Zansa › Answers › Manufacturing
How do I calculate scrap rate and put a cost on it?
Scrap rate is the units (or material weight) scrapped divided by total units (or material) produced or put into the process, multiplied by 100. To cost it, multiply scrapped units by the cost accumulated in each unit up to the point it was scrapped.
It matters because a unit scrapped late in the process has absorbed more material, labour and machine time than one scrapped early.
Commonly misread:
- Costing scrap at raw material value only, ignoring conversion cost.
- Mixing units and weight or measure bases between products.
- Excluding reworked items, which consume cost without being scrapped.
- Failing to separate normal, expected process loss from abnormal scrap.
Record a reason code, product, machine and shift for each scrap event so that causes can be ranked by cost, not just by count.
Want this applied to your business? Zansa builds dashboards and forecasts for small and mid-sized companies worldwide. Start with a free intro call.
Book a call