60
Material share of factory cost: 65.88%

Step by step

1Values used
2Factory cost
3Should-cost price
4Should-cost price= 2,070.00
5Factory cost= 1,821.60
6Labour plus overhead= 621.60
7Material share of factory cost= 65.88

Assumptions and limits

The result is derived only from the 4 inputs listed above. Anything not among them is not part of the calculation.
In particular, this calculator does not take inflation, tax or compounding frequency into account.
Figures are rounded for display to 2 decimal places, so totals built from several rounded parts can differ slightly from the unrounded arithmetic.

How these calculators are built and tested is described on the Methodology page. If a figure looks wrong, please report it.

Frequently Asked Questions

Where do I get labour minutes and rates?

From process observation, teardown analysis of the part, and published regional wage data for the relevant manufacturing sector.

What if the supplier's price is far above should cost?

Ask them to walk through the difference. Either your model misses a real cost, or there is margin to negotiate — both outcomes are useful.