Costing Calculation

Costing Calculation

Costing Calculation Method of Sweater Garments (Factory Costing):

Before costing of sweater garments, a sweater garments merchandiser should confirm the following items:

1.    Yarn Cost per lbs.

2.    Embroidery Cost per dozen,

3.    Printing Cost per dozen,

4.    Cost of Making (CM) per dozen,

5.    Washing Cost per dozen,

6.    Accessories Cost (Zipper, button etc.),

7.    Commercial Cost per dozen,

8.    Others Cost per dozen.

Next duty of a sweater garments merchandiser is to determine the yarn consumption and costing.

Costing Calculation

Yarn cost can be calculated by using the following formula,
= [{(Garments weight in lbs. per dozen) + wastage %} × Yarn price per lbs.]

Generally we have added 10-20% wastage depends on styling.

After yarn costing, all the others necessary cost should be added with total yarn cost to achieve total cost of a garment.

Now, one example is enough to clear all the confusion about the above discussion.

Example:

Suppose,
The buyer “world Fashion” forwards a sweater order to you by mentioning the following terms:

§  Yarn: 100% Bright Acrylic, 2/52”S

§  Weight: 255gm (2ply)

§  Knitting: 12 GG plain knit in body, (1×1) Rib at bottom and sleeve opening,

§  Specifications: Plain knit placket, slit, 2 pockets.

Now, calculate the garments costing of the above order.

Solution:

Let,

§  Yarn Cost per lbs.- $4.00

§  Embroidery Cost per dozen- $1.00

§  Printing Cost per dozen-$1.00

§  Cost of Making (CM) per dozen- $30.00

§  Washing Cost per dozen- $5.00

§  Accessories Cost (Zipper, button etc.)- $5.00

Now,
Yarn costing per dozen garments:
As garments weight is 255gm for 1pc then for 1dozen garments, yarn needed (255 × 12),

= 3060 gm

= 6.74lbs (1lb = 453.6gm)

After adding 12% wastage, total yarn needed- 7.55lbs
So, yarn cost per dozen stands at- $(4.00 × 7.55) = $30.20

By adding all the following costs with total yarn cost, we will get the total FOB cost of garments per dozen.
Yarn cost per dozen ………………………… $30.20 ………………………. (A)
Printing Cost per dozen ……………………..$1.00 ……………….………… (B)
Embroidery Cost per dozen ……………… $1.00 …………………………. (C)
Accessories Cost per dozen ………………..$5.00 …………………………. (D)
Washing cost per dozen …………………… $5.00…………………………… (E)
Cost of making (CM)………………………. $30.00 ………………………….. (E)
Commercial cost ……………………………. $1.00 …………………………….. (F)
Others cost ……………………………….…. $0.50 …………………………….. (G)

So,
Total FOB cost per dozen = (A + B + C + D + E+ F + G + H)
= $ (30.20+ 1.00+ 1.00+ 5.00+ 5.00+ 30.00+ 1.00+ 0.50)
= $73.70 per dozen.

In case of factory, we received the order from a buying hose (Here, we got the order from (“world fashion” Buying House), so we have to pay 7%commission to them for that order.

So, in this situation, total FOB cost per dozen stands at-
= $73.70 per dozen + 7% commission
= $78.86 per dozen.

In case of factory costing, profit% for the factory (here-10%) should be added with total FOB cost per dozen.

So,
Total FOB cost per dozen with profit% stands at ($78.86 + 10%) = $86.75
Now, total FOB cost per pcs is ($86.75 / 12) = $7.23
So, factory cost (FOB) per pcs garment is $7.23