Meaning
Periodic repayment plans track the distribution of capital costs for custom injection moulds across a specific volume of production parts. An amortisation schedule allows a buyer to avoid a large upfront payment by adding a small fee to the price of every moulded component. This financial arrangement links the cost of the tooling directly to the revenue generated by the project.
Unit Allocation
Calculation of the per part adder involves dividing the total tool cost by the expected number of units in the first production run. For example, a fifty thousand dollar mould spread over one hundred thousand parts results in a fifty cent charge per piece. This amount is tracked monthly to ensure the debt is eventually settled.
Payback Duration
Timeframes for full repayment depend on the speed of the production ramp and the accuracy of sales forecasts. If the product sells slower than predicted, the supplier may be stuck with an unpaid balance for several years. High volume consumer goods typically achieve full amortisation much faster than niche industrial components.
Asset Depreciation
Accounting rules determine how the value of the tool is written down on the balance sheet as it wears out. The physical life of the mould may exceed the financial schedule.
