### APPENDIX B. TEC HNICAL DESCRIPTION OF THE REVERSE ENGINEERING COST ESTIMATION METHODOLOGY

B.l TABLE OF CONTENTS INTRODUCTION ................................................... B.1-1 B.2 TEAR-DOWNS ..................................................... B.1-1 B.2.1 General Tear-Down Practice

..................................... B.1-1 B.2.2 Specific Product Class Features

................................... B.1-2 B.2.3 Weight Confirmation of Tear-down Results ......................... B.1-2 B.2.4 Final Confirmation of Tear-down Results ........................... B.1-2 B.2.5 General Tear-down Practice of "Hypothetical" Units .................. B.1-3 

### B.3 CREATING THE TEAR-DOWN BILL OF MATERIALS .................. B.1-4 B.4 ADDITIONAL PRODUCTION COST DATA ............................ B.1-5 B.4.1 Labor and Factory Overhead .................................... B.1-5 B.4.2 Depreciation

................................................. B.l-5 B.4.3 Parts and Materials

.......................................... B.1-6 

### B.5 STRUCTURE OF THE COST MODELS ............................... B.1-11 B.5.1 Main Cost Model ............................................. B.1-12 B.6 SENSITIVITY ANALYSIS RESULTS ................................. B.1-16 LIST OF TABLES Table B.2.1 Specific Features for Each Product Class ........................... B.1-2 Table B.4.1 Material Costs for Low-Bound, 5-Year Average, and High-Bound

Scenarios .................................................... B.l-7



### LIST OF FIGURES Figure B.3.1 Sample Bill of Materials ........................................ B.B-5 Figure B.5.1 Cost Model Structure .......................................... B.B-12 Figure B.5.2 Sample of Global Controls Sheet ................................. B.B-13 Figure B.5.3 Subassembly Breakdown ....................................... B.B-13 Figure B.5.4 Site Table Spreadsheet ......................................... B.B-14 Figure B.5.5 Components Sheet ............................................ B.B-14 Figure B.5.6 In-house Fabrication Process .................................... B.B-15 Figure B.5.7 Raw Materials Sheet .......................................... B.B-15 Figure B.6.1 Standard Deviations of Manufacturing Costs ....................... B.B-17

### APPENDIX B. TECHNICAL DESCRIPTION OF THE REVERSE ENGINEERING COST ESTIMATION METHODOLOGY

B.1 INTRODUCTION The manufacturing cost estimation methodology-"reverse engineering"-is a detailed, component

-focused, activity

-based technique for rigorously estimating the manufacturing cost of a product

. It considers direct materials , direct labor, and plant overhead costs. This appendix describes the technical aspects of the approach as applied to residential furnaces and boilers. Refer to Chapter 6 of this Technical Support Document (TSD) for more information on assumptions and context.

B.2 TEAR-DOWNS The first step in the reverse engineering process was to perform tear-downs on equipment samples that are typical of today's furnaces and boilers

. A tear-down is a thorough disassembly of the equipment followed by a detailed inspection of the parts and subassemblies

. The level of resources allocated to different product classes and the unit selection process are described in Chapter 6.
B.2.1 General Tear-Down Practice Representative minimum, medium , and high-efficiency units were disassembled for many product classes, as discussed in Chapter 6. The Department of Energy (DOE) attempted to perform the disassembly in reverse of the actual assembly process ; the bill of materials (BOM) reflects the order of these operations

. From observations of industry practices , DOE assumed that major sub-assemblies arrive pre-assembled at the final assembly line.

### There were a few cases where individual manufacturer practices differed from industrywide practices, but the cost impact of these differences is within the tolerances of the analysis. First, sub

-assembly allocation practices varies between manufacturers

- for example, some stage sub-assemblies elsewhere and then add them to the final assembly line, while others build all assemblies directly on the final assembly line. A reasonable middle ground was taken , and the extremes assessed; assembly times varied on the order of minutes, well within the tolerances of the analysis

. Second, manufacturing out-sourcing practices vary between manufacturers. A similar middle ground was taken, and extreme points evaluated; these variations again fell within the tolerances of the analysis.

