Tag Archives: level

Unit level costs

Definition:
Unit level costs arise from activities that are performed at least once for each unit of product. For example, machining a surface, drilling a hole, or attaching a subassembly must be done for eacht and every unit produced. These costs include direct labor and material, machine costs, and direct energy costs.

Calculation:
Sum of direct labor costs, direct material costs, direct machine costs, direct energy costs

This KPI is measured as: Financial Value (e.g. €, $)

Interpretation of results: Lower Is Better

Strategic objective:
Increase profitability

Batch-level costs

Definition:
Batch-lever costs arise from activities performed once for each batch or lot of products. For example, machine setups, cleanup, moving the batch to the next step in the production process depend on the number of batches rather than the number of units in each batch. Purchase orders and inspections are also examples of batch-level activities. These costs occur for each batch, independent of how many units are in the batch.

Calculation:
Sum of all types of costs from activities performed for a batch

This KPI is measured as: Financial Value (e.g. €, $)

Interpretation of results: Lower Is Better

Strategic objective:
Increase profitability

Product-level costs

Definition:
Product-level costs arise from activities to support the production of the product or model. For example, engineering support costs for process modifications and product design depend on the existence of the product line and do not vary with the number of units or number of batches produced.

Calculation:
Sum of all costs for supporting production

This KPI is measured as: Financial Value (e.g. €, $)

Interpretation of results: Lower Is Better

Strategic objective:
Increase profitability