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CPM (Total Operational Expenses/ Total Minutes Produced)

The document discusses how to calculate cost per minute (CPM) for a garment factory by taking the total operational expenses and dividing by the total minutes produced. Total operational costs include manpower costs and overhead costs. Total minutes produced is calculated by multiplying the total acceptable pieces produced by the standard minute value. An example is given showing how increasing line efficiency from 66.67% to 75% reduced the CPM by increasing total production and minutes, lowering the cost per minute.

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50 views2 pages

CPM (Total Operational Expenses/ Total Minutes Produced)

The document discusses how to calculate cost per minute (CPM) for a garment factory by taking the total operational expenses and dividing by the total minutes produced. Total operational costs include manpower costs and overhead costs. Total minutes produced is calculated by multiplying the total acceptable pieces produced by the standard minute value. An example is given showing how increasing line efficiency from 66.67% to 75% reduced the CPM by increasing total production and minutes, lowering the cost per minute.

Uploaded by

alamtareq
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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CPM = (Total Operational Expenses/ Total Minutes Produced)

Total Operational Cost = (Manpower Cost + Overhead Cost)

Total Minutes Produced = (Total OK Pcs Produced X SMV)

Here is an example that shows how the cost per minute reduced when line efficiency is increased.

Let's say, A garment factory XYZ, 50 workers produced 800 garments in a day. The standard minute of
the garment is 20 minutes. The total salary paid to the direct labors 17,500 INR (assuming daily wages Rs
350 per day). In this case, cost per minute is

= (17,500/(800x20))
= 1.094

The calculated line efficiency is 66.67%.


Now let’s say, line efficiency is increased to 75%. Now, total production and produced minutes will be
increased.  As the production quantity increases the cost per garment and cost per minute will be
reduced. 

= (17,500/(900x20))
=0.972

In the above example, you can see the cost per minute reduced from 1.09 to 0.972 by increasing line
efficiency from 66.67% to 75%.

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