Issue link: https://docs.hic.us/i/403552
you add in your desired salary as well as retirement costs, medical insurance, life insurance and estimated income taxes. Add all of these numbers together, along with the total of all of your monthly costs, to achieve your estimated yearly cost of operation. The next step is to break this sum down to an hourly value. First determine how many weeks you plan to work annually. There are 52 weeks in a year, but if you take off 2 weeks for vacation, and 10 standard holidays, that leaves 48 weeks. Of course you may have a staff so that the shop isn't closed when you're off. Regardless, it is necessary to determine a usable figure. For this example, we will use 50 weeks. Second, you need to assess how may hours of production you can reasonably achieve in a normal week. Even if you run 2 shifts per day, you should base your numbers on one 8 hour shift per day. That way, if sales or production falls off, you won't have to raise your prices to compensate. If your business is operated on a part-time basis, you will have to estimate the average number of actual sewing hours you get per week. Assume that your equipment runs 40 hours each week for 48 weeks per year. That yields 1920 hours of production annually. Now simply divide your total estimated yearly expenses by 1920 hours to calculate your hourly cost of doing business. Theoretically speaking, if you can bring in this amount of money each and every production hour of the year, all of your expenses will be met, including your desired salary. Now take this one step further and calculate a price per 1000 stitches. You need to determine how many minutes per hour that the average head will sew. Taking into account down-time caused by such things as thread breaks, garment change- out, operator in-efficiency, design-loading, thread changeovers, etc., assume 30- 45 minutes of constant sewing per hour. Now assuming that your machine runs at an average of 800 stitches per minute you can expect to achieve at least 24000 stitches per hour per each sewing head that you have. If you have a single head machine, divide your hourly cost by 24000 stitches to achieve a cost per stitch. Multiply this number by 1000 to calculate your charge per 1000 stitches. Here is an example so that you can get a better view of the math: Assume that your Total Estimated Yearly Expenses = $60,000 Assume - 48 Weeks of Production Per Year Assume - 40 Hours of Production Per Week Step 1: Calculate the total annual hours of production. www.hsi.us care@hsi.us 73