What is Garment Costing?
Costing of the apparel and textile product is a complex problem, it involves numerous number of activities associated with each product. Garment costing is one of the most important and critical procedures. Garment costing method is called the heart of ready-made garment business. Because profit depends on proper costing. There are many things that go into pricing a single piece of garment. A costing sheet makes the job of garment costing easier and faster. Because a well designed costing sheet will help to trace all details of costing. So become a less chance to miss any particular costing items. Normally merchandiser and the top management of a company are actively involved in deciding the cost of a garment.
Costing can be defined as the process of approximation of the total cost to produce a garment, from a buyer’s perspective, including raw materials, labor, and other expenses. The knowledge on the costing process is very essential for a merchandiser. Since, he or she is involved from the product development stage, the knowledge on costing is very essential.
In garment industry, the process of costing a product is very dynamic. Since, the fashion changes every season and sometimes very often, the
product which the manufacturing company receives for manufacturing from the buyer also differs every season. Most of the time, the products are manufactured only once.
Garment Costing Sheet Analysis:
Costing includes all the activities related to purchase of raw materials, trimmings and accessories, fabrics, processing and finishing of fabrics, sewing and packing of garments, transport and conveyance, shipping, overheads, banking charges and commissions, etc. There are always fluctuations in the costs of raw materials and accessories; charges of weaving or knitting; processing, finishing, sewing and packing; charges of transportation; and conveyance. Hence, it is essential to have knowledge updates about the latest prices, procedures, quality systems, market prices and availability, transportation and freight charges. The volatile nature and rigorous competition in the global garment manufacturing industry drive all the companies to minimize their cost by controlling inventory, accurate forecasting and low mark-downs. It must be remembered that the quality depends on price; and price depends on quality. Each product will have different price according to its quality. While the manufacturers and retailers decide the retail price of a garment, factors such as the average customer’s buying level, quality and quantity and payment terms, should be taken into consideration.
A garment costing sheet is used to trace the all costing components. It is quite useful and handy to understand the percentage share of cost for each constituent of the apparel supply chain, including material used. The allocation of the cost depends upon multiple variables. Due to competitive manufacturing in Asian countries, a large proportion of the world’s garments are manufactured in China, India, Bangladesh, Pakistan, etc. The ‘cost to the factory’ where the garment is manufactured include types of fabrics used, dyeing cost, trims and accessories used (such as labels, hangers, threads, fusing, buttons, zippers, etc.), cutting cost, stitching cost, trimming cost, packaging cost, company overhead, labor cost, administration cost, etc. A reasonable mark-up is added on the finished garment to cover expenses incurred by the manufacturer and to earn profit.
Once the garment is manufactured, road/rail transportation cost is added to deliver the garments to a port of loading. At the port of loading, the cost of freight forwarders and stevedoring is added. Normally, the garments are transported by sea unless the lead time requirement is very tight that demands air transport. The landed cost of the garment in the buyer’s country includes the FOB (free on board) price, shipping cost, clearance cost, custom duties and maritime insurance in the case of sea freight. The cleared garments from customs are road/rail transported to the buyer’s warehouse, where the cost of inventory holding is added onto the garment price. Margin is added to this final price (which is cost paid until the warehouse), which largely covers any mark-downs, expenses like salaries, sales promotion, rent, administration cost, insurance, taxes, etc., and finally the profit for the store. A detailed example of a costing sheet for a garment is given in Table.
Garment Costing Sheet Format:
Garment costing sheet
|Size range||XL||Season||Autumn / winter 2014|
|Product description||Selling price||$297.66|
|Fabric costing||Particulars||Details||Amount (AUD)|
|Fabric material||Metre per unit||Cost per metre ($)||Sub-total ($)|
|Fabric 1 Viscose||2||$ 9.00||$18.00|
|Fabric 2 Lawn||1.5||$ 4.00||$6.00|
|Fabric 3 Interfacing||0.78||$ 1.29||$1.01|
|Total fabric cost||$25.01|
|Average dyeing cost||$1.50|
|Dyed fabric cost||$26.51|
|Trims and accessories|
|Total trim and accessories||$5.20|
|Total packing material||$0.30|
|Total CMTP charges||$35.00|
|Sub total (fabric cost + trims + packing material + CMTP charges)||67.01|
|Total factory cost||$75.05|
|Total wholesale price||$93.81|
|Transport to port of loading||$1.00|
|FOB (Free on board)||$94.81|
|Insurance of FOB||1%||$0.95|
|Custom duty on FOB||10%||$9.48|
|Transport to warehouse||$1.50|
|Cost paid till warehouse||$108.24|
|Retail price exclusive of GST||$270.60|
|Retail price inclusive of GST||$297.66|
CMTP = Cut, Make, Trim and Pack
FOB = Free on Board
GST = Goods and Service Tax
- Garment Manufacturing Technology Edited by Rajkishore Nayak and Rajiv Padhye
- Apparel Merchandising by R. Rathinamoorthy and R. Surjit
Apparel Manufacturing Technology By T. Karthik, P. Ganesan and D. Gopalakrishnan
You may also like: How to Make A Specification Sheet for Reefer Coat
Editor of Fashion2Apparel. She is a fashion designer and ex-lecturer in Fashion Designing. She wants to spread fashion knowledge throughout the world.