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ALTERRA - Unit Cost Production Breakdown
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Long Run Economies of Scale
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Cost CategoryInput ValueCalculationCost per Garment
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KEY ASSUMPTIONS
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AI Sewing Machine Cost$2,000per machine
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Annual Maintenance & Software$200per machine per year
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Machine Useful Life5years
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Annual Production per Machine54,750
365 days × 150 garments/day
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Total Machine Lifespan Production273,750
garments over useful life
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1. MACHINE & EQUIPMENT COSTS
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Machine Depreciation (per garment)$2,000$0.01$0.01
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Maintenance & Software (per garment)$200$0.01$0.01
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Subtotal - Machine & Equipment$0.02
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2. DIRECT LABOR
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Operators & Technicians$2.00per garment$2.00
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Subtotal - Direct Labor$2.00
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3. MATERIALS & CONSUMABLES
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Thread, Fabric, Patches, Hardware, Dyes
$4.25per garment$4.25
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Subtotal - Materials & Consumables4.25$4.25
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4. PACKAGING
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Garment Bags & Packaging Only$0.80
per garment (shipping paid by customer)
$0.80
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Subtotal - Packaging0.8$0.80
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TOTAL UNIT COST PER GARMENT$7.07
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PRICING & MARGIN ANALYSIS
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Total Unit Cost$7.07
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Target Markup Percentage50%100%
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Markup Amount$7.07
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Suggested Retail Price per Garment$14.13
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Gross Profit Margin100.0%
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Avg Competitor Unit Cost$16.83
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Avg Competitor Retail Price37.50
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COST BREAKDOWN BY CATEGORY
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CategoryAmount% of Total
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Machine & Equipment$0.020.2%
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Direct Labor$2.0028.3%
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Materials & Consumables$4.2560.1%
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Packaging$0.8011.3%
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NOTES & STRATEGIC CONSIDERATIONS
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• Cost Reduction Strategy: Purchasing used machinery can significantly reduce initial investment
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• Machine depreciation uses 5-year useful life (conservative estimate)
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• Labor cost of $7/garment includes operators, technicians, and quality control
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• Materials include all consumables: thread, patches, fabric, hardware, dyes, cleaning supplies
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• Packaging includes garment bags only; shipping costs paid directly by customers
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