CONTENT

1. COSTING IN APPAREL INDUSTRY

2. GARMENT COSTING

3. DIVISION OF COST

3.1. ELEMENTS OF COST

4. COST CALCULATION

4.1. UNIT COST OF GARMENT

5. COST SHEET

6. FABRIC CONSUMPTION FOR MEN’S SHIRT

7. CMT COST

8. COSTING OF MEN’S FORMAL SHIRT

9. FABRIC CONSUMPTION CALCULATION

10. COST SHEET

11. CONCLUSION

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 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

▪ GARMENT COSTING

There are two types of garments, namely woven and knitted garments. Shirt, trouser, sarees, bed spreads, blankets, towels
and made ups are woven. T-shirts, sweaters, undergarments, pyjamas and socks are knits. Costing is the deciding factor
for fixing of prices and the important thing to follow in all stages like purchase, production, marketing, sales, etc. Also
update knowledge about everything related to garments, is essential to make perfect costing. Costing includes all the
activities like purchase of fabrics and accessories, processing and finishing of fabrics, sewing and packing of garments,
transport and conveyance, shipping, over heads, banking charges and commissions, etc.
We 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. Hence let us take men's basic T-shirt style as example
which is in regular in use.
To find out the costing of a garment, the following things should things be calcuated:
• Fabric consumption.
• Gross weight of other components of garment.
• Fabric cost per kg.
• Fabric cost per garment.
• Other charges (print, embroidery, etc).
• Cost of trims (labels, tags, badges, twill tapes, buttons, bows, etc).
• CMT charges.
• Cost of accessories (hangers, inner boards, polybags, cartons, etc).
• Cost of a garment.
• Price of a garment.

DIVISIONS OF COST

Prime Cost Direct Materials + Direct Labours + Direct

Expenses
Works or Factory Cost Prime Cost + Works or Factory Overheads.
Cost of Production Works Cost + Administration Overheads.
Total Cost / Cost of Sales Cost of Production + Selling Overhead +
Distribution Overhead.
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Elements of Costs
There are three main elements of costs. They are: Materials, Labour and other expenses. Materials can be either
direct material or indirect material. Labour can be direct or indirect. Other expenses can be direct or indirect.
All Indirect Expenses give rise to Overhead expenses. This includes:
• Production or Works overheads, administration overhead, selling overhead, distribution overhead,
research and development overhead.
• Direct Materials
• Direct materials include: All raw materials, materials specifically purchased, parts or
• components purchased or produced, and primary packing materials.
• Direct Labour
• Direct labour includes: Labour engaged on the actual production, labour engaged in aiding the
manufacture, and specially required for production. For example, Inspectors.

▪ 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.

UNIT COST OF GARMENT

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.
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

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▪ COST SHEET

The particulars of the cost sheet includes, Direct materials, direct labour and direct expenses. The Prime costs are the
work overheads. The work cost is the administrative overheads. The cost of production is the selling and distribution of
overheads. The total cost as well as the cost per unit for each of these should be calculated. A cost sheet is prepared on
the basis of: Historical cost and Estimated cost.
Components of Cost:
• Prime cost: Direct costs
• Production cost: Prime cost+ Overheads
• Total cost: Production cost+ General operating expenses
• Wholesale price: Total cost+ Profit
• Retail price: Wholesale price + Selling and distribution cost+ Mark up

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.

