Scrap Cost
It is how much money you threw away in bad parts, bad runs, or rework scrap this period.
Formal definition
Scrap cost equals the dollar value of scrapped material and parts, typically scrap weight or count multiplied by material cost per unit.
Why it matters
Scrap hits margin twice — you paid for material and lost production time on the same job.
Where you see it
- Shop floor scrap logs
- ERP job costing modules
- ISO quality management reviews
- Lean and Six Sigma projects
- Customer charge-back negotiations
Worked example
- Scrap weight: 500 lbs.
- Material cost: $4/lb.
- Scrap cost = 500 × $4 = $2,000.
- Interpretation: $2,000 of material was scrapped this period.
How Business metrics calculates it
Scrapped units × Cost per unit, or the scrap cost you entered.
Where people fool themselves
Scrap cost at material only ignores the machine time already spent. Full cost is uglier and more useful.
Run it on your own numbers: the Manufacturing calculator.