The Chemical Connection: Getting the Best from Your Cupric Chloride Etchant
It’s Only Common Sense: The Dangers of Staying Stagnant in a Changing World
Dan’s Biz Bookshelf: ‘Born to Create’
Understanding Depreciation for Electronic Manufacturers
December 4, 2024 | Doug Palladino, ASC Sunstone CircuitsEstimated reading time: 1 minute
As a PCB design engineer, your focus is on creating innovative, cost-effective designs. However, the financial aspects behind your designs—such as depreciation—play a significant role in the overall business. While depreciation may sound like "accounting speak," understanding it can help you make better decisions for your projects, especially when dealing with equipment, machinery, or even intangible assets like software licenses. Most people don’t fully understand the meaning of depreciation, especially young engineers and designers entering the field, yet when it comes to calculating the total cost to manufacture or the total cost to operate, it is an important financial piece of the total manufacturing cost algorithm.
Here’s a breakdown of depreciation from a financial controller’s perspective, aimed at those less familiar with accounting.
Defining Depreciation
Depreciation is the process of allocating the cost of a tangible asset over its useful life. In other words, instead of recognizing the full equipment cost as an expense when purchased (e.g., a piece of equipment, a tool, or a machine), the expense is spread out over multiple years based on its expected useful life. This helps the financial reporting by preventing a large spike in expenses in the month the equipment was purchased.
For instance, if your company buys an $80,000 pick-and-place machine for PCB assembly that’s expected to last 10 years, you wouldn’t account for the entire $80,000 in the first year. Instead, you would record an expense of $8,000 each year over 10 years. This reflects how the machine is used to generate revenue over time.
To read this entire article, which appeared in the November 2024 issue of PCB007 Magazine, click here.
Share on:
Suggested Items
Case Study: PCB Design Flaws Affect Product Cost
12/03/2024 | Matt Stevenson, ASC SunstoneIn the rapidly evolving aerospace industry, precision and reliability are paramount. “AeroTech Solutions” (not the company’s real name), an aerospace company specializing in satellite technology, recently faced a significant challenge that tested its operational integrity: A flaw identified in the PCB design of its latest satellite model led to unexpected delays and cost overruns.
Subdued Electronics Industry Sentiment Continues in November
11/25/2024 | IPCIPC releases November 2024 Global Sentiment of the Electronics Manufacturing Supply Chain report
Process Yield Statistics and Distributions
11/25/2024 | Dr. Pat Valentine, UyemuraThe costs of poor quality include all expenses incurred for not making or providing a perfect product the first time, including scrap, rework, re-purchasing raw materials, labor, and inventory. Companies operating at a three-sigma quality level can spend about 25% of their annual sales remediating poor quality costs. Other estimates put the costs of poor quality in the range of 25–40%. Poor quality can destroy a company.
PCB007 Magazine: November 2024—Engineering Economics
11/18/2024 | I-Connect007 Editorial TeamThe real cost to manufacture a PCB encompasses everything that goes into making the product: the materials and other value-added supplies, machine and personnel costs, and most importantly, your quality. A hard look at real costs seems wholly appropriate.
Marcy's Musings: Engineering Economics
11/19/2024 | Marcy LaRont -- Column: Marcy's MusingsThe real cost to manufacture a PCB, sometimes referred to as the "loaded cost," encompasses everything that goes into making the product: the materials and other value-added supplies, machine and personnel costs, and most importantly, your quality. Happy Holden calls it "Engineering Economics," and dedicated a chapter in his book, 24 Essential Skills for Engineers, to the subject.