Calculating the cost of an individual shirt...

...is harder than you might think. It involves the challenging game of "cost accounting," or the process of looking at all the different expenses involved in running the business and crunching them to come up with an idea of what each unit of output actually costs. This cost estimate is critical to the long-term health of the operation: without an accurate feel for the true cost of your products, it's very difficult to price them at a level that will provide an adequate return over time.

But coming up with even a ballpark cost estimate can difficult, as the photo at right might help illustrate. It's a shot of my merchandise at a recent farmer's market, and it includes a few examples of how cost accounting can get wacky pretty quickly.

My products are t-shirts, and the first cost associated with them is the cost I pay to get them from the printer. This one is easy...the print shop charges me somewhere around $6 to $10 per shirt, mainly depending on how many ink colors are involved and whether it's a Hanes men's shirt (less expensive) or American Apparel women's shirt (more expensive).

But take a look at some of the other stuff in the picture. The shirts are hanging on a neat fold-up clothing rack that cost me $70, and which I should be able to use for at least a few years. The blue strip you see in the upper left is part of my canopy, a necessity at outdoor selling events; the canopy cost me $50, and I'm hoping to get a couple years out of it, too. Other equipment includes a $25 portable table and an old patio chair I've had for years.

There are also lots of little supplies I've had to either make or purchase to be able to sell on this day and others like it: the signs that explain the shirt designs ($10 and an hour of work at Kinko's), the hangers the shirts are hanging on ($1 or $2), the stickers I hand out to people who sign up for me email list ($.25 each), the book of receipts I bring in case a customer wants one ($5), the four storage bins ($3.50 each) of shirts that I've brought with me as my inventory for the day.

One more number to throw into the mix is the participation fee for the farmer's market, which was $25 for the session pictured above - a session that saw me sell 10 shirts at about $15 each. So what did those 10 shirts actually cost me? And more importantly, should I consider this day of selling a success? Hmmm...let me know what you think.