Home › Textile Costing › Lecture 16
Textile Costing · Lecture 16
Simple Yarn Costing
Raw material, variable production and export costs, contribution per bag and per frame for an export yarn order.
Export costsContribution per bagProfit per frame
From a dollar price to a profit per frame
A spinning mill sells Ne 20 at US$ 2 per kg. One container carries 400 bags. Every cost that is incurred because the bag is sold is variable; the frame cost (depreciation, finance, labour) is fixed per frame and compared with the contribution a frame earns in a day.
| A | B | C | D | ||||
|---|---|---|---|---|---|---|---|
| 1 | Basis | Per container | Per bag | ||||
| 2 | Bags per container | ||||||
| 3 | Price (US$/kg) | ||||||
| 4 | Rs per US$ | ||||||
| 5 | Price per bag (100 lb) | 120.00 | 5,444.65 | ||||
| 6 | Local freight | 37.50 | |||||
| 7 | Export development surcharge | 13.61 | |||||
| 8 | Foreign bank charges (US$) | 15,000 | 37.50 | ||||
| 9 | Local bank charges | 4.50 | |||||
| 10 | Postage | 2.50 | |||||
| 11 | Ocean freight (US$) | 30,000 | 75.00 | ||||
| 12 | Packing per bag | ||||||
| 13 | Raw material per bag (adjusted cotton cost × 100 lb) | 4,057.28 | |||||
| 14 | Total variable cost per bag | 4,327.89 | |||||
| 15 | Contribution margin per bag | 1,116.75 | |||||
| 16 | Per frame | ||||||
| 17 | Bags per frame per day (Ne 20 → OPS 10.3 × 0.9) | ||||||
| 18 | Contribution per frame per day | 10,352 | |||||
| 19 | Fixed cost per frame per day | ||||||
| 20 | Profit / (loss) per frame per day | (3,648) | |||||
| 21 | Total frames | ||||||
| 22 | Profit / (loss) per day for the mill | (167,794) | |||||
| 23 | Break-even price per bag (Rs) | 5,838 | |||||
| 24 | Break-even price (US$/kg) | 2.145 | |||||
blue = input (edit me)grey = formula (click to see it)
At US$ 2 the Ne 20 frame loses about Rs 3,650 a day: the contribution of Rs 1,117 per bag × 9.27 bags does not cover the Rs 14,000 frame cost. Raise the price, the exchange rate or the OPS and watch the break-even line — this is the daily conversation in every spinning mill’s marketing office.