B-1

### B.2.2 Specific Product Class Features

Each product class presented some specific features that differ from the general teardown practice that performed. Specific features for each product class are indicated in Table B.2.1. Table B.2.1 Specific Features for Each Product Class Product Class Variation 

### Gas Furnace Clamshell and tubular constructions evaluated separately and averaged. Gas Boiler Cast iron heat exchangers are in-sourced at a sister plant for one major manufacturer. DOE assumed the transfer price would be equivalent to the open market value, and a high level of automation is applicable. Oil-fired Furnace None Oil-fired Boiler Based on bills of materials of gas boilers and oil furnaces. Mobile Home Furnaces None 

### Weatherized (Packaged) A/C coil model used rather than furnace/boiler model. Furnaces This is fully described in the Technical Support Document for the Residential Air-Conditioning Rulemaking.' B.2.3 Weight Confirmation of Tear-down Results DOE confirmed the cost and weight predictions using a number of methods. Initially, DOE compared shipping weight predictions with published shipping weights. Since cost and weight tend to be highly correlated in manufactured goods, the ability to accurately predict weight is usually an important indication of the accuracy of the cost model. However, DOE discovered that at least one equipment manufacturer had published erroneous weight data. Since it could not verify all the published weights, DOE could not place confidence in the weight verification.
B.2.4 Final Confirmation of Tear-down Results 

### For further confirmation of tear-down results, DOE solicited feedback and comments on the cost analysis directly from the manufacturers of units that were torn down. As a disinterested third party, DOE modeled their factory conditions and assumed production volumes, and calibrated the model assumptions and results for their particular units. Final results, as discussed in Chapter 6 of this TSD, were generated using a set of industry-wide aggregate assumptions to avoid disclosure of company-specific sensitive cost data.

B-2

### B.2.5 General Tear- down Practice of "Hypothetical" Units



### Although DOE had detailed information on a number of units physically torn down, it needed many more samples to span a broad range of efficiency levels in each of the product classes. To cost these samples, DOE created "hypothetical" units. For these units, DOE started from a calibrated tear-down BOM, and then modified the BOM to obtain the desired efficiency level. Typically, for any change in efficiency level, there are numerous paths to take and a variety of hardware changes that can be made to obtain a particular efficiency level. According to existing literature, three options appear to be the most promising for gas furnaces-increased heat exchanger area, improved heat transfer coefficient, and derating (see discussion in Chapter 6). Aside from the two design options selected for non-weatherized gas furnaces, a few others were considered for other product classes. These include: 1. Electronic ignition for boilers. 2. Two-stage Modulation. There are no efficiency gains attributed to modulation. Any efficiency gains can be attributed to the use of an ECM blower motor. 3. Insulation. For weatherized furnaces only, additional insulation can improve AFUE ratings. 

### In addition, design options that affect fuel and electricity consumption were costed. These include: 1. Two-stage Modulation-Uses a two-speed combustion air fan, a dual flow rate gas valve, a multi-speed blower, and associated electronic controls. 

### 2. Continuous Modulation-Uses a continuously variable combustion air fan and gas valve, a multi-speed blower, and associated sensors and controls. 3. Interrupted Ignition (Oil-Fired equipment only)-Uses interrupted firing of the burner ignitor rather than continuous spark ignition, and associated controls. 

### 4. Fan Atomized Burner (Oil-Fired equipment only) with modulation-Uses a fan and ECM motor to atomize the oil. Prototypes exist; conservative costs have been used to reflect the relatively undeveloped nature of this technology. For each hypothetical tear-down, DOE modified the BOM hardware to reflect applicable design options from the list above, costed each design option path, and averaged the results.

B.3 CREATING THE TEAR-DOWN BILL OF MATERIALSDOE used the tear-down process to create a complete and structured BOM for each torndown and hypothetical unit. In the process of completely dismantling each piece of the unit, DOE characterized every part according to weight, dimensions, material, quantity, and the manufacturing processes used to fabricate and assemble it.

B-3

### The BOMs incorporate all materials, components, and fasteners with estimates of raw

materials and purchased parts and sub-assemblies. DOE based its sourcing assumptions on previous industry experience, recent information in trade publications, and discussions with high- and low-volume original equipment manufacturers (OEMs). To augment its understanding of the industry's manufacturing practices, DOE also visited several manufacturing plants. These visits focused on observing and characterizing current manufacturing practices. 

### Figure B.3.1 illustrates a small section of a structured bill of materials. It shows: ® Serial Number: Assigned during disassembly. ® Part Number: Assigned during disassembly. 

### ® Description : A description of the part. Subassemblies are grouped. ® Quantity: Number of parts assembled in a given step for a given subassembly. ® Extended Quantity : Flat bill-of-materials. ® V: This entry denotes whether a part is a purchased component or fabricated in-house.
® Material : Material type or component number ® OD, Length, Width, Depth, Thickness : Physical parameters that describe the finished part. ® Extended Weight: Final weight of the part, in grams. 

