NIFT

COSTING OF APPAREL PRODUCTS

Costing of Mens
Formal Shirt

Submitted To:

Submitted By:

Mr. Neeraj Jaiswal

Chahak Nagpal

Assistant Professor

Deepali Pandit

NIFT, Kangra

Lovely Gupta
Rashmi Dhara
Shikhar Maurya
DFT - VI

ABSTRACT

In this document, we present a theoretical model, which grows together the elements of Costing
and material requirement in Apparel Industry. The data have been gathered from various sources
such as our visit to NEHRU PLACE and also from academic literature, and a qualitative analysis
has been carried out.
The core category of the model is Costing. The analysis and the model answer the question of
principles and practices should be considered while doing costing for formal mens Shirt.
It is based on the philosophies that are linked to the categories: cost estimation, types of fabric
used, timely delivery, production methods, saving resources and etc.

CONTENTS

1)
2)
3)
4)
5)

Costing in Apparel Industry

Costing Techniques in Garment Industry
Unit Cost of Garment
Costing of Basic Shirt
Conclusion

COSTING IN APPAREL INDUSTRY

Costing is the process of estimating and then determining the total cost of producing a garment,
including the cost of materials, labor and general expenses of indirect costs. The increased number
of seasons or offerings per year has put tremendous pressure on product development and the
costing process. Constant style changes require constant feedback and adjustments for whichever
costing strategy a company chooses to adopt. This has resulted in a multilevel costing process,
which includes:
Cost Estimating
Cost Calculating
Cost Monitoring
Cost Reporting

COST ESTIMATING (QUICK COSTING)

Cost estimation is the forecast of costs made before the item is manufactured. The first step in the
costing process can also be called as pre-costing. Pre-costing is a preliminary estimate or best
guess of what it will cost to produce the garment, based on judgment and past experience.
This quick cost is usually accurate within 10 to 15% of the actual cost and gives the manufacturer
some idea of whether the style can be produced and sold at a profit. The quick cost helps the
manufacturer decide whether to reject the style, accept it as a part of the line, or send it back to the
designer or merchandiser for changes to reduce its cost.
During Product Development cost estimation plays a vital role. Product Development process is
shown as:

COST CALCULATION
Cost calculation is the computation of the actual cost of manufacturing. This process is a detailed
calculation of the costs required to manufacture a style based upon available data. A detailed
analysis is made based upon prototypes. This level of costing is important in determining price
values.

Production Costing: Production costing is related with the actual costs of production but does not
take into consideration the overhead costs and profit margins.
Accounting Costing: Accounting costing is used to make the final adjustments to all elements of
costing and pricing processes.

COSTIING TECHNIQUES IN GARMENT INDUSTRY

In order to achieve 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.
The Indian textile and apparel industry is very large and diverse, employing 35 million people and
accounting for 27 per cent of the country's exports. The apparel industry plays a pivotal role as a
key driver of the national economy and has grown to be the most significant contributor to the
country's economy over nearly three decades of its existence. However, during last 10 years, the
industry's actions, government policies as well as market events have begun to converge,
providing several growth opportunities for the sector domestically as well as in the global market.
As the MFA quota-regime ended, India presented many opportunities for buyers, suppliers and
investors to collaborate with its textile industry, and to profit from the partnership. While the
industry recorded a remarkable growth in a protected market environment, it faces a series of
challenges that have come to the fore in the post-quota situation, notably in areas such as:

Price competitiveness.
Faster lead times.
High raw material base.
Full service offering.
Access to market. "A Cost is the value of economic resources used as a result of producing
or doing the things costed".

UNIT COST OF GARMENT

To provide a highly effective cost system, costs in companies should be categorized and be
searched according to some categories. The main cost categories in apparel companies can be
classified into these titles and sub categories:
Assignment to a cost object
-

Direct costs / Indirect costs

Behavior pattern in relation to changes in the level of activity or volume

-

Variable costs / Fixed costs

Components (elements)
-

Material costs / Labor costs / Overhead costs

Business Function
-

Administration costs / Sales costs / Purchasing costs / Production costs

Aggregate or average
-

Total costs / Unit costs

Assets or expenses
-

Inventorable costs / Period costs

To define the unit cost of goods each component (element) of a garment should be defined clearly.
The unit cost of goods includes all expenses involved in the manufacture of an apparel product.
The cost of goods is summarized under the categories of material cost, labor cost and overhead
costs.

MATERIAL COST:
Material costs include fabric and accessory costs. Fabric is the most costly material in most garment
styles. Fabric accounts for 45% of a garment according to the statistical data. Since fabric is the
most significant factor in costing a garment, an accurate calculation for the required amount of
fabric per garment is essential. There are two stages to determine fabric expenditure.

First of all, unit fabric price is defined. Accordingly, the expenditure of fabric per unit garment is
determined. To accurately determine the average amount of fabric needed for a garment style,
marker plans are prepared by using the size scale and the fabric width.
After determining the consumption of fabric required to produce a style, including a waste factor,
total cost of the fabric is defined by multiplying the expenditure value by the price per square
meter.
For all other direct materials such as trim, thread, buttons, zippers, labels, shoulder pads and poly
bags, quantities per garment are measured in units, sets or meters. Waste factors are also
calculated to accommodate materials that are dropped, broken or damaged during the
manufacturing process.

