Bill of Materials (BOM) Cost Calculator

The price of a product starts with what it costs to make, and that is more than the sum of the parts on the invoice. Some material is lost in cutting and testing. Someone’s time is spent assembling it. The workshop, the power and the paperwork all have to be paid for. A bill of materials, with a few more lines, captures all of this. This page turns one into a cost per unit and a suggested selling price.

The parts list

Enter one part per line: its name, the quantity needed for one finished unit, the unit cost, and an optional scrap percentage, separated by pipes. Scrap is the share of the part that is wasted in making: a 3% allowance on a 4.20 part adds 0.126, making the cost per finished unit 4.326. Quantities can be decimals, such as 0.25 kg of wax. A line that cannot be read is named in the message with an example.

Labour and overhead

Labour is the hours per unit times the cost per hour. Use the fully loaded cost of the person, not only their wage, if you want a true figure. Overhead is a percentage added on materials and labour together, a way of sharing out costs such as rent and utilities. The batch size turns the unit cost into the cost of a production run. The margin box sets the profit you want on the selling price.

A worked example

The default is a small electronic device with four parts: an aluminium frame at 4.20 with 3% scrap, eight screws at 0.04 with 5% scrap, a control board at 6.50 with 1% scrap and a box at 0.85. Their costs per unit are 4.326, 0.336, 6.565 and 0.85, and the material cost is 12.08. The frame is 35.8% of it, the board 54.4%, the box 7.0% and the screws 2.8%. Labour is 0.25 hours at 12, or 3.00. Overhead of 15% on 15.08 of materials and labour is 2.26. The cost per unit is 17.34 and a batch of 500 costs 8,669.28. For a 35% margin the price is 26.67, a profit of 9.34 a unit. The candle sample costs 10.49 to make, 3.53 of materials, 6.00 of labour and 0.95 of overhead, so a batch of 60 costs 629.24 and a 55% margin needs a price of 23.31.

Using the cost shares

The share column points to where savings are. In the device, one part is more than half the material cost, so a better price on the board matters more than anything on the screws. Handmade products often show the opposite: materials are small and labour dominates, which is a reminder that your time is the main cost and must be priced in.

Edge cases

Scrap must be from 0 to 100, quantities and costs zero or more, and the margin below 100%. A list with no parts is rejected. Labour hours and cost can be zero for a product that is bought in and resold. The overhead can exceed 100% for a business whose fixed costs are large, up to 1,000. Unit costs are displayed with four decimals only when they need them.

Limits

Each part has one cost, so price breaks at higher quantities are not modelled, nor is the cost of tooling and set-up that is spread over a batch. Overhead is a flat percentage, which is crude: a better method allocates actual costs by machine hours or floor space. Costs also change, so review the list whenever a supplier changes a price.

Related tools

• Markup vs Margin Calculator converts the cost into a price at a markup rather than a margin.
• Profit Margin Calculator checks the margin once you have a price.
• CBM and Container Load Calculator plans freight for a batch of finished goods.
• Break-Even Point Calculator shows the sales needed to cover your fixed costs at this unit cost.