V: Cost Analysis

Raw Material Cost

All of our calculations will be based on a realized annual volume of 1,076,814 yo-yos. We did not include energy/waste cost of processes in analysis and we did not account for sprue/runners/gate in analysis.

Total Cost of Raw Materials and Other Components = $8570767.98

Tooling Cost

Total Cost of Tooling = $99,087

Tooling cost was calculated using an hourly pay of $21.

The bulk of the calculations were made using Tooling Cost Estimator.

Equipment Cost

Total Cost of Equipment = $172,740

Calculations made under assumption of being able to purchase PP sheets that are pre-cut to size for thermoforming processes.

Alibaba was the source of our machine costs as we only considered machines necessary to produce slightly over 1 million yo-yos per year (so you'll see lower-end price ranges than if we were going for 10 million yo-yo production rates).

Labor Cost

Total Annual Cost of Labor = $990,000

11 workers are required at all times in the factory. With 24-hour factory operation, we have three 8-hour shifts. Each worker is paid a yearly salary of $30,000, which is slightly higher than what we found for factory workers. The actual number of employed workers and labor cost would actually be higher because the workers need to take breaks and have days off.

Assumptions: each task requires one worker per shift (each shift sees a new worker for a total XX workers in rotation), all worker positions receive the same wages, factory location in the United States (somewhere in the Midwest or South), no daily breaks/days off/holidays included in analysis, 24 hour factory operation.

Production Costs

Manufacturing Costs

Per-Part Cost for Manufacturing = $4.68

Manufacturing costs are slightly higher than our initial production cost as we have now accounted for the cost of assembly. However, we have not included labor costs for quality control in the following calculations.

How do costs compare to the price of commercially made yo-yos? What might account for the differences?

Commercially made yo-yos average at $5 yo-yo. This cost comes from the average price of a standard, no-frills yo-yo toy. Our manufacturing cost of $4.68 per yo-yo differs from this average cost likely due to the markup cost from the manufacturing cost to commercial sale in order for companies to make a profit. We project that a very basic yo-yo probably does not cost as much to manufacture as ours, and that the $5 average sales price for one of these yo-yos is likely a large markup from its original manufacturing cost. The reason why we believe our yo-yo likely has a higher manufacturing cost (on the assumption that both are evaluated with a target annual volume of around 1,076,814 yo-yos) is due to our yo-yo’s more complex design. Our yo-yo design contains a higher part count than a standard, flat-faced yo-yo. Since we have an assortment of parts, we also needed to account for more specialized tooling and material costs.

Could the cost be reduced significantly using additional automation? Explain advantages and challenges. Would your answer be different if you had to increase the volume 100-fold?

The cost could be reduced using additional automation, though this sees both advantages and challenges. The cost might not be reduced significantly due to the cost involved in adding automation. However, if we were to increase the volume 100-fold, we would consider adding automation, since, as we saw with the cost-quantity plots, cost decreases with the number of parts.

If we were to use additional automation, main advantages include being able to produce more to drive down cost per yo-yo. If we were able to produce a higher realized annual volume than our current 1,076,814 yo-yos. we could decrease the cost per yo-yo, as higher production would offset the tooling cost of the IM molds and TF die shared amongst all of the manufactured yo-yos. Additionally, automation could replace the need for human labor, which is a costly part of our operation. The high cost of labor stems from our choice of factory location. We chose to construct our factory in the United States, where manufacturing labor is more costly than if we had sourced work from other countries where labor is less costly. Challenges would include the need to design other specialized rigs and clamping systems that could allow for some currently human-labor intensive processes - mostly assembly and painting - to occur.