### ® Extended Material Cost : Final material cost of the part (calculated), accounting for scrap losses but excluding required assembly, painting, fabrication, or joining costs. ® Extended Assembly Time : The manual labor (in seconds) required to handle all parts and assemble them into the unit.Scrial'r1 Fart 9 Dcscription Qty Ex1 C1ty 

### u? 1.4.defial Length 11lidth fID {cm) bepth I (cm) l41lit (cm) Cxt Wei j1i (y) Ext mat

Cost (I(S0) Ert AS3j

Time (x1 6000 10.0 Model2 ."•,asrrr.Ylr 1 1 110 79.3 69 XX

. XX XX.XX XX.XX 6001 1.1 Pac:lsa:^ ii SubAssy 1 1 11417 $35.37 111 6002 1.1.1 Banding 1 1 Y 18anr1 3411 1 I? 71111 33 6003 1.1.2 Box End 2 22 Y L.xrrlSd 0.4 11, 22' •'11 1 90 11 6004 1.1.3 Cardboard Corners 4 4 Y I^arrj d 104 S 8 016 20112 814.35 43 6005_ 1.1.4 Cardboard Body 1 I 'f ^;rdBd 2735 191] 11 6006 1.1.5 Pallet 1 1 Y Canlp# U '122 122 . 503;.1 ! 1L1-3 12 6007 1.2 Label SubAssy 1 1 30 $17.11 U.0 6008 1.2.1 Efficiency I Labal 1 1 V Paper 10 14 0.013 4 ^::I CI I 17.6 6009 1.2.2 UPC Label 1 1 Y Pappr 10 6 0.016 I ?).01 1.1.6 6010 1.2.3 Energy Star Label 1 1 Y Mvlar a 5 0.016 1 $0 05 17.11 6011 1.2.4 CA Warning Label 1 1 1 Prljlar DL 5 U.CI16 I $ 115 17.1 6012 1.2.5 a Model Label 1 I Y Mylar 1S. in 0.036 8 'hI15f1 17.8 

### Figure B.3.1 Sample Bill of Materials

B.4 ADDITIONAL PRODUCTION COST DATA The tear-down process and the development of the structured BOMs provided the starting points for estimating production costs, but DOE still needed information on manufacturing operations, part and material prices, wages, plant equipment amortization, and plant overhead. Chapter 6 describes the assumptions and data sources. This section briefly describes the processes DOE used to gather the data and how it used them. B.4.1 Labor and Factory Overhead DOE obtained information on equipment and tooling costs, typical process cycle times, and materials used for fabrication from the proprietary TIAX (a collaborative product and technology development firm) manufacturing databases

. Plant equipment suppliers provided details concerning equipment capabilities and processing parameters (cycle times, scrap rates, etc.). Fabrication cycle rates are directly entered into the cost model and depend on part complexity and processes used. B.4.2 Depreciation 

### Depreciation, or amortization, is the accounting process by which capital costs are allocated to production volume. Amortization occurs over the whole period of time that it takes to produce a product, so that at the end of that time, all capital costs are accounted for in the full cost of producing the product. For example, if a manufacturer produces one million furnaces over ten years and amortizes a $10 million investment over the same ten years, each furnace produced during that time would include $10 in amortization charges. The methodology DOE used to allocate depreciation depended on whether it is assumed that the plant machinery is dedicated or non-dedicated to the production of the sample product. Dedicated machinery is tied solely to the production of the sample product. During times when a piece of dedicated machinery is not needed for that product, it sits idle. The entire capital cost of

B-5

### a piece of dedicated machinery is amortized across the annual volume of the sample product.

Conversely, non-dedicated machinery may be used to produce another product when it is not needed for the sample product. Only a fraction of the capital cost of non-dedicated machinery is allocated to the sample product, based on the time the machinery was used to produce the sample product. For example, a non

-dedicated press that was used 55 percent of the time to produce the sample product would allocate 55 percent of its depreciation charges to the sample product and 45 percent to the other products with which it is associated

. A dedicated press, on the other hand, would allocate 100 percent of its depreciation to the sample product, even if its utilization was 55 percent, since the press is not used for any other production. 

### DOE assumed that all fabrication machinery is non-dedicated , unless it is part of an assembly line (welding, or bending, directly on the line). Due to the seasonal nature of the furnace and boiler business , some manufacturers have off-season uses for their fabrication machinery (e.g., to make air conditioners). DOE also allocated labor to operate a piece of machinery based on whether the machinery is dedicated or non-dedicated. As equipment utilization rates approach 100 percent , the costs associated with dedicated versus non-dedicated equipment costs become equal

. However, few dedicated pieces of equipment ever achieve 100 percent utilization due to lack of demand , capacity mismatches between process steps , scheduled downtime , etc. Thus, non

-dedicated equipment results in lower overall costs per part, as depreciation , maintenance , and other costs are only assessed on the basis of how much time each part uses a piece of equipment

. As equipment types vary, so do the manufacturing equipment and labor requirements