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▪ FABRIC CONSUMPTION FOR MEN’S SHIRT

And for woven fabric and shirt as an end product, then the fabric consumption can be calculated as:
Fabric consumption in metres = (Full length + Sleeve length + allowance) x (Chest + allowance) X 2 X Fabric width
____________________________________________________________
39.37
The marker efficiency considered 80-85% depending upon the fabric type i.e. solid dyed, stripe, checks fabric. Efficiency
can be changed depending upon the fabric parameters, matching parameters of the buyer, type of style. The buffer in the
consumption should be added to the fabric by merchandiser, generally it is 0.03-0.08% of total fabric consumption. In
case of trim fabric i.e. interlining the 10-20% more buffers is kept while ordering the interlining, in order to maintain the
inventory and to avoid the shortage during the production and fabric wastage percentages, to be added also, while
calculating the fabric consumption. Considerable wastage depends on factory practices, type of fabric and type of
garment
TRIMS
Trims include all materials other than fabric used in the garment. For example most garments have accessories such as
threads, buttons, zippers, labels, elastics and miscellaneous items. Quality and quantity of trim and labour required to
apply it on garment are directly related to cost of garment. The different trims have different UOM; even same trim can
have 2-3 different UOMs that can be summarised as:
UOM OF TRIMS USED IN GARMENTS
Trims UOM
Thread 1000 meter tube. 2000/5000 Meter Cone
Labels Unit
Zippers Unit
Buttons Gross (144 Units)
Polybag Unit, thickness is measured in mm or guage
Carton Unit
Hand tags Unit
Shanks Gross
Rivets Unit
Lace 50 Meter
Hanger Unit
Tapes/Velcro 50 Meter or Kg
Elastics 50 Meter

Calculation of Trim Charges

Trims charges are generally calculated as for the different type of sourcing and mode of transportation. If shipment is by
air then the trim cost + 15-25% more cost is quoted to buyer, depending on the freight charges. If shipment is by sea then
trim cost + 10-15% more cost is quoted to buyer depending upon freight charges. If there is domestic sourcing then there
are local taxes. Transportation charges is bound to add in the total trim cost. Rejection and wastage charges is 2 to 5%,
depending on the order quantity. Commission on foreign exchange is 2 to 3%. Commission of buying house, (if
applicable) is 1 to 1.5%. Internal transportation charges is 1 to 2 dollars per garment. Margin, decided by marketing
department by looking at the business scenario is 10 to 15%. Testing inspection charges is 1 to 2%.
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▪ CMT (Cost of Making) Cost

The cost of making done "in house" is based on the total cost per hour multiplied by the number of hours it takes to
make the style and divided by the number of units produced if the making is done by a contractor; the contractor adds
profit on to this amount. Labour cost per minute = (Monthly salary of an operators / Total minutes available in the month)
at 100% efficiency. CM cost = (SAM of the garment * Minute cost of the labour)/Line efficiency (%)

Calculation of CMT Charges

Total available capacity per month (in minute) = 26
working days X 8 hours per day X 60=12,480 minutes.
1. Labour Cost per Minute
Labour cost per minute = (Monthly salary of an operators/Total minutes available in the month)
at 100% efficiency
= 6000/12480 =0.480 Rs.

2. Sewing Cost
Sewing cost = (SAM of the garment X Minute cost of the labour)/Line efficiency (percent)
=15* 0.480/50
=0.288 dollars

3. Cutting Cost
Trimming cost is considered as 0.06 dollars, as it depends upon how many operators are there
for trimming.

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 COSTING OF MEN’S FORMAL SHIRT

Sl. No. Operation List SAM 21 Hem right front 0.494

22 Attach front placket 0.603

1 Pinning to profile 0.234 23 Crease pocket 0.542

2 Run stitch collar 0.219 24 Hem pocket mouth 0.28

3 Trim collar 0.285 25 Attach pocket to front 0.861

4 Clip and turn collar 0.223 26 Attach brand label and tack 0.589
loop
5 Crease collar 0.381 27 Crease patch pieces 0.236

