Important Costing Tips for Garments

Cost and costing
Cost typically can be defined as’ the economic value placed upon the resources consumed to make a product.

Costing is the process of estimating and then determining the total cost of producing a garment, including the cost of materials, labour and transportation as well as the general expenses of the operating the business .

Costing

In order to do perfect garment costing, one must know about all the activities including purchase of fabrics, sewing, packing, transport, overheads, etc. and also about their costs, procedures, advantages and risk factors. Merchandiser must be aware that there are always fluctuations in the costs of raw materials and accessories, charges of knitting, processing, finishing, sewing and packing, charges of transport and conveyance. The method of making costing will vary from style to style, as there are many different styles in garments.

Purposes for doing costing.
Merchandiser has to have thorough understanding of costing. There are several reasons where cost plays the vital role. Merchandiser does the costing mainly for two purposes.

• Pricing of the garment: If manufacturer selling the garments directly to the end consumers then it’s very important to estimate the cost very accurately. Pricing of the garment can be done by manufacturing cost added with estimated mark-up or profit % to it. 

• Order acceptance: If manufacturer is exporting the garment, the costing is base of the business. On the basis of cost of manufacturing including wages, operating expenses and transportation and freight charges, and profit margin of company, merchandiser claims the cost of unit garment. With this merchandiser negotiates cost with buyer and decides whether to accept the order or not.

Points should be considered before costing

• Fabrication: We must take clear idea regarding the fabrication before taking the order from the buyer / buying house. After then, you must ensure that, you have strong source of the followings fabric.

• Size spec: Make sure that, you have got the correct/latest size spec with the measurement of all the sizes, which will be ordered. Many times we see that, PO sheet has come with new bigger size which was not during the costing. 

• Fabric color: Try to know that, how many colors the style has & also try to know that, color wise order qty ratio.

• Qty: Take information regarding approximate order qty. 

• Shipment date: Asked buyer for the shipment date & check with your production department that, they have enough space for shipped out the followings qty within the require ship date Or tell your possible date. 

• Test requirement: Let you know that, the order has any test or not. 

• GSP: Please confirm that, buyer has need the GSP or not. 

• L/c payments term: Take a previous l/c copy from them & discuss with your commercial people regarding all the terms along with payment terms. 

• Inspection: Please get a confirmation from the buyer that, who will inspected the goods. If third party then who will pay their charges.

The general formula for costing
Costing = Commercial cost ( Fabric cost + Fabric finishing cost+ trimmings/ accessories cost) + Additional cost (3-15% of commercial cost) + CM cost + profit (Normally 20% of CM cost).

Note:

1. 3% additional is taken when L/C payment terms is as sight.
2. 7.5 % additional of commercial cost is taken when L/C payment is 60 days deferred.
3. 15 % additional of total commercial cost is taken when L/C payment is 90 days deferred.

Fabric Cost
Fabric cost = Fabric consumption in unit (yds, kgs ) × price / each unit.

Calculating the following fabric consumption and making each costing individuality if garments have

1. Body fabric
2. Neck tape
3. Rib
4. Applique & others fabric

Estimate wastage :

• Generally 9% wastage on total fabric cost is taken for knit items. 

• If it is with only front chest print then 9% is ok but if with all over/rotary print, with heavy wash etc then you must increase the wastage. 

• Moreover, if the garments with pigments dye then add minimum 25 to 30% wastage because in this pigment dye garments reject percentage is very high.

Fabric finishing cost

• Print: If the garments have print then make sure that, you have a clear art work of it. Check that there clearly mentioned the print quality, dimension & placement. Send the art work to your printers for a better price idea. Also let you know from your printers regarding the difficulties of the followings print. Many times we found that, buyer has asked for so many type/kind prints in same body which is so difficult for production. Such as, if buyer asked for Flock + discharge & foil print in at the same artwork then it is not possible for production. 

• Embroidery: Discuss with your embroidery supplier regarding the embroidery & take price quotation. 

• Wash: Take the wash price quotation from washing factory. 

• Test: Confirm the charges of test from the testing company.

Accessories & trims
Please try to Calculate the price of accessories individually it will reduce the percentage of mistake. Please find below the list of some accessories item

• Sewing thread: Confirm that, which thread you need 100% cotton, spun polyester or filaments. Then ensure the count 50/2 or 40/2 or any other denier. Its may vary on fabrications. Regarding the pigment dye garments we normally used cotton grey color cotton thread. 

• Labels: Take the quotation from your supplier for the entire woven & satin/paper label. 

• Tape: Calculate the consumption of tape if it has, such as Velvet, herringbone or canvas etc. 

• Elastic: Make sure which denier & width it need. Then take the quotation from supplier. 

• Zipper: If the garments have zippers then confirm that, from where you will purchase that. Many time the logo zipper need to import the mold from abroad. Make sure the zipper quality, such metal, nylon or vislon zipper. Check the zipper measurement from your production department and get prices from your zipper supplier. 