. Depreciation charges therefore also vary across equipment types.
B.4.3 Parts and Materials Cost estimates for raw materials and purchased components were drawn from manufacturing databases and supplemented with information obtained from manufacturer and supplier sources. DOE adjusted the cost estimates as appropriate to include price discounts typically seen in the industry as the result of high-volume purchases. The cost of purchased components and most materials were based primarily upon the ANOPR engineering analysis prices adjusted for inflation

. In the NOPR, DOE used a five-year average of material prices from years 2000 through 2004

. 71 FR 59216

. For the final rule, DOE revised the material price averages used in the cost model to include material price data from 2005 and 2006. Therefore , DOE calculated a new five

-year average material price for cold rolled steel , aluminized steel , galvanized steel , painted cold rolled steel, and stainless steel. DOE used the BLS Producer Price Indices (PPIs) for cold rolled steel and stainless steel spanning from 2002 to 2006 to calculate new averages , which incorporate the changes within each material industry and inflation

. Finally, DOE adjusted all averages to 2006$ using the gross-domestic

-product implicit

-price deflator.

B-6

### DOE also created two scenarios for the material-price-sensitivity analysis: a low-bound

and a high-bound scenario. DOE calculated the low-bound scenario by finding the year ranging between 2002 and 2006 with the lowest cost of cold rolled steel, which was 2002. DOE then used the annual prices for all other materials in 2002 and applied a 15-percent reduction to each of the raw material costs. Likewise, DOE calculated the high-bound scenario using the annual average price for each of the raw materials from 2006, when prices of raw materials were uncharacteristically high. DOE expressed both the low-bound scenario and the high-bound scenario in 2006$. DOE evaluated the results of the material-price-sensitivity analysis, using all three material-cost scenarios, in the engineering analysis and then used them as inputs for the LCC analysis. Table B.4.1 shows the material cost for the five-year average, the high-bound scenario, and the low-bound scenario.
Table B.4.1 Material Costs for Low-Bound , 5-Year Average, and High-Bound Scenarios Low-Bound Material Cost (2006$) 5-Year Average

Material Cost (2006$) High-Bound

Material Cost (2006$) Non-weatherized gas furnaces 78-percent AFUE - Baseline $241.46 $264.24 $276.12 80-percent AFUE - Increased Heat Exchanger Area $243.19 $267.08 $279.53 80-percent AFUE - Increase Heat Transfer Coefficient $243.70 $267.80 $280.38
80-percent AFUE - Modulation (2-stage) $386.16 $410.04 $422.50 81-percent AFUE - Increased Heat Exchanger Area $256.53 $282.27 $295.70 81-percent AFUE - Improved Heat Transfer Coefficient $255.55 $280.40 $293.37
81-percent AFUE - Modulation (2-stage) $399.51 $425.25 $438.68 90-percent AFUE - Baseline Condensing $356.05 $422.85 $461.26 92-percent AFUE - Increased Heat Exchanger Area $434.38 $487.76 $521.11 92-percent AFUE - Modulation (2-stage) $577.25 $630.33 $664.50 92-percent AFUE - Modulation (Continuous) $577.25 $630.33 $664.50 96-percent AFUE - Modulation (Continuos) $706.88 $909.86 $1,022.68 

### Weatherized gas furnaces 78-percent AFUE - Baseline $557.70 $589.42 $605.97 80-percent AFUE - Increased Heat Exchanger Area $559.43 $592.25 $609.38

B-780-percent AFUE - Improved Heat Transfer

Coefficient $559.98 $592.81 $609.93
81-percent AFUE - Increased Heat Exchanger Area $561.92 $596.61 $614.70 81-percent AFUE - Improved Heat Transfer Coefficient $561.19 $594.02 $611.14
82-percent AFUE - Increase Heat Exchanger Area, Stainless Steel, and Low Bound GAMA Estimates $600.64 $649.76 $678.37
82-percent AFUE - Increase Heat Exchanger Area, Stainless Steel, and High Bound GAMA Estimates $772.83 $891.76 $968.77
83-percent AFUE - Increase Heat Exchanger Area, Stainless Steel, and Low Bound GAMA Estimates $613.20 $667.42 $699.57
83-percent AFUE - Increase Heat Exchanger Area, Stainless Steel, and High Bound GAMA Estimates $785.40 $909.42 $989.97



### Mobile home furnaces 75-percent AFUE - Baseline $177.49 $208.00 $223.91 80-percent AFUE - Increased Heat Exchanger Area $205.23 $237.14 $253.78 80-percent AFUE - Modulation (2-stage) $345.09 $375.60 $391.51 81-percent AFUE - Increased Heat Exchanger Area $208.89 $240.05 $256.30 81-percent AFUE - Modulation (2-stage) $350.41 $380.91 $396.82 82-percent AFUE - Increased Heat Exchanger Area $217.75 $249.08 $265.42 82-percent AFUE - Modulation (2-stage) $358.91 $389.41 $405.33 90-percent AFUE - Condensing $288.84 $327.45 $348.84 

