Daily Archives: 15-December-2015

A Couple of Cost Versus Run Rate Examples

I spend a fair amount of time estimating the cost of electronic components with different purchase quantities. In earlier posts, I showed how component cost quotes often reduce by ~7 % per doubling of quantity purchased. In this post, I will present quotes from two different vendors for the same part (normalized to preserve confidentiality). The component quotes from each vendor reduced by 3.6% per doubling of quantity purchased, which differs significantly from my 7% rule. While each vendor had different costs, their rates of variation with purchase quantity were identical. As I thought about these quotes, their deviation from what I usually see made sense. Continue reading

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