Cost the run properly: materials, minutes, scrap and setup
A manufacturing job is costed per good unit delivered, but it is paid for per unit started, and the difference is where margins quietly die. This page builds the cost the way a job sheet does: a bill of materials per unit, labour and machine minutes per unit at your rates, a scrap allowance that grosses the run up to the units you must actually start, setup and tooling spread across the run, overhead allocated on top, and then the selling price at your target margin. Every figure is yours to enter. The results show the units started, the cost per good unit, the total job cost and the price, with a downloadable cost sheet.
The job
Bill of materials (per unit)
Labour and machine time (per unit)
Run charges and overhead
Price and range
Disclaimer: This calculator gives estimates for general information only. It is not financial, medical or other professional advice. Job costs depend on your actual rates, yields and overhead; the binding figures are those in your own cost accounting and the quote you issue.
What this calculator does
It costs a production run the way the work actually consumes money. Materials are taken from a bill of materials per unit. Labour and machine time are taken in minutes per unit at hourly rates, because that is how routings are written. The scrap rate then grosses the order up to started units (you cannot start a fraction of a unit, so the count rounds up), and materials and conversion are charged on every started unit, scrap included, because scrap consumes both. Setup and tooling land once per run. Overhead is allocated as your percentage of production cost, contingency sits openly on top, a minimum job charge can floor the total, and the price is derived from the cost at your target margin, with profit shown in dollars so the margin is never a rumour. Per-unit figures are per good unit throughout, since good units are what the customer pays for.
How to use it
- Cost per good unit, always. Dividing a run’s cost by the units started flatters every job with scrap in it. This page divides by good units only, and prints the started count next to the required count so the cost of rejects is visible as a number of units, not hidden in a rate.
- Setup is why short runs are expensive. A $350 setup is $0.70 a unit across 500 and $35 a unit across 10. The minimum job charge field exists for the same reality at the quoting desk: below some run length, the honest answer is a floor price, and this page applies it openly rather than letting a tiny order inherit a fantasy unit cost.
- Minutes, not hours, for cycle times. Routings are written in minutes per unit; converting them by hand invites the decimal errors that haunt job costing. Enter minutes as the routing states them and the hourly rates as your costing states them, and let the page do the sixtieths.
- Keep the machine rate and the overhead honest with each other. If your machine hour rate already carries depreciation and energy, an overhead percentage that loads the same costs again double-counts them. The overhead here is a percentage of production cost because that is a common allocation base; whatever base your shop uses, the discipline is the same: every cost counted once, somewhere visible.
- Margin is struck on the price. A 25% margin and a 25% markup are different prices (on the worked example, margin pricing gives $39.71 a unit; markup pricing would give $37.23 and a thinner profit than planned). The margin field divides cost by (1 minus margin), and the profit line proves the arithmetic in dollars.
How it is calculated
- Bill of materials per unit = the sum over materials of quantity per unit x cost each. Labour per unit = labour minutes / 60 x hourly rate. Machine per unit = machine minutes / 60 x hourly rate. Cost per started unit = the three together.
- Units started after scrap = good units / (1 minus scrap %), rounded up to the next whole unit.
- Production cost = units started x cost per started unit, split in the results into materials, labour and machine lines on started units. Run cost = production cost + setup + tooling.
- Overhead = your % x run cost. Contingency = your % x (run cost + overhead). Total job cost = run cost + overhead + contingency, unless a minimum job charge is entered and larger, in which case the minimum becomes the total and the results state that the minimum charge applied. Cost per good unit = total job cost / good units.
- Price = total job cost / (1 minus margin %). Profit = price minus total job cost. Sales tax, when entered, is applied to the price and shown as a separate with-tax figure. Range = total job cost less and plus your percentage.
Worked examples
A 500 unit run, fully costed. Illustrative figures: the bill of materials per unit is a housing at $6.40, a circuit board at $11.25 and four fasteners at $0.35, totalling $19.05. Labour 6 minutes at $28 per hour adds $2.80; machine time 4 minutes at $45 adds $3.00; cost per started unit $24.85. At 4% scrap, 500 good units require 521 started units, and production costs $12,946.85. Setup of $350 brings the run cost to $13,296.85; overhead at 12% adds $1,595.62; the total job cost is $14,892.47, or $29.78 per good unit. At a 25% margin the job prices at $19,856.63 ($39.71 per unit), a profit of $4,964.16.
