Use recorded material consumption
Production material cost comes from the materials actually posted to the run and their recorded costs. Earlier consumption costs remain in the run’s history.
See the material cost of what you make.
Use recorded material consumption to understand production costs. See the impact of scrap on each good unit and use material-based margin estimates to inform pricing.
Recorded material cost and cost per good unit on a completed Cedar & Smoke run. Expand to see its material consumption, output and scrap.
Understand the cost of each good unit.
Understand material cost per finished unit and how scrap affects your margins.
See what scrap costs per good unit
Materials consumed for faulty output still count toward run cost. Divide total recorded material cost by good output to see the cost per usable unit.
Put material margins in context
Compare sales revenue with recorded material costs where cost records are available. Use the result as a material-based estimate when reviewing product margins.
Product costing focuses on materials. Labor and overhead are excluded, so these figures are not your total manufacturing cost or net profit.
50 good candles. 2 scrapped. €104 in materials.
Suppose the recipe consumes €2 of materials per attempted candle, with unchanged material costs throughout the run.
Record the consumption
Producing 50 good candles and 2 scrapped candles consumes €104 of materials: 52 × €2.
Calculate cost per good unit
The run’s material cost per good candle is €2.08: €104 ÷ 50. Scrap has added €0.08 to each usable unit.
Compare with the selling price
At €10 per candle, the difference is €7.92 per unit, or a 79.2% material-based margin before other business costs.
You can see the cost of scrap in the finished unit, rather than losing it in a theoretical recipe estimate.
Figures are in EUR, with no discounts or taxes. The margin excludes labor, overhead, and other operating costs.
Understand the materials behind your margins.
Record your materials and production output to make unit costs easier to see.