• Button: Take the button price from your supplier if the garments have it. 

• Inter lining: Calculate the inter lignin price if the garments need. 

• Patch or badge: Calculate the patch or badge or others metal item if the garments have. 

• Finishing item: Tissue paper, silica gel, hang tag, barcode sticker, back board, h/tag string, scotch tape, security tag calculate the prices of these item. 

• Hanger: Take the quotation of hanger. 

• Poly: Make the measurement of poly. Confirm the quality & with adhesive or not. 

• Carton: Find out the carton measurement & take the prices from carton supplier along with top, bottom & divider. 

• Gum tape: Confirm the gum tape quality that, whether it is normal transparent or with any logo. Then take the price quotation. 

• PP belt: Take the price quotation of pp belt if buyer asked it. 

• Carton sticker: Take quotation for sticker.

CM (Cost of Making)
Normally at present (after starting the new salary scale) in Bangladesh we calculate the CM of any item consider the overhead sewing machine cost 1200 tk to 1400 tk/day that means $15.38 to $17.95/per day.

Above is for a non-compliance factory. For a compliance factory the per day machine cost will be 1800 tk to 2100 tk ( $23.08 to $26.92)

Example : If an items produce 1600 pcs per day using 25 machines then what would be the CM cost ???

Solution:

CM cost = Overhead machine cost X require machine / produce quantity X 12
= (1800 X 25 / 1600 )X 12
= 337.5 Taka
= $ 337.5/78
= $ 4.32 /dozen

Calculate the CM after discussion with your production department. It’s vary depends on require machine qty & output qty.

To find out the CM of a item you must need the following 06 (six) information at first, as listed below

• Monthly total expenditure of your factory with factory rent, commercial cost, electricity bill, water bill, transportation, repairing, worker & stuff wages etc. (8hrs/day) in bangla taka. Suppose-50,00,000/tk 

• Qty of running Machine of your factory of the following month (which total expenditure we have consider here).Suppose- 100 machine 

• Number of machine to complete the layout for the following Items (which CM we are calculating). Suppose - 25 machines . 

• Production target/capacity of the following items, per hour from the existing layout, excluding alter & reject. Suppose 200 pcs per hour. 

• Total working day of the followings month,(though the houserent,commercial expenses,machine overhauling & some other cost remain same)Suppose- 26 days. 

• If you want to calculate the CM in US$ (dollar) then pls input present dollar conversation rate BDTk.

Suppose $1 = 78 tk.

COST OF MAKING (CM)
=(SAM of the garment * Minute cost of the labor)/Line efficiency (%)

OR

= Overhead machine cost X require machine / produce quantity

= [{Monthly total expenditure of the following factory / (26 X Qty of running Machine of your factory of the following month)}] X (Number of machine to complete the layout) / produce quantity per day.

= [{50,00,000 / (26 X 100 )} X 25] / {(200) X 8}] X 12
= [{192307.7 / (100) X (25) } / 1600] X 12
= (48,076.9 / 1600) X 12
= 30.048 X 12
= 360.58 Taka
= $ 360.58/ 78
= $ 4.62/dozen

This is the making cost (12 pcs) garments.

Example of garment costing
The example of garment cost is given by assuming the following dimensions for polo neck T-shirt, no. of pieces = 4000, salary of the operator =6240 tk/month=80$/month, no. of working days = 26, line efficiency considered= 50%, sewing SAM= 15 min., Cutting SAM= 7 min. 1$ =78 taka, Chest = 60 cm, Length (HSP to waist) = 75 cm, Sleeve length = 25 cm. Fabric used is 2/60s 100% cotton S/J fabric. GSM is 180

Solution

The fabric consumption can be calculated as

          {(B.L +S.L + 4-10 cm) ×( ½ chest+ 2-4 cm) ×2}×GSM
= …………………………………………………………………. + Wastage 10%
                                           10000000


              {(75+25 + 4) ×( 60+ 2) ×2}×180
= ………………………………………………… + Wastage 10%
                            10000000

= 0.232 + Wastage 10%
=0.255 kg/dozen

CMT (cost of making with trimming) charges may be calculated as follows

Labour cost per minute = (Monthly salary of an operators/Total minutes available in the month
= 6240/ (26×8×60)
= 0.5 tk.

Sewing cost = (SAM of the garment * Minute cost of the labour)/Line eff%
= 15*0.5 / 50%
= 15 tk.

Cutting cost = (SAM of cutting * Minute cost of the labour)/cutting efficiency (%)
= 7*0.5 / 50%
= 7 tk.

Now trimming cost is considered as 3 tk. but it depends how number of operators are there for trimming

CMT= sewing cost + cutting cost + trimming
= 15+ 7+ 3
= 25 tk.