### Oil-fired furnaces 78-percent AFUE - Baseline $383.55 $415.21 $431.74 80-percent AFUE - Increased Heat Exchanger Area $385.67 $417.34 $433.86 81-percent AFUE - Increased Heat Exchanger Area $387.64 $420.59 $437.77 81-percent AFUE - Interrupted Ignition $401.08 $432.75 $449.27 81-percent AFUE - Fan Atomized Burner with Two-stage Modulation $528.98 $561.93 $579.11
82-percent AFUE - Increased Heat Exchanger Area $389.06 $422.62 $440.14 82-percent AFUE - Interrupted Ignition $406.59 $440.16 $457.67 82-percent AFUE - Fan Atomized Burner with Two-stage Modulation $530.40 $563.96 $581.48

B-883-percent AFUE - Increased Heat Exchanger Area $390.47 $424.66 $442.50

83-percent AFUE - Interrupted Ignition $408.01 $442

.20 $460.04 83-percent AFUE - Fan Atomized Burner with Two-stage Modulation $531.81 $566.00 $583.84
84-percent AFUE - Increased Heat Exchanger Area $391.89 $426.70 $444.86 84-percent AFUE - Interrupted Ignition $409.42 $444.24 $462.40 84-percent AFUE - Fan Atomized Burner with Two-stage Modulation $533.23 $568.04 $586.20
85-percent AFUE - Increased Heat Exchanger Area $396.13 $432.81 $451.95 85-percent AFUE - Interrupted Ignition $413.66 $450.35 $469.49 85-percent AFUE - Fan Atomized Burner with Two-stage Modulation $537.47 $574.15 $593.29



### Gas boilers 80-percent AFUE - Baseline $375.13 $420.90 $444.78 81-percent AFUE - Improved Heat Transfer Coefficient and Electronic Ignition $406.51 $454.60 $479.69
81-percent AFUE - 2-stage Modulation and Induced Draft $463.66 $515.99 $543.29
82-percent AFUE - Improved Heat Transfer Coefficient and Electronic Ignition $413.58 $462.20 $487.56
82-percent AFUE - 2-stage Modulation and Induced Draft $470.73 $523.58 $551.16
83-percent AFUE - Improved Heat Transfer Coefficient and Electronic Ignition $422.35 $471.61 $497.32
83-percent AFUE - 2-stage Modulation and Induced Draft $479.29 $532.78 $560.69
84-percent AFUE - Improved Heat Transfer Coefficient and Electronic Ignition $425.55 $478.44 $506.03
84-percent AFUE - 2-stage Modulation and Induced Draft $482.69 $539.81 $569.62
85-percent AFUE - Improved Heat Transfer Coefficient and Electronic Ignition $428.96 $485.47 $514.96
85-percent AFUE - 2-stage Modulation and Induced Draft $486

. 11 $546.86 $578.56
86-percent AFUE $493.46 $557.77 $591.32 91-percent AFUE $746.16 $844.76 $895.71
B-999-percent AFUE $1,069.42 $1,224.52 $1,305.62



### Oil-fired boilers 80-percent AFUE - Baseline $534.94 $551.22 $559.72 81-percent AFUE - Increased Heat Exchanger Area $535.60 $552.54 $561.39 81-percent AFUE - Interrupted Ignition $553.13 $570.08 $578.92 82-percent AFUE - Increased Heat Exchanger Area $536.25 $553.86 $563.05 82-percent AFUE - Interrupted Ignition $553.79 $571.40 $580.58 82-percent AFUE - Fan Atomized Burner with 2- stage Modulation $677.59 $695.20 $704.39
83-percent AFUE - Increased Heat Exchanger Area $536.91 $555.18 $564.71 83-percent AFUE - Interrupted Ignition $554.45 $572.72 $582.25 83-percent AFUE - Fan Atomized Burner with 2- stage Modulation $678.25 $696.52 $706.05
84-percent AFUE - Increased Heat Exchanger Area $537.57 $556.50 $566.38 84-percent AFUE - Interrupted Ignition $555.10 $574.03 $583.91 84-percent AFUE - Fan Atomized Burner with 2- stage Modulation $678.91 $697.84 $707.72
85-percent AFUE - Increased Heat Exchanger Area $538.89 $559.14 $569.70 85-percent AFUE - Interrupted Ignition $556.42 $576.67 $587.24 85-percent AFUE - Fan Atomized Burner with 2- stage Modulation $680.22 $700.48 $711.04
86-percent AFUE - Increased Heat Exchanger Area $540.20 $561.77 $573.03 86-percent AFUE - Interrupted Ignition $557.74 $579.31 $590.57 86-percent AFUE - Fan Atomized Burner with 2- stage Modulation $681.54 $703.11 $714.37
90-percent AFUE $840.06 $869.02 $884.13 95-percent AFUE $1,336.65 $1,378.52 $1,400.36



