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Indirect Cost in Should Cost Calculations - How Carmaker's Cost Engineers See It

Author

Listed:
  • Remo Rossi

    (Mendel University in Brno, Czech Republic)

  • David Hampel

    (Mendel University in Brno, Czech Republic)

Abstract

In a world of intense competition, automotive manufacturers are continually increasing their outsourcing activities and, as a result, automotive companies have built extensive cost engineering departments within their organisations. Staff in these units provide Should Cost Calculations for externally manufactured components, which are utilized as supplier targets to support buyers in fact-based negotiations. This paper aims to explore potential differences in the direct and indirect cost categories in the context of Should Cost Calculations. Based on a sample survey among cost engineers, it was possible to determine differences in cost knowledge, risk of suppliers concealing unjustified costs, level of analytical detail, and suitability to conduct fact-based negotiations depending on the length of job experience, industry, and especially the type of costs. The evaluation is carried out through analysis of variance, and a contingency table homogeneity test, and the results are presented using correspondence maps. The results show significant differences between the direct and indirect cost categories, including a higher risk of cost hiding and a lower suitability for price negotiations for the indirect cost category.

Suggested Citation

  • Remo Rossi & David Hampel, 2024. "Indirect Cost in Should Cost Calculations - How Carmaker's Cost Engineers See It," European Journal of Business Science and Technology, Mendel University in Brno, Faculty of Business and Economics, vol. 10(1), pages 96-106.
    • Handle: RePEc:men:journl:v:10:y:2024:i:1:p:96-106
    DOI: 10.11118/ejobsat.2024.006
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    References listed on IDEAS

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    1. Lorenzo-Seva, Urbano & van de Velden, Michel & Kiers, Henk A. L., 2009. "CAR: A MATLAB Package to Compute Correspondence Analysis with Rotations," Journal of Statistical Software, Foundation for Open Access Statistics, vol. 31(i08).
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    More about this item

    Keywords

    analysis of variance; automotive industry; correspondence analysis; cost engineering; direct cost; indirect cost; questionnaire survey; Should Cost Calculation;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L62 - Industrial Organization - - Industry Studies: Manufacturing - - - Automobiles; Other Transportation Equipment; Related Parts and Equipment

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