This measure calculates all costs under direct control of the manufacturing operation— which includes direct labor and expenses, asset charges, and excess material and packaging costs—as a percentage of revenue. It is part of a set of Cost Effectiveness measures that help companies understand all cost expenditures related to the process "produce/manufacture/deliver product."
(Manufacturing controllable costs / Total business entity revenue) * 100
Total Annual Revenue/Net Revenue
Total annual revenue is net proceeds generated from the sale of products or services. This should reflect the selling price less any allowances such as quantity, discounts, rebates and returns. If your business entity is a support unit and therefore does not directly generate revenue, then provide the revenue amount for the units you support. For government/non-profit organizations, please use your non-pass-through budget. For insurance companies the total annual revenue is the total amount of direct written premiums, excluding net investment income. Note: Business entity revenue needs to only include inter-company business segment revenue when the transactions between those business segments are intended to reflect an arm's length transfer price and would therefore meet the regulatory requirements for external revenue reporting.
Manufacturing Controllable Costs
Manufacturing controllable costs are defined as all costs under direct control of the manufacturing operation. This includes direct labor and expenses, asset charges, and excess material and packaging costs. Raw material and finished goods packaging are not included.
Cost effectiveness measures are those in which two related variables, one of which is the cost and one of which is the related outcome related to the expenditure are used to determine a particular metric value.
The metric value which represents the 50th percentile of a peer group. This could also be communicated as the metric value where half of the peer group sample shows lower performance than the expressed metric value or half of the peer group sample shows higher performance than the expressed metric value.