The vocabulary of a manufacturing cost calculation.
Short, quotable definitions of the terms a should-cost is built from, and what each one gives you in ARCNM. One term per section. The first sentence is the definition.
Should-cost
A should-cost is the price a part ought to have when made with an efficient process at fair rates. It is computed bottom-up from material, cycle time, setup and overhead rather than taken from a supplier quote. If a supplier quote is higher, the breakdown shows line by line where the difference arises.
ARCNM computes it from the CAD model and the drawing. Every line of the should-cost names the operation and the parameter behind it.
Manufacturing cost (Herstellkosten)
Manufacturing cost (Herstellkosten) is material cost plus production cost. Material cost is direct material and material overhead. Production cost is direct labour, machine time, production overhead and special direct costs such as tooling. Together they are the cost-accounting basis of a unit price before sales overhead and margin.
ARCNM decomposes it per part into material, amortised setup, run labour, machine cost, tooling, subcontract steps and overhead. The lines always sum to the headline.
Machine-hour rate (Maschinenstundensatz)
The machine-hour rate is the cost of running one machine for one hour. It divides depreciation, imputed interest, floor space, energy and maintenance by the hours the machine is actually available. VDI 3258 lays out the method. The guideline is withdrawn but remains the shop-floor reference.
ARCNM prices every operation at the machine-hour rate of its machine class in your costing environment. The rate applies to the cycle and setup time ARCNM computed for the part. The operator's labour is a separate line.
Cycle time
Cycle time is the machine time needed to produce one part once the machine is set up. It covers cutting time, tool changes, rapid moves and handling per piece.
ARCNM returns the cycle time per operation. The time is computed, not read off a rate card. It comes from the part's geometry on the machine class in your costing environment.
Setup time
Setup time is the one-off time to prepare a machine for a batch. It covers fixturing, tool loading, program proving and the first-piece check. It is paid once per lot, regardless of quantity.
Setup amortises over the lot. That makes it the main reason a part's unit price falls with quantity. ARCNM prices the whole curve, so the effect is visible per quantity.
Lot-size curve
The lot-size curve is unit cost plotted against batch quantity. It falls as setup, tooling and order minimums amortise. It kinks where the economics change.
ARCNM returns the curve on a grid from 1 to 2,500 pieces. It names the machine chosen at each quantity and marks the optimum lot on an annual-total-cost basis. That total includes setup and holding cost.
Pre-calculation (Vorkalkulation)
A pre-calculation determines what a part will cost before it is made. It works from the drawing and model, the planned routing and standard rates. It prices a quote or sets a target cost.
ARCNM automates it. Routing, times and cost come from the CAD model and drawing. The same calculation re-runs when the environment or the drawing changes.
Routing (Arbeitsplan)
A routing lists the operations that make a part, in order. Each operation names its machine, setup time and cycle time. Secondary steps such as heat treatment and coating are part of it.
ARCNM derives the routing from the geometry and your fleet. It names each step with its DIN 8580 code and exports the routing alongside the cost.
Feature recognition
Feature recognition is the automatic identification of manufacturing features in a 3D model. Such features include holes, pockets, threads, bends, slots and bosses. Each feature can then be planned and timed.
ARCNM recognises the features of a STEP model and gives each one a stable ID. That way the same feature keeps its identity from one revision to the next. The same model always yields the same features.
PMI and GD&T
Product and manufacturing information (PMI) is everything a drawing states beyond geometry. It includes dimensions, tolerances, surface finish and treatments. GD&T (ISO 1101 / ASME Y14.5) is the geometric-tolerance subset of PMI.
ARCNM reads PMI from the PDF drawing or natively from STEP AP242. It binds each callout to the face it constrains. That way a tolerance is priced where it applies.
Design for manufacturing (DfM)
Design for manufacturing is the practice of shaping a part so it can be made reliably and cheaply. It avoids deep pockets, thin walls, unreachable features and tolerances the process cannot hold.
ARCNM flags DfM issues per feature with a severity and shows what each costs. So the trade-off is made in euros, not opinions.
Design to cost
Design to cost is developing a product against a cost target. Each design decision is priced while it is still open. So you do not wait for the first quote to discover the cost.
With ARCNM a designer re-costs the part after every change to tolerance, material or geometry. The designer sees the lot-size curve move.
Cost driver
A cost driver is the feature, parameter or decision responsible for a measurable share of a part's cost. Examples are a tight fit, a fifth setup, a hardened material or a small batch.
ARCNM ranks the drivers of every calculation with their share of the unit cost. Each driver comes with the direction that would reduce it.
Calibration
Calibration aligns a cost model to a specific plant, supplier or region from a set of known real costs. The model's absolute level then matches reality, while its structure stays physical.
In ARCNM you calibrate a costing environment from your own actuals. You post known real costs. Every later calculation in that environment then carries your price level. A confidence band says how well that level fits. A part's routing and times read the same before and after. Only the money changes.
Conformal prediction
Conformal prediction is a statistical method that turns a point estimate into an interval with a guaranteed coverage rate. The method does not assume a distribution. For example, a 90 % band contains the true cost nine times in ten.
Every calibrated environment in ARCNM comes with such a band, and it tightens as more real costs arrive.
Clean-sheet costing (cleansheet)
Clean-sheet costing builds a part's cost from zero. The building blocks are material, process steps, cycle times, machine rates, overhead and margin. The result shows what an efficient supplier would need to charge, independent of any quote on the table.
A should-cost from ARCNM is a clean sheet computed from the CAD model and drawing. It is not filled in by hand. So a buyer opens a negotiation with the bottom-up figure already itemised.