LABOR COST:
Labor costs include those costs that change the condition or physical appearance of raw materials.
Examples of direct labor functions are cutting, bundling, folding, sewing and finishing. Labor
accounts for a large portion of the total cost of garments and sewing is the most costly process.
Regarding this, each individual operation in the production of a garment should be defined and
total time of sewing operations should be carefully calculated.

OVERHEAD COST:
Overhead costs include all the costs except material and labor costs. Manufacturing overhead,
general and administrative expenses are all included in overhead costs.
Marketing and selling expenses, merchandising, design or product development expenses and
distribution expenses can be examples of this group.

COSTING OF BASIC SHIRT

FABRIC CONSUMPTION CALCULATION:

Back Part
30.5 (Body Length) X 27.5 (1/2 Chest) / 36X 44 ( Fabric Wirth)
26 (Yoke Length) X 7 (Yoke Width) X 2 (Double Part) / 36 X 44
32 (Body Length) X 16.5 (1/2 Chest) X 2 (Double Part / 36 X 44
Front Part
32 (Body Length) X 16.5 (1/2 Chest) X 2 (Double Part) / 36 X 44
Sleeve
23.5 (Sleeve Length) X 25 (Arm Hole) X 2 (Double Part) 36 X 44
12 (Cuff Length) X 3 ( Cuff Width) X 4 ( 2 X2 Parts) / 36 X 44
Collar
21.5 ( Collar Band Length) X 2 ( Band Width) X 2 ( Double Part) / 36 X 44

0.529 YDS
0.229 YDS
0.666 YDS
0.666 YDS
0.741YDS
0.99 YDS
0.067 YDS

21.5 ( Collar Band Length ) X 2 ( Band Width) X 2 ( Double) / 36 X 44

0.054 YDS

Pocket
8 ( Pocket Length) X 6 ( Pocket Width) / 36 X 44
Total Fabric Consumption

0.03 YDS
2.406 YDS

TOTAL FABRIC CONSUMPTION OF SHIRT (IN METERS) = 2.2 METERS

ASSUMPTIONS:
-

Woven fabric 100% cotton is used

Size of shirt = 40 inch
Formal shirt with full sleeves
Profit is 20%.
Waste = 3%
Administrative overheads = 8%
Factory Overheads = 5%
Sales and Production Overheads = 7%

COST SHEET
DIRECT MATERIAL
S.No.

Description

Unit of
Measurement

Cost

Consumption/ Cost/piece
piece

meters

100

2.2

220

pieces

1.5

1.5

pieces

1.5

1.5

spool
unit
TOTAL

4
0.25

1
12

4
3
235

FABRIC
1 100% cotton
TRIMS
2 Fusing
material
3 Brand and
Size Label
4 Care and
Code Label
5 Threads
6 Buttons

DIRECT WAGES
S.No.

Operation
1 Inspection
2 Spreading
and Marking
3 Cutting
4 Sewing
5 Finishing

Estimated
SAM
0.1
0.2

Skill Matrix

Cost/ unit

Cost/piece

skilled
skilled

3.5
3.5

0.35
0.7

0.1
22.3
0.5
TOTAL

skilled
skilled
Semi - skilled

3.5
3.5
3.5

0.35
78.05
1.75
81.2

DIRECT EXPENSES
S.No.

Description
1
2
3
4

Carton Box
Poly Bag
Hand Bag
Packaging
Labor Cost

PACKAGING COST
Unit of
Cost (Rs)
Measurement
piece
3
piece
0.6
piece
0.4
SAM
8

Consumption/piece Cost/piece
0.1
1
1
0.1

0.3
0.6
0.4
0.8

TOTAL

2.1

COST SHEET
Product
Style Number
Buyer

Mens Formal Shirt

Width

42
Particulars
Direct Material
Direct Wages
Direct Expenses
PRIME COST

XY6789
Blackberry

Mono Color
Country
India
Fabric
100%
cotton
Details

Cost (Rs)
235
81.2
2.1
318.3

Factory Overheads
TOTAL FACTORY COST

5%

15.9
334.2

Office and Administrative

Overheads
COST OF PRODUCTION

8%

26.7

Sales and Production

Overheads
Waste
COST OF SALES

7%

25.2

3%

10.8
396.9

Profit
Total Cost/ Piece

20%

79.4
476.2

360.9

TOTAL COST OF SHIRT = RS. 476.2

CONCLUSION

Costing is a very essential part of a garment. Cost sheet helps a manufacturer to know every minute
details of the cost that is included in production of a single piece of garment. It ultimately helps to
decrease the production cost and increase profit.
Costing should be done at a very initial phase of product development. It should be done on properly
and in accordance to the target market. The success of a brand depends on how well the costing of its
product is done.
The above mentioned cost sheet of a basic sheet tells us about all the factors that cost in production of
mens basic formal shirt. The cost sheet may vary from industry to industry but its particulars are
always the same.