I've been talking with some other folks about this (and some other cost accounting sorts of things).  Nobody has told me I'm all wet (yet) but I have been told of an error in at least some of my reporting on the metric.

In one of the previous posts on the topic (I don't know which one and I don't feel like looking for it) I said something like: From Sales, we subtract Materials and Other Stuff.  First, we just subtract Materials.  The only Other Stuff would be Outsourced Processes, e.g., plating, heat-treating, etc.

Second, and more important, I allowed as how that Materials figure included Materials for product we hadn't made yet (Raw Materials),
Material for product that was being made now (Work in Process), and Material for product that was sitting in inventory (Finished Goods).  It doesn't.  It just includes Material purchased to make the stuff that was actually sold.

Same thing with the Total Labor Hours.  It doesn't include hours for making stuff that's sitting on warehouse shelves (Finished Goods) or on the Shop Floor (Work in Process). 

The overall point is the same (if not quite as powerfully made):  Scrap is  included in the material costs, as are the hours spent making scrap.  And all those wasted hours I talked about are included.