Work out should cost estimate instantly with clear inputs, formula shown and shareable results.
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.
Factory cost
Factory cost = Material + Labour + Overhead at 85% of labour
Should-cost price
Should cost = Factory cost / (1 - Supplier margin %)
From process observation, teardown analysis of the part, and published regional wage data for the relevant manufacturing sector.
Ask them to walk through the difference. Either your model misses a real cost, or there is margin to negotiate — both outcomes are useful.