Target costing
Target costing sets the allowable cost of a part from the market price minus the required margin. The part is then designed and sourced to meet that cost. This is the mirror image of cost-plus pricing.
After every change, ARCNM gives the design and sourcing teams the current should-cost against that target. So the gap is known while the geometry, tolerances and material are still open.
Make-or-buy analysis
A make-or-buy analysis compares the cost of producing a part in-house with buying it from a supplier. Both are costed at the same quantity. The comparison includes setup, tooling, overhead and the supplier's lot minimums.
ARCNM runs the same part in an environment for each plant or supplier. It reports the winner per lot size, with the delta.
Cost breakdown (cost breakdown analysis)
A cost breakdown itemises a part's price line by line. The lines are material, machine time, labour, setup, tooling, subcontract steps, overhead and margin. Each line can then be challenged separately in a supplier negotiation.
Every ARCNM calculation returns this breakdown per lot size. Each line is tied to the operation, rate and parameter that produced it.
Bottom-up costing vs. parametric estimating
Bottom-up costing prices a part operation by operation from its geometry and routing. Parametric estimating regresses cost against a few descriptors, such as mass or envelope, from past parts. Bottom-up explains the number, parametric only estimates it.
ARCNM is bottom-up. Every calculation prices the part operation by operation from its geometry and routing. Calibration on your real costs sets the level for a plant or supplier. The number stays explained, line by line.
Material utilisation
Material utilisation is the ratio of the finished part's mass to the stock it is made from. The stock is a bar, blank, sheet nest or billet. The rest is bought, then cut away. It is often paid for a second time as machining time.
ARCNM prices the material from the stock the part actually consumes. That is the bar, blank or sheet, offcut included. So poor utilisation shows up as a named cost driver.
Workpiece material group (ISO 513)
A workpiece material group is a class of materials that machine alike. The same cutting data hold for every grade in the group. The groups are the ISO 513 letters, refined by composition and hardness band. P stands for steel, M for stainless steel and K for cast iron. N stands for non-ferrous metals and polymers, S for superalloys and titanium, H for hardened steel.
ARCNM maps each of its 536 catalogue grades to one of 62 such groups. A material you register yourself joins a group the same way. It is priced exactly like a catalogue grade.
Process capability (IT grade)
Process capability is how reliably a machine class holds a tolerance in normal production. Statistically, that is the Cp/Cpk index. In practice, it is the finest ISO 286 IT grade the class can hold. The same applies to geometric tolerance zones and surface roughness. A callout tighter than that forces a finer process or a scrap risk.
ARCNM checks every drawing tolerance against what the planned machine class can hold. Where a callout is tighter, the routing gains the finer step it needs, such as grinding. The routing names the callout that caused the step.
Manufacturing overhead
Manufacturing overhead is the cost of running the factory that no single part consumes directly. Examples are supervision, planning, quality and logistics. It is allocated to each part as a surcharge on its direct cost.
ARCNM carries the remaining production overhead (Rest-FGK) as its own line per part. The rate is set in the costing environment. Machine-dependent overhead sits in the machine-hour rate, so nothing is charged twice.
DIN 8580 manufacturing processes
DIN 8580 is the German standard that classifies every manufacturing process into six main groups. The main groups are primary shaping, forming, cutting, joining, coating and changing material properties. Each main group is subdivided into groups and subgroups down to the individual process.
Every operation ARCNM costs carries its DIN 8580 code on the routing. So a process plan exported to an ERP or PLM system uses the vocabulary the shop floor already speaks.
Costing environment
A costing environment is one complete set of costing assumptions for one plant, supplier or region. It covers the fleet, machine-hour rates, labour, material prices, subcontract rates, overhead and calibration.
In ARCNM a calculation always runs in one environment. Running the same part in several environments is the basis for make-or-buy, multi-plant sourcing and supplier comparison.
MCP server
An MCP server exposes an application's capabilities to AI assistants through the Model Context Protocol. An agent in Claude, ChatGPT, Cursor or a custom workflow can then call them as typed tools.
ARCNM's MCP server lets an agent upload and price a part and explain its cost. The agent can also rank the drivers, optimise the lot size and compare options. The server uses the same data as the REST API. Billing and credentials stay with people.
Frequently asked questions
What is a pre-calculation?
A pre-calculation determines what a part will cost before it is made. It works from the drawing and model, the planned routing and standard rates. It prices a quote or sets a target cost.
How do I calculate a machine-hour rate?
The machine-hour rate is the cost of running one machine for one hour. It divides depreciation, imputed interest, floor space, energy and maintenance by the hours the machine is actually available. VDI 3258 lays out the method. The guideline is withdrawn but remains the shop-floor reference.
What is a routing?
A routing lists the operations that make a part, in order. Each operation names its machine, setup time and cycle time. Secondary steps such as heat treatment and coating are part of it.
What is manufacturing cost?
Manufacturing cost (Herstellkosten) is material cost plus production cost. Material cost is direct material and material overhead. Production cost is direct labour, machine time, production overhead and special direct costs such as tooling. Together they are the cost-accounting basis of a unit price before sales overhead and margin.
How do I calculate manufacturing cost (Herstellkosten)?
Manufacturing cost is material cost plus production cost. Material cost is direct material plus material overhead. Production cost is labour, machine cost, production overhead and special direct costs such as tooling. ARCNM computes each line per part and lot size from the CAD model and the drawing.
How do I check a supplier quote for a drawing part?
Calculate the should-cost from the same CAD file and drawing the supplier received. Then compare line by line: material, setup, machine time and overhead. The largest gap shows where to negotiate.