Methods of garment costing

Material cost is a major cost component of garment manufacturing costs and a correct cost calculation metho
give one a better projection of garment cost for a style, explains Vishnu Pareek.

Since the industrial beginnings, textiles and apparel have been the leaders in terms of cost awareness as well as
product innovations. Textile costing includes all the activities like purchase of raw materials and accessories,
knitting fabrics, processing and finishing of fabrics, sewing and packing of
garments, transport and conveyance, shipping, overheads, banking charges and
commissions, etc.
To do perfect garment costing, one must know about all these activities
thoroughly about their costs, procedures, advantages and risk factors. Also he
must know how to solve the problems when they occur and to take suitable
alternate decision immediately in time.

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. Hence
knowledge update is required about the latest prices and charges, latest procedures, methods and quality system
market prices and availability, transportation (road, sea, air) and freight charges, etc.

Quality depends on price; price depends on quality. Each product will have different price according to its qua
Different Costing methods include:

Job Costing.

Batch Costing.

Contract or Terminal Costing.

Single or Output Costing.

Process Costing.

Operation Costing.

Operating Costing.

Departmental Costing.

Multiple Costing.

Job Costing
Job Costing is done, as the name suggests, on job works which may differ from case to case basis. By giving
different job numbers and debiting the costs on the jobs, cost of each job work can be ascertained.
Batch Costing or Batch Costing method
Batch Costing is similar to job costing but pertains to batches.
Contract Costing or Terminal Costing
Contract costing is done for large contracts. Such businesses need not maintain costs separately as financial
accounting will indicate the costs and expenses. In such contracting firms, the cost sheets are maintained for
individual contracts. In the absence of expense budgets, inefficiencies are often hidden in such cost sheets.
Single or Output Costing

Single Costing is done when the end product is single like a colliery or a power station. Cost sheets are mainta
Process Costing
Process Costing is useful when a product passes through various processes, yielding different by products of
commercial value. This is useful in industries like refineries.
Operation Costing
Operation Costing is followed by mechanical engineering industries which make products or parts. Each
manufacturing operation cost is taken into account. There is no difference between this and process costing.
Departmental Costing
When an end product is ultimately manufactured by different departments this method can be useful.

Multiple Costing

Multiple Costing is useful when a product is manufactured in an assembly line like an automobile. It is import
choose the most appropriate method of costing for your business or industry. Most businesses do not like to en
cost accountants and leave it to financial accountants to take care of this job. It is not recommended. There are
free lance cost accountants available and they can be engaged on need basis.
How to Calculate Raw Material Cost for Garments?

Material cost is the major cost component of a garment manufacturing costs. A correct cost calculation method
give you better projection of garment cost for a style. In this article how to calculate direct materials cost have
explained in details. Raw materials required for making a garment is sourced from suppliers. Main materials ar
fabric, labels, sewing thread, hang tags, trims, etc. So to have correct material cost you must have price knowle
of each item.

Steps used for material costing are: Preparation of material requirement sheet; Material price listing; Preparatio
material cost sheet.
Prepare material requirement sheet
List down all items required and calculate consumption per unit for all materials to be used in garments.

For an example, let us say you are going to calculate material cost for a polo shirt. To make polo you need knit
fabric - Single jersey/pique, cuff and collar rib. Sourcing of knitted fabric can be done in three ways:

You can directly purchase dyed fabric, or

You can source yarn, knit fabric and process the knitted fabric as per your requirement, or

Purchase dyed yarn and knit.

Let us consider you will purchase yarn and get knitting and dyeing processes done by job workers. To go throu
this process collect the pricing list of different types of yarn (or at least for the yarn that you will purchase for y
product), knitting cost, knitting loss%, dyeing cost per kg and process loss% from suppliers.

Material Price listing

Collect material price quote for all the material you need to purchase from different vendors. Prepare database
the current market price of raw materials.

For example here is one Price List Yarn: The costs for different yarns are 20s Combed - Rs 105/kg, 30s Combe
115/kg, 50s Combed - Rs 140 - 145/kg, 2/60s Combed - Rs 200/Kg, 2/60s dyed yarn - Rs 420/kg dark shade.
Knitting cost: For Single Jersey - Rs.15/kg; For Rib - Rs 18/kg; For Interlock - Rs 30 - 35/kg.
Knitting loss: 2%; Dyeing cost: Rs 80/kg for dark shades; Process loss (Dyeing): 6%.

Fabric cost: Ready to use fabric cost is calculated using basic calculation as shown in the following Table. Co
the knit fabric is represented in price per kg.

Fabric Consumption: Next step is to find requirement of fabric for the polo. Suppose for this polo shirt you n
shell fabric 0.32 kg and ribs for cuff and collar 0.080 kg. Read how to calculate fabric consumption for a knitte
garment to know fabric consumption calculation.

Prepare material cost sheet: Once you find fabric cost and fabric consumption prepare material cost sheet
including all other material required to make a garment ready for sale. An example of material cost sheet has b
shown below:

So, the total fabric cost is Rs 128.37 and including other material costs the total cost of the material for making
Polo is Rs 142.87.

Now for each item, merchants generally purchased extra quantity of inventory (from 2% to 7%) as buffer. This
excess cost due to extra purchase of material is added to the garment costing.
References

1. Prasad Kulkarni: Overview of Fashion Brand.

2. Nikhil Bhosale: Textile Progress.
Vishnu Pareek
DKTE Society's Textile & Engineering Institute
Rajwada, PO Box No 130
Ichalkaranji, Maharashtra-416 115.
Email:vishnudkte@gmail.com.