Material Cost of Waste

Amount of raw material purchased (A)

Amount of raw material in product (B)

Loss of raw material to waste (C= A-B)

Unit cost of raw material (D)

Cost of raw material waste (E = C x D)

Cost of disposal of raw material waste (F)

True cost of waste (COW1 = E + F)

Cost of Waste from Rejected work

First time right value = number of components processed/ number actually produced for sale (include rework unless large % is carried out in which case this must be costed separately) G

Annual Running cost of running process (H)

Cost of producing reject (I = (1 - G)x H)

True cost of waste COW2 = COW1 (from materials) + I

Capacity Costs

Amount of Production (L)

Theoretical max capacity (M)

Theoretical max capacity (M)

Profit Margin/ unit of product (P)

Cost of lost margin (Q = N x P)

True cost of waste = COW2 + Q