Manufacturing health calculator

Volume can hide a cost problem. If scrap, overtime, and idle inventory grow with the big PO, the shop is busier and weaker. This calculator is for small manufacturers who can count units, COGS, and a scrap or rework number — even if the number is ugly.

Who this is for

Job shops and short-run manufacturers. If you are a pure reseller, use retail. If you are a GC, use construction.

What to enter first

Revenue, COGS, units, labor, and operating expenses. Scrap units or scrap cost, machine hours, and first-pass yield are the shop-floor set. Inventory and cash show working-capital squeeze.

Worked example: 12-person fabrication shop

Original quarter, shown as a quarter so mix stays comparable.

  • Quarter revenue: $910,000
  • Materials: $398,000
  • Shop labor: $241,000
  • Units shipped: 4,860
  • Units scrapped or unrecoverable rework: 92
  • Machine hours available: 6,240; hours running: 4,100
  1. Cost per shipped unit (materials + labor) = (398,000 + 241,000) ÷ 4,860 =
  2. Gross margin on those direct costs = (910,000 − 639,000) ÷ 910,000 = 29.8%. Many job shops talk about mid-30s to mid-50s depending on value-add. This quarter is packed and thin.
  3. Scrap rate = 92 ÷ (4,860 + 92) = 1.86%. The band we watch is often 2% as a ceiling. This shop is near the line; a bad alloy lot would push it over.
  4. Machine utilization = 4,100 ÷ 6,240 = 65.7%. A common conversation range is roughly 60–75%. They are not “out of capacity”; they are out of margin.

Overtime to hit the PO would raise labor and maybe utilization while crushing margin further. The coaching on this page is meant to push the conversation toward scrap and quoting, not toward a third shift by default.

How to read the results

Cost per unit and job margin are quoting health. Scrap rate and first-pass yield are process health. Machine utilization is capacity. Idle capital drag is inventory and WIP that is not turning. Runway is payroll week.

Mistakes that make the math useless

  • Shipping units in the denominator but materials for jobs not yet shipped in COGS.
  • Calling rework “training” so scrap looks like zero.
  • Comparing a prototype month to a production month.

When to re-run the check

After a BOM change, an overtime spike, or a large PO that stretches materials. Compare months with similar volume so mix does not fool you.

Do I include finished-goods inventory in units?

Shipped units for the period is the cleanest match to revenue. Inventory is a separate field for working capital, not for cost per unit.