Garments Cost Calculation Tips for Apparel Merchandiser

Apparel Cost Calculation System or Tips Followed By Garment Merchandiser:

An important part of the management of the textile mill is the determination of the production costs. Cost involves numerous variable factors which are often hard to evaluate accurately and mathematical exactness in difficult to reach. The yarn market fluctuates, finishing materials, dyestuffs, etc., and change from season to season, equipment is often replaced by more modern machinery. All of these affect the determination of accurate production costs.

The elements of cost are as follows-

• Material,
• Direct,
• Labor Overhead,
• Commission / Profit.

All the above elements have explained in the below:

Materials:

The cost of Materials for a knitting plant is high in comparison with that for other manufacturing establishment. The materials, yarn, etc. are already in an advanced stage of manufacture and the cost of the material in a knitted article is frequently as high as fifty percent of the selling price of finished article . Since the cost of materials is always available the only difficulty to be met in figuring the cost is the determination of the amount to be added for waste in manufacturing.

Waste Occurs in-

1. Winding,
2. Press-off and defective knitting,
3. Cutting Wastage in the manufacture of garments,
4. Losses due to finishing,
5. Invisible waste from evaporation of moisture etc.

Direct Labor:

Practically all the operations coming under the head of direct labor are paid for on a piece rate basis. The winding and preparation of yarns is paid for at so much per lbs. each count or quality being assigned a different rate according to the count or nature of material. Pieces rate varies with conditions in various localities and are arrived at by studying the production over an extended period of time.

Overhead-Overhead costs include a part or all of the following items-

1. Rent, Taxes, Insurance.
2. Light, Power, Fuel.
3. Needles and supplies.
4. Depreciation of machinery, plant and equipment.
5. Salaries of department heads and managerial staff.
6. Interest on loans.
7. Payroll taxes.

Rent, Taxes, and Insurance:

This item may vary from one season to another due to the increase or decrease in number of people employed. Rent and taxes should be apportioned according to floor space and costs figured against the department.

Light, Power and Fuel:

These items will include all expense for electric power, water gas, steam, pipes and fittings, motors, belts and drives etc.

Needles and Supplies:

With the increase in complexity of modern knitting machinery the expense for supplies to keep the equipment running is higher than ever before. Savings in the needles, jacks, sinkers etc. may be affected in the first place by employing mechanics of the highest skill.

Depreciation of Machinery, Plan and Equipment:

The depreciation of machinery is dependent not only upon the Normal life of the machine but also upon the time for which the machine can be operated before it becomes obsolete.

Salaries of Departmental heads and Management:

The Salaries of managers, Supervisors and the wages of persons on the office staff must be accounted for either in the departmental costs or the administrative charges.

During the fixation of FOB price following elements are to be followed carefully-

1. Cost of Fabric / doz. Garments (woven/knit) or cost of yarn/ doz. Garments (sweater),
2. Cost of Knitting,
3. Cost of Dyeing,
4. Cost of Printing,
5. Cost of Embroidery,
6. Cost of Accessories / doz. garments,
7. Cost of Manufacturing (CM) / doz. garments,
8. Cost or Transportation from factory to Sea Port,
9. Clearing and Forwarding cost,
10. Overhead Cost,
11. Commission / Profit.

Costing Function of a Garment:

Pre Cost:

• Fabric, trim and labor costs for each garment are calculated here.
• The merchandiser / designer usually keep a record of all materials costs on a work sheet.
• Then the costing department can roughly estimate the cost and price structure. (Normally overhead cost is 30-40%).

Final Cost:

• It is an exact calculation by the costing or import department.
• Using actual figures for fabric, accessories and labor cost.
• Costing department uses…
  a) Merchandiser work sheet,
  b) A proto type garment,
  c) Production pattern,
  d) A detailed cost analysis is made for each garment the final cost is plotted on a costing sheet.

Costing of Garments (In Fob) Prices:

Costing of a garment for example in a shirt:

1. Fabric costing
2. Garment accessories:

• Button,
• Interlining label,
• Sewing thread,
• Hang tag/ price tag,
• Collar bone.

3. Finishing accessories:

• Poly bag,
• Plastic clip,
• Gum Tape,
• Neck board,
• Scotch Tape,
• Neck insert,
• Back board,
• Collar insert,
• Carton,
• Butterfly,
• Tag pin,
• Sticker.

4. Labor charge,
5. Washing charge (If it is garment wash),
6. Commercial and transportation cost.