This measure helps companies calculate the total cost of material that is added into production but is not part of a finished product as a percentage of sales. 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."
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Scrap and rework costs as a percentage of sales
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.