### As purchased components make up much of the unit costs, DOE paid special attention to establishing accurate OEM-level price data. Through manufacturer submissions, industry literature, and active research, DOE was able to ascertain the exact specifications for the majority of components used in the units under investigation. For the relatively few purchased components DOE could not identify, it substituted parts from comparable equipment. For example, a manufacturer's technical data sheet may report that a sample furnace uses a certain

B-10

### type of motor supplied by a particular company, but may not state the precise size or part

number. In the cases when distributors could not positively identify the part, industry experts would compare the known attributes of similar units (such as horse power, voltage, etc.) with those of the sample equipment. DOE would then select a specific motor size and type based on an interpolation of the available data. DOE then consulted with local distributors, wholesalers, parts suppliers, and OEMs to determine high-volume pricing. DOE applied a discount to the prices received from each of those sources based on their place in the distribution chain. These discounts were based on markup data and DOE's previous experience in the industry. The many different data'sources and the large purchased parts list also allowed DOE to do some cross-checking of price data and discounts. DOE selected those that, most likely reflected actual prices to OEMs. The discounts on each component are a function of the total dollar volume of a typical OEM's account with a typical supplier. Since DOE is modeled high volume OEMs who deal with one supplier for each component, this resulted in substantial discounts relative to retail or wholesale prices. In addition, OEM manufacturers commented on assumed OEM pricing, as detailed in section B.2.4 of this appendix. 

### B.5 STRUCTURE OF THE COST MODELS Once DOE had collected all of the information required to estimate production costs for each sample, DOE used Excel spreadsheet models to perform the required calculations. In addition, DOE used Boothroyd-Dewhurst, Inc. (BDI) Design for Assembly software to calculate assembly times, and BDI's Concurrent Costing software to estimate casting and machining processes.' Figure B.5.1 illustrates the structure and relationship of the spreadsheets and software used to make the estimates.Mfg Site Dependent Global Controls Materials Variables ( labor rate , etc.) Sheet Sheet

Site Table Sheet t Cost Global Data Variables

BOM Sheets (1 per teardown) N Purchased Part Costs I Part Data Assy Time

BDI Design For Assembly BDI Concurrent Costing

VBA Macros, Portability file data transfer 

### Figure B.5.1 Cost Model Structure 

### B.5.1 Main Cost Model Components Sheet

Cast, Machined Part Cost Data



### The main model serves to hold data and perform the calculations that determine the production cost of the final assembled equipment. It contains a number of worksheets that perform different functions. Global Controls Sheet. This worksheet sets parameters such as production volume and wages; it also displays the cost results by sub-assembly. The basic parameters (e.g., days available per year) of the Global Controls sheet are linked to multiple BOM sheets, one for each tear-down. A sample section of those controls is shown in Figure B.5.2. Shaded fields are also varied in the sensitivity analysis. Material Costs Processes Sheet

Equipment Cost, Ji Cycle Times

B-12Designed Fabrication Work days per Year: 240 Designed Assembly Work Days per Year: 240

Runtimo per Shift (hrs) : 8 EgUiprnant Uptim© I^t' : Designed Assembly Worker Downtime (%); Auxiliary Eluipineni + Installation Cost: lir"1 yin Bullding Depreciation Life (Yea: s): 25 l Tooling Deprecialion (Years): Ratio of Walkways to Fabric itton + Storarge: 20% Yearly Maintenance Ratio (as 'i'o of Equipment Cost)

Utility Cost (`% of factory cost) Invest. Relativity Factor (%) 

### I Avg De.prerciation Life (°/a} W

Freight Factor: 3% Freight Cost{ Irn ft}: $1.66

Benefitc• 40% Building Cost ($fsf). 120 

### Figure B.5.2 Sample of Global Controls Sheet 

### The Global Controls sheet also shows costs broken down by sub-assembly and cost category. Figure B.5.3 features costs by major sub-assembly and cost type. Cost breakdowns to this fine level allowed DOE to zero in on the differences between equipment across efficiency levels and facilitated the calibration and industry review processes. 

