Cost Accounting question

[ebarker]

The purpose of the cost accounting rules are to keep the playing field level.

If someone for some crazy purpose decided to sell a $12,000 gizmo on ebay for $50 and had only one to sell, and you bought it, you would have to use a basis of $12,000 for the part, not $50, in order to comply with the rules.

That is because every team can not go out and by one off the shelf. It isn't fair if you somehow lucked out and got the magic part and no one else could buy it.

And I'm ignoring the fact here that a $12K part isn't legal because it exceeds financial limits. I'm just making the extreme example to demonstrate 'cost basis'.

Now if you went out and bought $50 worth of sand and potash and stuff and melted it down into a pot and made two pieces of super optical glass and rubbed them together until you had yourself a mirror that was worthy of the Hubble telescope and would really be worth $12,000,000, then it would be legal to have a cost basis of $50. Your labor is free, it is a fab part.

To be compliant with the rules of the contest and fair and gracious, you can certainly buy your titanium off of ebay for nickels to save money. But in the cost accounting you need to treat it as though you bought it from a retail supplier. The same thing goes if someone gave you a pile of aluminum, etc.

[AdamHeard]

Originally Posted by ebarker

The purpose of the cost accounting rules are to keep the playing field level.

If someone for some crazy purpose decided to sell a $12,000 gizmo on ebay for $50 and had only one to sell, and you bought it, you would have to use a basis of $12,000 for the part, not $50, in order to comply with the rules.

That is because every team can not go out and by one off the shelf. It isn't fair if you somehow lucked out and got the magic part and no one else could buy it.

And I'm ignoring the fact here that a $12K part isn't legal because it exceeds financial limits. I'm just making the extreme example to demonstrate 'cost basis'.

Now if you went out and bought $50 worth of sand and potash and stuff and melted it down into a pot and made two pieces of super optical glass and rubbed them together until you had yourself a mirror that was worthy of the Hubble telescope and would really be worth $12,000,000, then it would be legal to have a cost basis of $50. Your labor is free, it is a fab part.

To be compliant with the rules of the contest and fair and gracious, you can certainly buy your titanium off of ebay for nickels to save money. But in the cost accounting you need to treat it as though you bought it from a retail supplier. The same thing goes if someone gave you a pile of aluminum, etc.

But a piece of scrap 1" aluminum plate that's roughly a square foot could be found pretty commonly... Maybe not in the *exact* same dimensions but it certainly is pretty equivalent; that is a lot more in the gray area than someone simply slashing the price on something. Scrap has a pretty uniform price ($2-4 per pound for aluminum usually from metal supplier scrap bins from what I've seen.... Not the same on ebay, but close enough).

[Cory]

Originally Posted by AdamHeard

But a piece of scrap 1" aluminum plate that's roughly a square foot could be found pretty commonly... Maybe not in the *exact* same dimensions but it certainly is pretty equivalent; that is a lot more in the gray area than someone simply slashing the price on something. Scrap has a pretty uniform price ($2-4 per pound for aluminum usually from metal supplier scrap bins from what I've seen.... Not the same on ebay, but close enough).

I think the idea is that it has to be a COTS item.

From Section 8.3.4.4:

"The purchase price of a COTS item offered for sale by a VENDOR to any customer."

Farther down it refers to prorating raw materials to the smallest commonly sold unit, which is also relevant.

What I interpret this to mean is that if you get it off ebay (or if someone gave you a discount, which is essentially the same thing as buying it off ebay) you have to account for the lowest price the same size, or closest larger sized plate would cost from a vendor (note the definition of vendor--ie: an ebay seller cannot, in most cases, be considered a vendor) such as McMaster, Metal Supermarkets, etc.

$0.02

[ebarker]

Let's look at this another way. As a practical matter, it is unlikely that a team is going to get any where near their regulated cost limits from buying aluminum.

You can go to a site like
http://www.metalsdepot.com/
and figure out the cost of metal. Then calculate the amount that you actually used on the robot on a per item basis. That is from rule <R51>

So if you go buy some titanium off of ebay for 10 bucks and the material is worth 250, but you only used a fifth of the material, then your cost basis it 50 bucks, even though it cost you only 10 bucks.

If you manage to use 3,500 bucks worth of titanium on a robot I'd like to see a picture of that.

My $ 0.0001

Ed

[Kevin Sevcik]

Originally Posted by ebarker

You can go to a site like
http://www.metalsdepot.com/
and figure out the cost of metal. Then calculate the amount that you actually used on the robot on a per item basis. That is from rule <R51>

So if you go buy some titanium off of ebay for 10 bucks and the material is worth 250, but you only used a fifth of the material, then your cost basis it 50 bucks, even though it cost you only 10 bucks.

Ed,
I think you're right on about the cost accounting for buying off ebay. If the ebayer doesn't qualify as a VENDOR (and I don't think any do) then the correct thing to do is cost your part based on a price from McMaster or another VENDOR.

Please be careful about your advice about pro-rating. There was a discussion prior to last season about this and (I believe) the consensus was that you could prorate down to the smallest commercially available amount. This is opposed to your example of only using 1/5th of the price if you use 1/5th of the material. The appropriate example is that if you use 6" of a 3 foot length of titanium that usually costs $250, then you could prorate to the cost of a 1' length (assuming a 1' length is the smallest amount you could find).

This makes more sense when you're talking about things that really don't come in arbitrary amounts like, say, tubs of exotic resin for carbon fiber. If the smallest commercially available amount is a 50 gallon drum, it doesn't matter if you only use 2 ounces.

[ebarker]

I went and read the thread that you referred to.

I would have to agree with the comments made there that the cost is higher of the following:

a) the minimum unit cost
b) the material actually used.

so if you used a half a square foot of material, but the minimum buy is a foot, then the cost is for the foot.
if you used 3 square foot then that will be the cost because it is greater than the minimum buy of one foot

So I agree with your comments on pro-rating after thinking about it.

It would be good if they clarified the rules on pro-rating as I'm not sure that it is clear enough.

The one cool thing about metalsdepot is they have some fairly small sized materials, so that helps with the minimum buy.

Ed

[AdamHeard]

Well... there is a metal supply nearby called M&K metal, they are rather large and definitely meet the definition of a vendor. They also happen to be the place with a scrap bin I was talking about; So, a vendor is selling it now, does that make a difference? Or should I just leave it be?

[Kevin Sevcik]

... The whole point is that another team should be able to get the same thing for the same price. Not almost the same thing, etc. You can always bring it up at the beginning of next year, of course, but the GDC usually insists that salvage and donated materials still have to be accounted for at retail price.

[kawelch]

The guideline I use for accounting is...what would it cost for the GDC to build an exact replica of my robot. This assumes that the have no donated materials and have to pay retail for everything. They also only by the bare minimum of materials regardless of long term savings. This may not be a perfect interpretaion but I think it honors the intend and spirit of the rule.

So when in doubt... what would they have to pay for it in NH...or CA..or KS? (Whereever you aren't)