1. Introduction
In the manufacturing industry, the cost of tooling or molds can be a significant expense for producing new products. To reduce the burden of this cost, companies often choose to share the cost among multiple customers or projects. This is known as mold sharing or mold amortization. In this article, we will discuss what mold amortization is and how it works.
2. What is Mold Amortization?
Mold amortization is the process of dividing the cost of a mold or tooling among multiple customers or projects. Instead of one customer bearing the full cost of the mold, the cost is shared among several customers who use the same mold. The cost of the mold is divided based on the number of units produced by each customer.
3. How Does Mold Amortization Work?
When a company needs a new mold to produce a product, they can either purchase the mold outright or choose to share the cost with other customers. If they choose to share the cost, they will negotiate with other customers to determine the percentage of the mold cost that each customer will pay. This percentage is based on the estimated number of units that each customer will produce using the mold.
Once the mold is purchased, the cost is divided among the customers according to the agreed-upon percentages. As each customer produces units using the mold, they are charged a portion of the mold cost based on their production volume. This continues until the total cost of the mold has been paid off.
4. Conclusion
Mold amortization is an effective way for companies to reduce the cost of tooling or molds. By sharing the cost among multiple customers, each customer can benefit from the reduced cost while still being able to produce high-quality products. It is important for companies to carefully negotiate the terms of mold amortization to ensure that each customer pays a fair share of the cost based on their production volume.