How to calculate the production cost of Partially Oriented Yarn?

As a supplier of Partially Oriented Yarn (POY), accurately calculating the production cost is crucial for maintaining a profitable business and offering competitive prices to our customers. In this blog post, I will share the key factors and steps involved in calculating the production cost of POY.

1. Raw Material Costs

The primary raw material for POY is usually polyester chips. The cost of these chips can fluctuate significantly due to factors such as global oil prices, supply - demand dynamics in the petrochemical industry, and geopolitical events. As a POY supplier, we need to stay updated on these market trends.

To calculate the raw material cost, we first determine the quantity of polyester chips required to produce a certain amount of POY. This quantity is based on the production process's efficiency and the specific characteristics of the POY we are manufacturing. For example, if we know that for every 1000 kilograms of POY produced, we need 1050 kilograms of polyester chips (to account for some losses during the process), and the price of polyester chips is $1.5 per kilogram, then the raw material cost for 1000 kilograms of POY is 1050 * $1.5 = $1575.

It's also important to note that different grades of polyester chips can be used, and each grade may have a different price. Higher - quality chips may result in better - quality POY but will also increase the raw material cost.

2. Energy Costs

The production of POY is an energy - intensive process. Energy is required for melting the polyester chips, spinning the yarn, and other manufacturing steps. We mainly use electricity and sometimes steam in our production facilities.

To calculate the energy cost, we need to measure the energy consumption at each stage of the production process. For instance, the melting process may consume a certain number of kilowatt - hours (kWh) of electricity per kilogram of POY produced. If the melting process consumes 2 kWh of electricity per kilogram of POY and the electricity price is $0.1 per kWh, then the electricity cost for melting in the production of 1000 kilograms of POY is 2 * 1000 * $0.1 = $200.

We also need to consider the energy cost for other processes such as cooling and winding. By accurately measuring the energy consumption at each step and multiplying it by the corresponding energy price, we can get the total energy cost for POY production.

3. Labor Costs

Labor is another significant component of the production cost. Our production facilities require a team of skilled workers, including machine operators, technicians, and quality control personnel.

To calculate the labor cost, we first determine the number of workers involved in the production process and their hourly wages. For example, if we have 10 machine operators working 8 - hour shifts at a wage of $20 per hour, and they are directly involved in the production of POY, then the daily labor cost for these operators is 10 * 8 * $20 = $1600.

We also need to account for the labor cost of technicians who maintain the production equipment and quality control personnel who ensure the POY meets the required standards. By summing up the labor costs of all relevant workers involved in the production process over a specific period and dividing it by the amount of POY produced during that period, we can obtain the labor cost per unit of POY.

4. Equipment Depreciation and Maintenance Costs

The production of POY requires specialized equipment such as spinning machines, extruders, and winding machines. These machines have a limited lifespan and need to be depreciated over time.

To calculate the equipment depreciation cost, we first determine the initial cost of the equipment, its expected useful life, and the salvage value at the end of its useful life. For example, if a spinning machine costs $100,000, has an expected useful life of 10 years, and a salvage value of $10,000, then the annual depreciation cost using the straight - line depreciation method is ($100,000 - $10,000) / 10 = $9000.

In addition to depreciation, we also need to consider the maintenance cost of the equipment. Regular maintenance is essential to ensure the smooth operation of the production process and to extend the lifespan of the equipment. Maintenance costs may include the cost of spare parts, lubricants, and the labor cost of maintenance workers. By adding the annual depreciation cost and the annual maintenance cost and dividing it by the annual production volume of POY, we can get the equipment - related cost per unit of POY.

5. Overhead Costs

Overhead costs include all other expenses that are not directly related to the production process but are necessary for the operation of the business. These costs may include rent for the production facility, insurance, administrative expenses, and marketing costs.

To calculate the overhead cost per unit of POY, we first sum up all the overhead costs for a specific period. For example, if the monthly rent for the production facility is $5000, the insurance cost is $1000, and the administrative and marketing costs are $3000, then the total monthly overhead cost is $5000 + $1000+ $3000 = $9000.

We then divide the total overhead cost by the monthly production volume of POY to get the overhead cost per unit.

6. Quality - related Costs

Maintaining high - quality POY is essential for our business. Quality - related costs include the cost of quality control measures, such as testing equipment, the labor cost of quality control inspectors, and the cost of rework or scrap due to quality issues.

For example, if we use a testing machine that costs $50,000 and has an expected useful life of 5 years, the annual depreciation cost of the testing machine is $50,000 / 5 = $10,000. The labor cost of quality control inspectors is also a significant part of the quality - related cost. And if, on average, 2% of the produced POY is scrapped due to quality issues, we need to account for the cost of the raw materials, energy, and labor that went into producing that scrapped POY.

Calculating the Total Production Cost

Once we have calculated all the above - mentioned costs, we can calculate the total production cost of POY. We sum up the raw material cost, energy cost, labor cost, equipment depreciation and maintenance cost, overhead cost, and quality - related cost for a specific production volume.

For example, if for the production of 1000 kilograms of POY, the raw material cost is $1575, the energy cost is $200, the labor cost is $300, the equipment - related cost is $150, the overhead cost is $120, and the quality - related cost is $80, then the total production cost for 1000 kilograms of POY is $1575 + $200+ $300 + $150+ $120 + $80 = $2425.

The unit production cost per kilogram of POY is $2425 / 1000 = $2.425.

Our Product Range and Competitive Edge

As a POY supplier, we not only focus on accurate cost calculation but also offer a wide range of high - quality products. In addition to our standard POY, we also provide related products such as Glove Cotton Knitting Yarn, Recycled FDY High - strength Yarn, and 21 Count Recycled Polyester Yarn.

Our accurate cost - calculation methods allow us to offer competitive prices without compromising on quality. We are committed to providing our customers with the best value for their money.

Contact Us for Procurement

If you are interested in our Partially Oriented Yarn or any of our other products, we welcome you to contact us for procurement discussions. We can provide you with detailed product information, samples, and competitive quotes. Our team of experts is ready to assist you in finding the right products to meet your specific needs.

References

• Chemical Economics Handbook: Polyester Fibers. S&P Global Market Intelligence.
• Textile Manufacturing Technology: Spinning, Weaving, and Non - woven Processes. Elsevier.
• Principles of Industrial Engineering. McGraw - Hill Education.