True Manufacturing Cost: Direct Labour + Materials + Overhead Allocation
6 August 2025·Updated Sept 2025·10 min read·GuideIntermediate
Key Takeaways
True manufacturing cost is not just materials and direct labour. Overhead — rent, utilities, indirect labour, depreciation, insurance — must be allocated to each product to give an accurate picture of unit cost and product-level profitability. Most SMB factories get this wrong.
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More in factory-manufacturing-operations
→ Raw Materials Running Out Mid-Production: Fixing Your Factory's Inventory Blind Spots→ Bill of Materials for SMB Factories: Getting Your BOM Right Saves Thousands→ Batch Tracking and Quality Control: Tracing Defects Before They Reach Customers→ Calculating Yield Loss: The Hidden Cost Eating Your Factory Margin
📊 By The Numbers
25%38%40%31%£360,000
Key Takeaways
- True manufacturing cost is not just materials and direct labour.
- Overhead — rent, utilities, indirect labour, depreciation, insurance — must be allocated to each product to give an accurate picture of unit cost and product-level profitability.
- Most SMB factories get this wrong.
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