6 Top stitch collar 0.42 28 Attach patch piece 0.333

7 Run stitch (R/s) collar band 0.291 29 Sew pleats 0.278

8 Crease collar band 0.317 30 Attach yoke to back 0.475

9 Insert collar in neck band 0.799 31 Top stitch back yoke 0.365

10 Turn and crease collar 0.452 32 Join shoulder 0.64

11 Attach bias piece to cuff 0.874 33 Top stitch shoulder 0.656

12 Crease cuff 0.458 34 Attach collar 0.535

13 Hem cuff 0.501 35 Close collar with size label 1.01

14 R/s cuff 0.565 36 Sleeve attach 0.862

15 Trim cuff 0.36 37 Top stitch armhole 0.678

16 Turn cuff 0.527 38 Top stitch side seam 1.036

17 Crease cuff bottom 0.566 39 Attach & close cuff 0.696

18 Attach placket to sleeve 0.795 40 Top stitch cuff 0.524

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 19 Lock and make diamond 1.026 41 Hem bottom 0.947

20 Sew pleats (4 no.) 0.389 Total SAM 22.322

Total Garment SAM: 22.32 minutes.

▪ FABRIC CONSUMPTION CALCULATION:

Back Part
30.5”” (Body Length) X 27.5” (1/2 Chest) / 36”X 44” ( Fabric Wirth) 0.529 YDS
26” (Yoke Length) X 7” (Yoke Width) X 2 (Double Part) / 36” X 44” 0.229 YDS
32” (Body Length) X 16.5” (1/2 Chest) X 2 (Double Part / 36” X 44” 0.666 YDS
Front Part
32” (Body Length) X 16.5” (1/2 Chest) X 2 (Double Part) / 36” X 44” 0.666 YDS
Sleeve
23.5” (Sleeve Length) X 25” (Arm Hole) X 2 (Double Part) 36” X 44” 0.741YDS
12” (Cuff Length) X 3” ( Cuff Width) X 4 ( 2 X2 Parts) / 36” X 44” 0.99 YDS
Collar
21.5” ( Collar Band Length) X 2” ( Band Width) X 2 ( Double Part) / 36” X 44” 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” 0.03 YDS
Total Fabric Consumption 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%

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 COST SHEET

DIRECT MATERIAL
S. No. Description Unit of measurment Cost Consumption/piece Cost/Piece

FABRIC
1 100% COTTON meters 100 2.2 220
TRIMS
2 FUSING MATERIAL 5 1 5
3 BRAND AND SIZE LABEL pieces 1.5 1 1.5
4 CARE AND CODE LABEL pieces 1.5 1 1.5
5 THREADS spool 4 1 4
6 BUTTONS unit 0.25 12 3
TOTAL 235

DIRECT WAGES

S. NO. Operations Estimated SAM Skill Matrix Cost/unit Cost/piece

1 Inspection 0.1 Skilled 3.5 0.35

2 Spreading and Marking 0.2 Skilled 3.5 0.7

3 Cutting 0.1 Skilled 3.5 0.35

4 Sewing 22.3 Skilled 3.5 78.05

5 Finishing 0.5 Semi-Skilled 3.5 1.75

TOTAL 81.2

DIRECT EXPENSES
S. No. Description Unit of measurment Cost Consumption/piece Cost/Piece
1 Carton box piece 3 0.1 0.3
2 Poly bag piece 0.6 1 0.6
3 Hand bag piece 0.4 1 0.4
4 Packaging labour cost SAM 8 0.1 0.8
TOTAL 2.1

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 COST SHEET
PRODUCT MEN’S FORMAL SHIRT MONO COLOR
STYLE NO: 234468 COUNTRY India
BUYER: HRX FABRIC 100% cotton
width 42"
PARTICULARS DETAILS COSTING
Direct Material 235
Direct Wage 81.2
Direct Expenses 2.1
Prime Cost 318.3

Factory Overheads 15% 47.74

Total Factory Cost 366.04

Office and Administrative overhead 8% 26.7

COST OF PRODUCTION 392.74

Sales and Production Overhead 7% 25.2

Waste 3% 10.8
COST OF SALES 428.74
Tax 12% 47.6
Profit 15% 59.53
Total cost/ piece 535.87

TOTAL COST OF SHIRT = RS. 535.87

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 properlyand 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
men’s basic formal shirt. The cost sheet may vary from industry to industry but its particulars are always
the same

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