Costing of shirt

NIFT

COSTING OF APPAREL PRODUCTS

Costing of Men’s 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 men’s 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) / 36”X 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

5

1

5

pieces

1.5

1

1.5

pieces

1.5

1

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

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