## YY Class XX% AFU E Material Labor Overhead Blower Casing Circulator Electrical/Controls Exterior Components Fuel Control Heat Exchanger Inducer Packaging Total Grand Total Figure B.5.3 Subassembly Breakdown
Site Table Sheet . Variables that vary from manufacturing site to manufacturing site were isolated on the Site Table sheet. These include labor rates, purchasing power (effective production volumes for components shared across many product families), and a number of other variables. (see Figure B.5.4). After individual manufacturer data was gathered, an industry average were generated, along with two sub-group averages-large and small manufacturers. To avoid disclosure of manufacturing site-specific information, the industry average column was

B-13

### used to generate all numbers in this TSD. The ranges found from individual manufacturers were

used in the sensitivity analysis.

Industry Avg Small Mfg. Largo Mfg. Mfg A Mfg B Mfg C Assembly Factor assy shifts / day Desi g n vs. Actual Ca p acity Ratio Direct Labor Rate lab shifts / day Ind:Dir Labor Ratio Mana gement S pan (peo p le/manag er) Pay Difference Mana g er to Line worker Production Volume Purchasin g Power rework rate (all repaired) Lot size (days of invento ry) JIT ratio 

### Figure B.5.4 Site Table Spreadsheet Components Sheet . The Components sheet contains two types of data: major purchased components unique to each model; and minor, common purchased components used by every model. Major Purchased Components. The Components sheet represents the output of the Subcontractor manufacturing component database, which logs multiple quotations at a variety of production volumes to build a production volume versus cost curve. These outputs are shown in the Ql to Q1000000 columns in Figure B.5.5. Depending on quantity per model and production volumes, the component cost is fed to the BOM sheet through the CompCostX column, which queries the result by unit number. These tables determine at least 45 percent of total cost.

Component ID Comp Class

Name "P

SubClassNaMnnutachirer Name '.ut f. _iri0ee os Model ID Number Q1 01000 Q10000 Q100000 01000000 TotQtyl ComyCostt 1 0 0 Dummy 2 Electronic PCB Control Board, Dam per 3 Electronic PCB Control Board, Mfg A 4 Electronic PCB Control Board, Mfg B 5 Mechanical Motor Blower Motor 6 Mechanical Motor Blower Motor 7 Mechanical Motor Blower Motor 8 Mechanical Fan Blower W eel 9 Mechanical Fan Blower Wheel 10 Mechanical Fan BlowerWheel 11 Mechanical Pump Circulator with gaskets 12 Mechanical or Blower Motor 13 Mechanical Motor Blower motor 14 Electronic Switch Dual Pressure Switch SubAssy 15 Mechanical Fan Blower Wheel 16 Mechanical Fan Blow rWheel 17 Fuel S stem Valve Gas valve 16 Fuel System Valve Gas Valve Assy 19 Fuel System Valve Gas Valve Assy 20 

### Figure B.5.5 Components Sheet 

### Minor, Common Purchased Components. These include items such as connectors, wire, fasteners, board transformers, and other smaller parts that OEMs are likely to purchase from outside suppliers. From the Subcontractor manufacturing component database, DOE gathered price quotations from multiple sources (suppliers, distributors, prior experience) in quantities throughout the price versus volume curve. In the same fashion as for major purchased components, minor component costs are passed to the BOM sheets.

B-14

### Figure B.5.6 shows modeled fabrication processes; material cost in these cases is

determined by the part weight times a cost per gram as detailed on the Raw Materials sheet, Figure B.5.7. For out-sourced parts, DOE applied a vendor profit markup of 1.2. DOE assumed that even in cases of a sister company manufacturing sub-components, this markup will capture the transfer price and the profit of the sister unit.

rocess ID Class Name u ass Name Machin . Name Capacity apRT y Units Capacity

Rate Capacity

Rate Units cycl e T ime

(minutes) rprecm ion

Life (Years) Q1 C apita l Cost (S) 1 None None Dumm y Process 2 Material Handlin g Convey Conveyor 3 Material Removal Tube Tube Cut 4 Deformation Forming Tube Tube Bend 5 Deformation Formin g Tube Roll Form 6 Deformation Forming Tube Tube Coil 7 Sheet Metal Stam p Larg e Press 8 Sheet Metal Stam p Med Press 9 Sheet Metal Stamp Sm Press 10 Sheet Metal Bend Press Brake 11 Sheet Metal Blank Blankin g 12 Sheet Metal Stam p Turret Punch 13 Material Removal Machine Machinin g Center 14 Castin g Plastic 

### _

Injection Mold 15 Castin g Metal Sand Cast 16 Castin g Metal Investment Cast 17 Finishin g Powder Coat 

### _

Paint 18 

### _

_
Material Removal Stam p 

### _

Plasma 19 

### _

_ Assembl y Adhesive Adhesive Bondin g 20 Assembl y Weld Seam Weldin g 21
... ... ... 