The scrap line, in money. Without scrap, 500 units at $24.85 would cost $12,425.00 in production. The 21 extra started units add $521.85 of materials and conversion that ships as rejects. Shops that quote from good-unit quantities and run with real scrap donate that difference on every job; the started-units row exists to make the donation visible before the quote goes out.
A short run meets the floor. Ten good units, one material at $5.00, no labour or machine time entered and no scrap: production is $50.00, and against a $500 minimum job charge the costing builds on the minimum, giving a total job cost of $500.00 ($50.00 per unit) and a price at a 20% margin of $625.00. Short runs are priced by floors and setup, not by materials.
Reading your results
Read the started-units row as the job’s honesty test: every costing downstream of it (materials bought, hours booked, machine time scheduled) should be planned on started units, while every price conversation happens on good units. Then read cost per good unit against the price per unit: the gap is the margin you planned, and the profit line states it in dollars for the whole run, which is the number that pays rent. If the margin only works at zero scrap or zero overhead, the quote does not work; the page’s structure is deliberately arranged so those two lines cannot be quietly left out.
Limitations
- Overhead allocation is a convention, not a measurement. A single percentage spreads shared costs evenly, which over-costs simple jobs and under-costs complex ones. Activity-based costing exists for shops that need finer truth; this page implements the percentage method openly and labels it as allocation, not fact.
- Rates are yours and they age. Material prices, labour burden and machine rates move. A cost sheet is only as current as its inputs, and the downloadable sheet records the figures used so an old quote can be re-costed rather than re-guessed.
- Learning curves and volume effects are not modelled. The hundredth unit usually costs less labour than the fifth. This page costs a run at steady per-unit minutes; jobs with a strong learning effect need the minutes adjusted by whoever knows the process.
- Yield loss is treated as uniform. Real scrap clusters (startup, changeover, end of reel). A single scrap percentage is the standard estimating simplification, and the range field is there to carry the uncertainty it hides.
Frequently asked questions
How do I work out cost per unit for a manufactured product?
Add the bill of materials per unit to the labour and machine cost per unit (minutes divided by 60, times the hourly rate), gross the quantity up for scrap, spread setup and tooling across the run, allocate overhead, and divide the total by the good units delivered. On this page’s example that chain gives $24.85 per started unit, 521 started units for 500 good ones, and $29.78 per good unit after setup and overhead. Each step is printed, because a unit cost nobody can decompose is a number nobody can defend.
What is the difference between margin and markup here?
Margin is profit as a share of the price; markup is profit as a share of the cost. A 25% margin on a $29.78 unit cost prices at $39.71 (cost divided by 0.75), while a 25% markup prices at $37.23 (cost times 1.25) and quietly delivers a 20% margin. This page prices by margin, states which it is doing on the form and in the method, and shows the profit in dollars so the distinction survives contact with a purchase order.
Why are materials charged on scrapped units?
Because they are consumed by them. A rejected unit used its housing, board and fasteners exactly as a good one did, and the labour and machine minutes spent on it were spent. Costing materials only on good units understates every job by its scrap rate, compounded across the year. The started-units count on this page is the correction: everything variable is charged on started units, and only the price is divided by good ones.
How should setup be treated in a quote?
As a real cost of the run, spread across its units, which is what this page does. Setup does not shrink when the run does, and that asymmetry is the entire economics of short runs: the same $350 is $0.70 a unit at 500 units and $35 a unit at 10, before any minimum charge is considered. Showing setup as its own line also lets a customer see what a larger order would do to their unit price, which is often the most useful conversation in quoting.
Related calculators
Method: job costing on started units grossed up for scrap, per-unit bill of materials and conversion minutes at entered rates, overhead allocated as a percentage of run cost, price derived at the entered margin, exactly as defined on this page. Last reviewed: 13 October 2026.