How do you calculate rework cost?

Rework Cost = Reworked Units x Rework Time per Unit x Loaded Labor Rate + Extra Material. For 85 units at 12 minutes (0.2 hr) each and $42/hr: rework hours are 85 x 0.2 = 17, labor is 17 x $42 = $714, extra material at $0.80/unit is $68, so total is $782. Convert rework time to hours before multiplying by the labor rate.

How do I convert rework time from minutes to hours in the formula?

Divide minutes by 60. Twelve minutes per unit is 12/60 = 0.2 hr. Then multiply by units to get total hours: 85 x 0.2 = 17 hours, times $42/hr equals $714 in labor. Keeping time in minutes and multiplying by an hourly rate is a common error that inflates cost 60-fold, so always convert to hours first.

Should I include re-inspection cost in rework cost?

Yes. Every reworked unit must be re-inspected, and that inspection labor is typically 20-30% of the rework labor time and easy to forget. In the example, adding 25% to the 17 rework hours adds about 4.25 hours, or roughly $178 at $42/hr, raising labor from $714 toward $890. Leaving it out understates cost-of-quality and weakens the case for error-proofing.

What loaded labor rate should I use for rework?

Use the fully loaded rate, base wage plus benefits, payroll taxes, and applied overhead, not the raw hourly wage. A $42/hr loaded rate typically corresponds to roughly $26/hr base pay. Your controller or ERP standard cost carries this figure. Using base wage alone can undercount rework labor by 40-60%, making the improvement opportunity look smaller than it is.

When is it cheaper to scrap a part than to rework it?

Compare rework cost per unit to the part's loaded value. Here $782 across 85 units is about $9.20 per reworked unit. If that meets or exceeds the fully loaded cost of making a new good part, scrap it instead. Also weigh re-inspection labor and the risk that reworked parts fail again; marginal repairs on cheap parts rarely pay off.

What is the difference between rework cost and scrap cost?

Rework cost is the extra labor and material to fix a defective part that stays in the flow, calculated as reworked units times rework time times loaded rate plus extra material. Scrap cost is the full loaded value of parts thrown away, unit count times cost per scrapped unit. Rework recovers the part for an incremental cost ($9.20 each here); scrap loses the entire built-in value.

Quality and Inspection

Rework Cost Formula

Rework cost is the labor, material, and machine time spent fixing non-conforming parts. Use it when building cost-of-quality reports, setting improvement priorities, or calculating ROI on error-proofing investments.

Formula

Rework Cost = Reworked Units x Rework Time per Unit x Loaded Labor Rate + Extra Material

Variables

Reworked Units: Number of units that required repair or correction in the period
Rework Time per Unit: Average labor time to rework each unit, in hours
Loaded Labor Rate: Hourly labor cost including benefits and overhead in $/hr
Extra Material: Any additional material consumed during rework (adhesives, fasteners, coatings, etc.)

Understanding the Rework Cost Formula

Rework cost captures the money spent salvaging parts that should have been right the first time. It is Reworked Units times Rework Time per Unit times Loaded Labor Rate, plus Extra Material. In the example, 85 units at 12 minutes each and $42/hr yields $714 in labor, plus $68 in adhesives and fasteners, for $782. Unlike scrap, the part survives, but the incremental labor and machine time are pure waste that erodes throughput and margin on work you already paid to produce once.

Pull Reworked Units from your nonconformance log, and Rework Time per Unit from a time study or MES ticket, always in hours. Convert minutes carefully: 12 minutes is 12/60 = 0.2 hr, so 85 x 0.2 = 17 hours. Loaded Labor Rate must include benefits and overhead, not the base wage; $42/hr is realistic for a loaded rate on roughly $26/hr base pay. Extra Material sums any consumables the repair adds. The classic omission is re-inspection labor after rework.

Compare rework cost to the value of the parts and to your error-proofing options. Here $782 on 85 units is about $9.20 per reworked unit, which may exceed the margin on the part itself. If rework cost approaches scrap cost per unit, scrapping may be cheaper than fixing. Add the missing 20-30% re-inspection time to avoid understating; that pushes labor from $714 toward $850-$930. Use the total to justify poka-yoke or process fixes with a clear payback.

Worked Example

85 units required rework averaging 12 minutes each. Loaded labor rate is $42/hr. Extra material is $0.80 per reworked unit.

Rework hours = 85 x (12 / 60) = 17 hours
Labor cost = 17 x $42 = $714
Extra material = 85 x $0.80 = $68
Total rework cost = $714 + $68 = $782

Result: $782 total rework cost

Common Mistake

Not including the cost of re-inspection after rework. Every reworked unit needs to be inspected again, which adds inspection labor. This is often 20-30% of the rework labor time and is easy to overlook.

Frequently Asked Questions

How do you calculate rework cost?: Rework Cost = Reworked Units x Rework Time per Unit x Loaded Labor Rate + Extra Material. For 85 units at 12 minutes (0.2 hr) each and $42/hr: rework hours are 85 x 0.2 = 17, labor is 17 x $42 = $714, extra material at $0.80/unit is $68, so total is $782. Convert rework time to hours before multiplying by the labor rate.
How do I convert rework time from minutes to hours in the formula?: Divide minutes by 60. Twelve minutes per unit is 12/60 = 0.2 hr. Then multiply by units to get total hours: 85 x 0.2 = 17 hours, times $42/hr equals $714 in labor. Keeping time in minutes and multiplying by an hourly rate is a common error that inflates cost 60-fold, so always convert to hours first.
Should I include re-inspection cost in rework cost?: Yes. Every reworked unit must be re-inspected, and that inspection labor is typically 20-30% of the rework labor time and easy to forget. In the example, adding 25% to the 17 rework hours adds about 4.25 hours, or roughly $178 at $42/hr, raising labor from $714 toward $890. Leaving it out understates cost-of-quality and weakens the case for error-proofing.
What loaded labor rate should I use for rework?: Use the fully loaded rate, base wage plus benefits, payroll taxes, and applied overhead, not the raw hourly wage. A $42/hr loaded rate typically corresponds to roughly $26/hr base pay. Your controller or ERP standard cost carries this figure. Using base wage alone can undercount rework labor by 40-60%, making the improvement opportunity look smaller than it is.
When is it cheaper to scrap a part than to rework it?: Compare rework cost per unit to the part's loaded value. Here $782 across 85 units is about $9.20 per reworked unit. If that meets or exceeds the fully loaded cost of making a new good part, scrap it instead. Also weigh re-inspection labor and the risk that reworked parts fail again; marginal repairs on cheap parts rarely pay off.
What is the difference between rework cost and scrap cost?: Rework cost is the extra labor and material to fix a defective part that stays in the flow, calculated as reworked units times rework time times loaded rate plus extra material. Scrap cost is the full loaded value of parts thrown away, unit count times cost per scrapped unit. Rework recovers the part for an incremental cost ($9.20 each here); scrap loses the entire built-in value.