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Cost per unit worksheet (manufacturing cost per good unit)
Cost per unit is what it costs to make one unit of a product: direct materials, direct labor and manufacturing overhead, added up. Cost per good unit goes one step further and divides the cost of everything started by the units that pass, so scrap is paid for by the good units. This worksheet works that out for one product, then shows where the cost sits and which change is worth most a year. You enter the purchased items with quantity, unit cost and scrap allowance, and the operations with run rate, people, labor rate and machine rate. You choose how overhead is charged: per direct labor hour, per machine hour or as a percent of direct labor cost. Page 1 of the PDF is the blank sheet. Page 2 gives the formulas, the cautions and a worked example of a steel bracket. The Excel version holds 12 purchased items and 6 operations, shows the cost of a good unit by block with the share each carries, shows the gap to your target per unit and per year, and ranks the levers (the price of each item, direct labor, machine, overhead and yield) by what a change in them is worth a year at your volume. The cost blocks and the overhead rate follow the OpenStax managerial accounting text. The yield and lever arithmetic is this sheet's own method, and the overhead base is a method choice. It is not for inventory valuation or financial reporting.
Free to use: print it, copy it and edit it for your team. Enter your name and work email once to download.
When to use it
When to use a cost per unit worksheet
- When a cost reduction target arrives and nobody can say which part of the product's cost is large enough to matter.
- Before quoting or re-quoting a part, to see how much of its cost is material, labor, machine and overhead.
- When scrap or yield is argued about, to put a price on a point of yield next to a price change on the main material.
- To choose between improvement ideas that act on different parts of the cost, such as a steel price, a run rate and a yield.
How to fill it in
- 1
Choose one product and one route
Take the volume you really run and the yield from your own counts of good units against units started. Use one part number: an average across products hides where the cost sits.
- 2
List every purchased item
Quantity per unit, unit cost and the scrap allowance you really lose, such as offcuts, overspray and damaged packaging. The Excel sheet holds 12 items.
- 3
Add every operation
Units started per hour, people, labor rate and machine rate for each step. Take the times from the line, with a time study or an OEE sheet, not from the routing.
- 4
Choose the overhead base and rate
The overhead rate is budgeted overhead divided by budgeted activity on the base you pick: direct labor hours, machine hours or direct labor cost. Write the choice down. It is a method choice, not a fact about the product.
- 5
Read the cost of a good unit and the gap
The sheet shows materials, labor, machine and overhead per good unit with the share each carries, then the gap to your target per unit and per year.
- 6
Read the levers and check they are real
The levers sheet values a 1% change, and a test change you set, in each driver at your annual volume, biggest first. A time saving frees capacity but saves overhead only if overhead spending falls.
A filled-in example
Illustrative, not a benchmarkAn example: a steel bracket made at 120,000 good units a year with a yield of 96%, so 125,000 are started (illustrative numbers). Six purchased items, two operations, overhead charged at $30 per direct labor hour, $0.40 recovered for each scrapped unit and a target of $6.40.
- The cost per good unit is $6.86: materials 2.58 (37.6%), direct labor 1.51 (22.0%), machine 1.22 (17.8%) and overhead 1.56 (22.8%), less 0.02 for the scrap recovery.
- Against the target of $6.40, the gap is $0.46 a unit, or $54,624 a year at 120,000 units: a 6.6% cut.
- The levers use a 5% change in every price, rate and time, and a 2-point gain in yield. Two points of yield (96% to 98%) are worth $15,809 a year. A 5% cut in the steel price is worth $9,936, although steel is 24% of the cost, because fewer scrapped units cut every block at once.
- Overhead at 5% is worth $9,375 a year, direct labor $9,063 and machine $7,321. The biggest lever closes 29% of the gap, so the plan needs several.
The team works on yield first, asks purchasing about the steel price second, and counts a labor or overhead saving only once the spending actually falls.
Common mistakes
Treating the cents as precise
Overhead is an allocation, and the rate depends on the base you pick and the activity you budgeted. Two decimals are plenty. Compare blocks and levers, not the fourth digit.
Counting an overhead saving that is only an allocation
If a job takes less labor time, the overhead charged to it falls on paper, but the building, supervision and utilities cost the same. It is a saving only when overhead spending falls. The sheet values time savings at direct cost for this reason.
Using routing times and standard yield
Routings and standard yields are often old. Use run rates and good-unit counts from the line, or the cost of a good unit will look better than the one you pay.
Leaving out the scrap allowance on materials
A 15% overspray allowance on powder coat is real cost even if the bill of materials shows only the net quantity. Enter what you really buy per unit.
Adding up lever values
Levers that act on the same cost overlap. A yield gain also lowers the steel you buy, so the yield value and the steel value are not additive.
Download the template
Free to use: print it, copy it and edit it for your team. Enter your name and work email once to download.
Run this template in LeanSuite
In LeanSuite, manufacturing cost reduction starts with a cost on every loss: loss trees show where a plant loses money, standard work removes waste, and KPI dashboards track the savings.
In the lean glossary
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FAQ
Cost per unit worksheet (manufacturing cost per good unit): common questions
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A shift handover sheet, a red tag log, a changeover checklist for one machine: if your team uses it on the floor, ask.