### Figure B.5.6 In-house Fabrication Process

Class Name Subclass Name Material Full Name Physical Form Name Density (glcc( Q1 01000 Q10000 Q100000 Q1000000 Totwtl (g) MatCostl

($Ig) Polymer Thermoplastic ABS Pellet 1.06 Metal Commodity Metal Aluminum Sheet 2,70 Metal Commodity Metal Alumized Steel Sheet 7,87 Metal Commodity Metal Aluminum Tube Tube 2.70 Polymer Commodit Metal Strap Band N/A N/A 

### Figure B.5.7 Raw Materials Sheet Bill-of-Materials Sheet. The Bill-of-Materials sheet (as illustrated in Figure B.3.1 and discussed in section B.3) serves as a structured assembly tree, summarizes fabrication and assembly tool data, and calculates production costs based on the price of the part or material and the labor and machinery required to fabricate or assemble it. The BOM sheet also adjusts many other costs in response to changes in physical parameters. For example, the model adjusts baseline sheet metal sizes to incorporate different enclosure sizes. Also, the size of the fiberglass insulation is a function of the sheet metal it has to cover and the efficiency level of the unit (insulation is thicker at higher efficiencies). Many fastener quantities and labor costs are also a function of the sheet metal walls they have to secure. The result is that every unit cost estimate is unique, using the initial BOM as a starting point. 

### Labor, parts, materials, and depreciation costs are aggregated by sub-assembly and linked back to the Global Controls page. Processes Sheet. This sheet, from the Subcontractor manufacturing database, is a list of process costs for all the plant machinery involved in the production of furnaces and boilers. An implicit assumption is that the plant equipment required to produce lower-efficiency samples is

B-15

### also able to produce higher-efficiency samples without any modification. The process data show

installed equipment costs, equipment capacity, depreciation life, whether equipment is dedicated, cycle times, labor requirements per station, consumables costs, etc. The installed costs include price quotations for the equipment plus markups to account for installation labor and auxiliary equipment (e.g., electrical service to the equipment). B.6 SENSITIVITY ANALYSIS RESULTS Chapter 6 of the TSD described the Monte Carlo analysis process. The results are presented in Figure 6.4.1 in the form of standard deviation values. These results are used as an input for the LCC analysis. Confidence intervals are easily calculated using standard deviation values.

### Material Labor Overhead Shipping Total

Non-weatherized Gas-fired Furnaces Baseline $5 $3 $2 $1 $6 80%AFUE $4 $2 $1 $1 $5 81% - 83% AFUE $5 $3 $2 $1 $6 Non-condensing Furnaces with Modulation $8 $3 $2 $1 $9 90% AFUE $3 $3 $4 $1 $6 92% AFUE $10 $3 $6 $1 $12 92% with Modulation $15 $3 $6 $1 $16 96% AFUE $35 $3 $6 $1 $36 Weatherized Gas-fired Furnaces Same as Non-weatherized Mobile Home Furnaces 75% AFUE $5 $2 $1 $1 $5 80% AFUE $6 $2 $1 $1 $6 90% AFUE $30 $10 $3 $1 $32 Oil-fired Furnaces Baseline $6 $10 $6 $1 $14 Other Options $10 $10 $6 $1 $15 Gas Boilers Baseline $4 $4 $3 $1 $7 81% - 84% AFUE $4 $4 $3 $1 $6 Gas Boiler with Modulation $10 $4 $3 $1 $11 88% AFUE $30 $10 $3 $1 $32 91 % AFUE $75 $15 $5 $1 $77 99% AFUE $100 $20 $10 $1 $102 Oil-fired Boilers Baseline $10 $4 $3 $1 $11 81%-86%AFUE $10 $4 $3 $1 $11 Oil Boiler with Other Options $10 $10 $6 $1 $15 90% AFUE $75 $15 $5 $1 $77 95% AFUE $100 $20 $10 $1 $102 Figure B.6.1 Standard Deviations of Manufacturing Costs

### REFERENCES U.S. Department of Energy

- Office of Building Research and Standards

. Technical Support Document: Energy Efficiency Standards for Consumer Products: Residential Central Air Conditioners and Heat Pumps

. 2000. U. S. Department of Energy. Washington, DC. Report No . LBNL-47463. 

### <http: //www. eere. energy .gov/buildings/app liance

_standards/residential/ac_central. html> 2. U.S. Department of Energy-Office of Building Technologies. Technical Support Document: Energy Conservation Program for Consumer Products: Energy Conservation Standards for Residential Furnaces and Boilers - ANOPR Version. 2003. U.S. Department of Energy. Washington, DC. Report No. LBNL-53984. 3. Boothroyd Dewhurst

. Design for Manufacture and Assembly (DFMA). (Last accessed December 17, 2000, <http://www.dfma.com/software/dfaben.html>