BEHIND THE NUMBERS
How this calculation works
Good units = produced units − rejects. Batch cost = materials + labour hours × hourly cost + allocated overhead + packaging × good units − scrap recovery. Unit cost = batch cost ÷ good units.
Worked example
Materials £70 + labour £30 + overhead £20 + packaging £10 = £130. Ten good units cost £13 each.
Example result: £13.00
Count saleable output
Rejected units reduce the denominator. Their costs remain in the batch unless recovered through the scrap field, so waste increases the cost of each saleable unit.
Avoid double-counting overhead
If machine time already contains allocated factory overhead, do not add that same overhead again. Keep marketing and sales expenditure separate from production costing.
Assumptions and rounding
- All units share the same cost structure.
- The batch is complete; no opening or closing work in progress is valued. Unit costs are retained beyond pennies for comparison.
Questions about this calculator
Can I divide by all units started?
The useful unit cost here is per good unit, so rejected units are excluded from the denominator.
Where does my overhead figure come from?
Use the cost allocated to this batch from your own overhead policy. The overhead-rate calculator can help with a consistent activity basis.