If you do not know what one unit really costs you, you cannot price it or see where margin is leaking. This guide shows a simple method that works for small and mid-size factories in Nepal.
The four cost components
- Raw materials: quantities from your bill of materials (BOM), at purchase cost.
- Direct labour: wages for the time spent on the batch, including piece-rate work.
- Factory overhead: power, rent, machine upkeep and supervision, shared across production.
- Wastage and scrap: material lost in the process, which must be added back to cost.
Step-by-step
- List every raw material for one batch from the BOM, with quantity and unit cost.
- Add wastage: if you lose 5% of a material, the usable cost is higher than the purchase cost.
- Add direct labour for the batch.
- Allocate overhead, for example per machine hour or per labour hour.
- Add everything and divide by the good units produced to get cost per unit.
A simple example
A batch uses Rs. 40,000 of materials, Rs. 6,000 of labour and Rs. 4,000 of allocated overhead, and produces 500 good units. Total cost is Rs. 50,000, so cost per unit is Rs. 100. If 20 units are rejected, the cost per good unit rises, which is why scrap tracking matters.
Work in progress (WIP)
Production that is started but not finished still holds cost. Valuing WIP at period end keeps your stock value and profit accurate.
Where NitiERP fits
NitiERP's manufacturing ERP links multi-level BOMs, work orders, raw material consumption, WIP and scrap to a cost per unit, with accounting and IRD CBMS billing in the same platform. Read the manufacturing ERP guide or book a free demo.
नेपालीमा
एक इकाईको वास्तविक लागत थाहा नभए मूल्य निर्धारण र नाफा नियन्त्रण गाह्रो हुन्छ। कच्चा पदार्थ, श्रम, ओभरहेड र खेर जाने सामग्री जोडेर प्रति इकाई लागत निकाल्नुहोस्।
NitiERP उत्पादन ERP हेर्नुहोस् वा निःशुल्क डेमो बुक गर्नुहोस्।