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COSTING FOR A SPINNING MILL - Cost Accounting - Page 3

cost accounting

 

The following table gives the details of count pattern, selling price, rawmaterial price, packing cost and contribution per kg of different counts for a particular period ( year 2000). This is just an example , one should understand that the selling price, rawmaterial price and all other costs keep changing.  THis is the reason why costing is important for a running mill.  All the costs are changing. Some costs change every month, some  once in a year.   Therefore costing plays a major role to run the plant efficiently.

count no. of spls no of mcs prdn/mc prdn kgs/day  raw material cost/kg packing cost /kg freight per kg commn 2% on selling price selling price / kg contribn per kg
20s CVC 4480 4 1109 4436 1.456 0.046 0.051 0.04 2.2 2674
24s CVC 4480 4 881 3525 1.456 0.046 0.051 0.05 2.3 2470
30s CVC 5600 5 679 3394 1.456 0.046 0.051 0.05 2.4 2712
30s TC 4480 4 679 2716 1.240 0.046 0.051 0.04 2.15 2091
36s TC 6720 6 552 3315 1.240 0.046 0.051 0.05 2.4 3365
    23   17385       contrbn/ day 13312

In the above table, all the costs are in US$. The ringframes are with 1120 spindles per machine with automatic doffing and link to autoconer. Packing cost is based on indonesian packing material prices for carton packing.

The ultimate aim of the project is to maximise the contribution.  Looking into the cotribution per kg of yarn, the project should produce only 36s TC. But in this project they have considered 5 different counts. Because

  • yarn market is not stable. It needs a lot felxibility
  • customers are not same, the price depends on the customers
  • the end uses are not same, the price depends on the enduse
  • this unit exports 80% of the yarn, it can not depend on one country, eg. 36sTc is only for Philippines market, it can not be sold in Malaysia, eventhough the quality is good
  • the count pattern depends upon the market requirement and the major counts in the market, not only on the contribution
  • A linear programming technique can be used to maximise the contribution, considering all market constraints,  and production constraints.
  • flexibility  needs more investment and more day to day expenses, if a project has to be more flexible, it has to invest more money on infrastructure
  • the major factor which will make the project feasible with less felexibility is YARN QUALITY in a spinning mill
  • Since this is a critical step for a new project, management should be clear about their  Yarn quality ,  Flexibility required for marketing and should make use of Linear Programming Techniques  to find out the best  product mix  to maximise the  contribution.

 

STEP NO. 2: To work out the Total Investment cost ( machineries, accessories, land and builidng, humdification and electrical instruments)

The following table gives the requirement of produciton  machines. To calculate the number of back proess and winding drums  required, a detailed spin plan should be worked out with  speeds and efficiencies to be achieved in each machine.

While calculating the no of   machines required, m/c utilisation, m/c efficiency , waste percentage, twist multipliers, delivery speeds etc  should be considered properly.  These factors should be decided based on yarn quality required, end breakge rates and the capacity of machine.

INVESTMENT ON MACHINERY

MACHINERY NO. OF MCS RATE / MC TOTAL COST
Trutzschler Blowrrom line for cotton 1  line 416,640 416,640
Trutschler Blowrrom line for Polyester 1 Line 321,365 321,365
Trutshcler DK-903 cards 22 92,500 2,035,000
Rieter RSB-D30 draw frames (with autoleveller) 6   1,648,000
Rieter double delivery drawframe 10
Rieter unilap 2
Rieter E62 combers 10
Howa speed frames with overhead blower 7 144530 1,011,710
Ring frames with autodoffer 23 148,960 3,426,080
winding machines ( 26 drums per mc) 23 93,200 2,143,600
Roving transport ( manual) 1 150,000 150,000
Argus fire system 1 50,000 50,000
       
    TOTAL 11,202,395

Some of the following points can be considered while deciding the machines.

From the above table it is clear that, 23 ringframes with 1120 spindles are working with auto doffing and with link to autoconer. The major advantage of this automation is to reduce labour and to reduce the problems related to material handling. One has to really work out the benefits achieved because of this and the pay back for the extra investment. 

Drawframe contributes a lot to the yarn quality and the ringframe and winding machine working. It is always better to go in for the best drawframes like RSB-D30 drawframes with autoleveller. It is not wise to buy  a cheaper drawframe and save money.

It is always better to keep excess carding and autoleveller drawframes, so that flexibility of the project is also maintained. If the coarser counts contributes more and the market is good, overall production can be increased. If the market is for finer count, both the machines (carding and drawframes)can be run at slower speeds, which will surely contribute to yarn quality.

Speeds of speedframe , combers and ringframes do not affect the yarn quality as it is affected by card and drawframe speeds.

Blow room capacity should be utilised to the maximum, as it consumes a lot of power ,space and money.

Ringframe specification should be perfect, because the working performance and power consumption of the ringframe depends on the specifications like, lift, ring dia, no of spindles etc. Ring frame specification should be decided   to get the maximum production per spindle and to reduce the power consumed   per kg of yarn produced by that spindle. Because the investment cost and the power consumption for the  ringframe is the highest in a spinning mill.

