Labour Cost per Unit

Why it matters

Your Labour Cost per Unit is the amount it is costing you in Wages to produce one item. The lower this figure is the better. Keeping track of your Labour Costs is important in order to ensure that your profitability per item is not being compromised.

Making the KPI

Step One

To calculate your Labour Cost per Unit you will need to know:

  1. Your employee’s hourly rate
  2. The number of hours it takes to produce one item

You can calculate your employee’s hourly rate by dividing the Direct Wages associated with the production of the item by the number of hours available in your working week. If only three days per week are being spent working on the item, subtract the appropriate number of days in your calculation.

Step Two

Once all your data is available you can calculate your Labour Cost per Unit by multiplying your employee’s hourly rate by the number of hours it takes to produce one item:

Labour Cost per Unit

 

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