Since ship hull blocks are constructed by assembling numerous intermediate parts, relatively small changes in their dimensions can easily accumulate to cause serious reworking during the block erection stage, as well as deteriorate the productivity in ship production industry. One of the major dimensional accuracy control activities in shipbuilding is shrinkage margin design, by which an optimal length of excess edge is assigned to plates, in order to compensate for welding shrinkage and thus minimise reworking due to shrinkage. This paper presents a stochastic methodology for a quantitative assessment procedure of welding shrinkage on production cost in shipbuilding. This reworking cost evaluation procedure includes not only the prediction of a nominal shrinkage profile, but also a statistical cost estimation process for shrinkage variation. The formulation to predict total rework cost is suggested to be a combination of nominal shrinkage profile, process variation and quality loss functions for each rework region. Also, this approach investigates the relationship between the shrinkage margin and the predicted rework cost, in case of different process variations for a 15 m × 15 m ship block model. It also presents an optimal shrinkage margin calculation procedure for ship designers in order to minimise the impact of dimensional variation due to welding shrinkage, on productivity.