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 occurred and to take a suitable alternate decision immediately in time.
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. Hence we must have update knowledge about the latest prices and charges, latest procedures, methods and quality systems, market prices and availability, transportation (road, sea, air) and freight charges, etc.
We must remember that the quality depends on price; price depends on quality. Each product will have different price according to its quality. We do not manufacture only one quality of garments. Also, we manufacture the garments not only for one customer.While we do the garment costing, the customer’s price level, quality & quantity and payment terms, to be taken into consideration.
There are two types of garments, namely woven and knitted garments. Shirt, trouser, sarees, bedspreads, blankets, towels and made-ups are woven. T-shirts, sweaters, undergarments, pajamas, and socks are knits.Costing is the deciding factor for fixing of prices and the important thing to follow in all stages of 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, overheads, 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 of garments.
The method of making costing will vary from style to style. As there are many different styles in garments, it is not possible here to discuss all the styles. Hence let us take some following styles as examples which are in regular use.
- Men’s Basic T-shirts,
- Men’s Printed Polo shirts,
- Ladies Nightdress,
- Men’s Pyjamas,
- Men’s Solid Pique Polo shirts,
- Ladies yarn striped T-shirts (Feeder stripes)
- Boys yarn striped T-shirts (Engineering stripes)
Based on these methods, costings can be made for other styles too. Let us see them in detail now.
To make the garment costing, we have to find out following things.
- Fabric consumption.
- Gross weight of other components of the 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.
Costs to Consider
- Direct cost: Cost of raw material — 66%. Cost of size and chemicals – 4%. Production cost comprising of running the machine, maintenance, power fuel, humidification and other utilities — 8 % and worker wages and salaries — 8% losses incurred due to shrinkage, wastage, grading, and also selling commissions.
- Indirect cost: Interest on investment, loan, working capital, depreciation, etc. Above 7%, overheads and administrative expenses like traveling, telephone, couriers, legal issues, taxes comprising of 7%.
- Profit: 10 – 20% depending on the order size. In some companies, 70% of the fabric cost will comprise of direct cost, but incorporate selling only 40% cost of the fabric is direct cost and 60% is overheads.
There are set patterns and guidelines followed by the industry. It is difficult to find out costs for every process as there are some inbuilt costs while costing. A larger picture has been taken into account while quoting the cost. Costing depends a lot on quantity and order received. Indirect cost is about 15 – 20%. On top of the cost, a profit of 15 – 20% is added. It is not only the cost of the final product that matters, for exports the cost is generally given as FAS, FOB, CIF, and LDP.
FAS (Free along Side) means: It is the cost of finished goods plus it includes the delivery of the goods to port, dock, etc. The price does not include loading into the ship, etc, or the shipping or any other charges incurred from that point on.
FOB (Free on Board): It is the cost of finished goods, cost of delivery of the goods to port and loading onto the ship, plane, etc. The cost does not include the shipping or any other costs incurred from that point on.
CIF (Cost Insurance and Freight): It includes the cost of finished goods plus it includes the delivery of the goods to the port, loading on the ship, shipping charges, all applicable insurance fees along the way. The price does not include going through customs or any duties or other costs incurred from that point.
LDP (Landed & Duty Paid): It is the cost of the finished goods, plus it includes the delivery of the goods to port, loading on the ship, shipping charges and the goods brought through the customs with all applicable duties and taxes paid.
Lead time plays an important part in the domestic and export market. Generally for production of greige fabric the lead time is 30 days. Processing time for grey fabric is 15 – 20 days but when the buyer needs something urgently then the above costing parameters sometimes are not significant; It depends on demand and supply.
Garment Product costing
How much does it cost to make a garment is something you have to know before you get too far in the process?
It goes without saying, the simplest garments cost less to make. As styling details are added; pockets, fancy seaming, linings and trims etc, the cost of the finished garment will increase labor cost in production. If you have chosen an expensive fabric for one of your designs, it would be wise to keep the details to a minimum. Using expensive fabric and many styling details often makes the finished cost of the garment too high for the market which has been targeted.
Now keep in mind, the cost the garment is information you will need from the factory. A simple formula is used to calculate the cost of the garment and looks like this:
Costs of fabric + trims + labor + business overhead + profit = Garment Cost
This is how a factory will calculate the cost of manufacturing each garment. For you as the small business, your overhead and all of your expenses such as design research, markdown sales losses, brand advertising, promotions, rent, and everything else that goes along with owning and running a business are deducted from the total revenue you generate per garment. After you deduct all of the expenses of running your business from the revenue you generate from the garments you make and sell, you are left with your profit.
The cost of piece goods (fabric) is generally about one-third the initial production cost of a garment. For the small company, the margin and mark-up will be higher than for bigger mass-producing companies that have a lower margin and mark-up percentages due to the volume they manufacture.
Ultimately, the final figures may be a subjective call of what the market will bear.