INVESTMENT ON ACCESSORIES:

The following table gives the details of  the accessories like cans for carding, rawframe, bobbins, trollies etc

ACCESSORIES NO. OF MCS RATE / MC TOTAL COST
Carding cans  36" x 48" 120 160 19,200
comber cans 24" x 48" 350 85 29750
Drawframe cans 20" x 48" 1100 53 58,300
Identification bands 20" 400 1.2 480
Identification bands 24" 50 1.8 90
Roving and spinning bobbins     36,000
Plastic crates 400 6 2,400
trolleys     10,000
Cone trolly 80 200 16,000
Fork lift 1 27,000 27,000
hand truck 3 1000 3,000
       
    TOTAL 202,220

 

SERVICE AND MAINTENANCE EQUIPMENTS:

The following table gives the details about  the investments required on service and maintenance  equipments

SERVICE AND MAINTENANCE EQUIPEMENTS NO OF MCS RATE/MC TOTAL PRICE
Cots buffing machine and accessories 1 20000 20000
Card room accessories 1 set 60,000 60,000
Spindle oil lubricator 1 4000 4000
Clearer roller cleaning machine 1 3000 3000
Vacuum cleaner 5 3000 15000
pneumatic cleaners 6 500 3000
Weighing balance 3 2000 6000
Strapping machine 2 2000 4000
Premier autosorter 1 2500 2500
Premier uster tester 1 45000 45000
Premier strength tester 1 45000 45000
premier fiber testing 1 45000 45000
Premier Classidata 1 25000 25000
Erection charges     150000
    TOTAL 427500

Card service machines like   Flat tops clipping machine and flats grinding machine are very important for yarn quality. One should not look for cheaper machine. It is always better to go for reputed manufacturers like  GRAF, HOLLINGSWORTH etc.

Rubber cots contributes a lot to yarn quality. Bad buffing in ring frame can increase the imperfections by 15%.  Poor quality of buffing in drawframe and speedframes can affect both production and quality. It is better to go for the best cots mounting machine and cots buffing machine.

HUMIDIFICATION AND ELECTRICAL EQUIPMENTS:

The following table gives the details about the investments required on  umdification and electrical istruments

Electrical installation including transformer, incoming and outgoing panels, bus duct, capacitor, etc for 3800 KVA 350,000
Cables 125,000
Compressor, Dryer and pipe lines 180,000
humidifaction system 767,000
chillers 176,000
Ducting and installation for humidification system 125,000
workshops, hydrant and other equipments 100,000
   

TOTAL

1,823,000

In indonesia, most of the units use PLN power and some of the spinning mills use Gensets. A detailed costing has to be done to compare the cost per unit  to decide, Whether to use the PLN power or to go in for Gensets. while working out the costing  finance cost on investment , overhauling cost, running cost, efficiency of the machine  should be considered for cost caluculation in the case of Genset. In case of PLN power, the losses due to power interruption( based on the area data), finance cost on initial investment,   md charges, unit charges to be considered. It is  better to use 50% PLN and 50 % own generation.

 

 

The following table gives the details about land and builiding investments

Land cost 200,000
Land development 40,000
Factory building Including Service ally 192 x 62 meters

11,712 Square meter @ 120 usd/sq meter

1,405,440
Road and others 40,000

TOTAL

1,445,440

 

STEP NO.3: To calculate the expenses ( labour, power, stores,working capital, insurance etc)

WorWorking capital = 3,000,000     

LABOUR:The following table gives the details about   labour requirement

DEPARTMENT No of people required
Production 140
packing 15
maintenance 30
utility 17
administration and personal dept 20
   

Total no of people required per day

222

 

wages at 50 usd/month including bonus and insurance 111,00
other facilities at 35 % 3,885
salaries for managerial staff 10000
Other facilities at 35 % 3500
   

Total labour cost / month

28485

POWER: The following table gives the details about the power

Total units(KWH) produced (consumed)per day 69559
Unit cost (cost / KWH) 0.03
Total production in Kgs 17,390
KWH/ Kg of yarn 4.0
TOTAL POWER COST /DAY 2087

SPARES:The following table shows the spares cost, repair , and insurance

spares cost at usd 8/1000 spindle shift 222,566d
repairs and other overheads 200,000
Insurance at 0.175% on investment and working capital 31320
TOTAL cost per year 453886

 

STEP NO.4: PAY BACK CALCULATION

DETAILS IN USD
INVESTMENT:  
Land and building 1,444,440
Machinery, accessories & service equipments 11,832,115
Electrical and Humidification ducts 1,823,000
   

TOTAL INVESTMENT

15,099,555
   
WORKING CAPITAL 3,000,000

GRAND TOTAL

18,099,555
   
RECURRING EXPENDITURES PER DAY  
Salaries and Wages 949.5
Power cost 2087
Stores , repairs and insurance 1260.8

TOTAL

4297.3
   
INTEREST CALCULATION (per day)  
On capital 8% 3355.5
on working capital 9% 750
   
TOTAL EXPENSES INCLUDING INTEREST 8402.8
   
TOTAL CONTRIBUTION PER DAY 13312
NET PROFIT( before depreciation & taxation) 4909.2
PAY BACK PERIOD 8.54 years

 

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