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Packaging Cost per Unit: Price It by Pack Quantity, Not by Weight

How to work out packaging cost for one unit - cartons, bags, foam, labels, pallets - from how many units fit a pack, and why packaging must not be folded into the material category.

Updated

Packaging leaves the plant with the product and is easy to forget, because it is not on the drawing. This guide shows how to reduce it to one figure per unit, and where its borders run with the two categories it is most often confused with: material and freight.

This guide does not say what share of your cost packaging should be. That share depends on whether the product is heavy or bulky, fragile or not, domestic or export - there is no common benchmark, and adopting somebody else's share sets you a target that was never yours.

Why packaging is its own category, not part of material

Material is weight times unit price divided by yield. Packaging has none of the three: a carton has no “weight per unit”, and it has no yield rate.

It is priced by PACK QUANTITY - how many units go in one pack. Those are two different arithmetics, and mixing them gets both categories wrong at once.

There is a second reason, and it belongs to the trade: “how much of my cost is packaging” is a question buyers and export teams ask constantly. Fold it into material and that question can no longer be answered.

Packaging

Cartons, bags, protective foam, labels, pallets - everything that leaves the plant with the product.

Enter it when packaging is material, or when the improvement touches it (new carton spec, dropping a liner, printing labels directly).

Worked example: a 15,000 carton holds 25 units, volume 2,000 a month -> 2,000 / 25 = 80 cartons x 15,000 = 1,200,000 a month, or 600 per unit.

Give each kind of packaging its own line: carton on one, poly bag on another, foam on another, label on another. Merged into a single line, an improvement that removes the inner liner has nowhere to show up.

How to enter returnable packaging

Plastic trays, crates and racks used again and again are not charged at full price each time. Divide the purchase price by the number of trips it survives, and enter the cost per trip - the same reasoning as consumable tooling.

If you pay freight to bring the empties back, that freight belongs under Logistics, not here.

What does not belong here

  • Road, sea or air freight - that is Logistics. This category counts the THING you buy, not the moving of it.
  • Packaging that INCOMING material arrived in - that was already inside the price you paid for the material.
  • The labor of packing - that is a person's time, and it belongs under Labor. This category counts packing materials only.
  • Pallets used inside the plant that never leave with the goods - those are plant assets, closer to Factory overhead.

When it is worth separating this out

When the product is light but bulky - packaging plus freight can then beat the material bill, and nobody believes that until they see the figure.

And when your improvement is a change of pack format: fit more per carton and this category AND Logistics both fall, which you cannot see if you only watch the total.

Try it on your own numbers: open the cost calculator and pick the Packaging category.

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Packaging Cost per Unit: Price It by Pack Quantity, Not by Weight | costdown.org