Direct Costing of Garment

Costing of apparel Direct costing of garment 5/16/2012

sDirect cost

• The cost of the marginal or last unit produced. • The accounting system in which variable costs are charged to cost units and the fixed costs are written off in full against aggregate contribution. • Contribution : Sales- variable cost Marginal cost = DL+DM+DE+ NO variable costs are taken into account

Principles

• For any given period of time ,FC will remain the same for any volume of sales and production • For every extra item of product/service sold a) Revenue : Increases by the sales value of the item sold b) Cost : Increases as variable cost/unit c) Profit : Increases as amount of contribution earned from the extra item • Profit measurement takes on the analysis of total contribution • NO extra FC are incurred when output is increased

Features of direct costing

• Cost classification • Stock/Inventory valuation : Done under marginal cost a) Only VC are taken as stock b) Closing stock will be lower c) Less carry forward of stock d) Stock value will affect profit • Marginal contribution for profitability of different products/departments

Advantages

• Simple to understand • Gives way for break even and profitability analysis and hence short term profit planning • Effect of varying charges per unit is avoided • Alternative sales or production policies can be assessed and decisions taken can yield maximum results • Eliminates balances in o/h control accounts • Prevents carry forward in stock valuation

Disadvantages

• Separation of costs can be misleading • Exclusion of FC affects profits • Unrealistic in case of highly fluctuating levels of production( seasonal production) • O/H absorption is estimated ; can be erroneous • In practice, SP, FC and VC per unit may vary • Not practical for long-term profit planning

Thread consumption of casual shirt 1inch = 0.0254 m Collar Collar = 20*2 (SNLS Top stitch + under stitch) Collar stand = 21.5*2 + 17*1 (SNLS top stitch + under stitch) Collar bone = 6*2 (SNLS) Total = 40+59+12 = 121 inch

Yoke Yoke attachment = 17*2 = 34 Yoke shoulder = 6*2 = 12 Total = 34 + 12 = 46 inch

Pocket Left front pocket = 7.5*2 + 5.5 + 2.5 = 48 Right panel placket = 25.5 Total = 48 + 25.5 = 73.5 inch

Cuff Top stitch + under stitch = (14+ +1 +9.5*2)*2= 92 inch Diamond placket (5 +13)*2 = 36 inch Shoulder attachment = (21.5*2)*2 = 86 inch Button stitch = 256cm or 100.78 inch (1cm = 0.393 inch) Button hole = 224 cm or 88.19 inch 2.5 stitch per inch on SNLS TOTAL = 121 + 46 + 73.5 + 92 + 36 + 86 + 100.78 + 88.19 = 643.47 INCH

2.5 stitch per inch on SNLS then thread consumption = 643.47*2.5 =1608.67 inch

Stitch done by chain stitch (401) Side seam = (34*3)*2 = 204 inch Hem = 44 inch Collar neck = 16 inch Right placket = 25.5 inch 3 stitch per inch on CHAIN STITCH (401) then thread consumption = 289.5*3= 868.5 inch Total thread consumption = 1608.67 + 868.5 = 2477.17 inch Or 62.92 meter