Garments Cost of Making (CM)
One of the highest
productive industries is a garment manufacturing industry where different types
of products are manufactured. It is required to Calculate Garments Cost of
Making time to time because the main motive of garments manufacturer is to make
a profit. After making the garments it is offered to the buyers. But the
problem is, what should be the required price of that item and how to calculate
the cost of the garment of making (CM). To solve this problem first, you need
to know the cost of making each garment and then add your markup price to set
the selling price. Here the cost of making means the cost of manufacturing
garments.
Monitoring
garments making cost is necessary continuously so that trends of the cost of
making can visible to the decision-makers and they actually know whether garments
making cost is increasing or decreasing. Based on your change
in garments cost of making you may take decisions accordingly.
Normally,
CM cost or Cost of Making garments indicates the sewing line cost of each
garment. But you can also calculate your whole factory cost of making each
garment.
Calculate Garments Cost of Making
we will show you two different ways of calculating the Cost of
Making (CM) of garments.
- Normal
Method of Calculation of CM
- Effective
Way of Calculation of CM
Pre Requirement of
Calculation of Garments Cost of Making
Before you
start your costing by using the normal way, you
need to know the followings:
1. Total Cost
(TC) = Fixed Cost (FC) + Variable Cost (VC)
2. Production
Capacity of Your Machine (Hourly)
3. Total
Effective Working Hours Per Day
4. Number of
Days Operation in a Month
Fixed
Cost of Garments Making
Fixed
Costs are those costs of garments manufacturing which are fixed in nature. With
the increase in the number of units of production, your per-unit fixed cost
will be reduced. Some examples of fixed costs are; salaries and wages, interest
expense of bank loan, a rental expense of your factory building, depreciation
expense of your fixed assets, etc.
Variable
Cost of Garments Making
Variable
cost is the cost which is change over an additional number of units of
production. But per unit variable cost is fixed. The variable expense of
garments making is; Utility (Electricity cost, Water cost, steam cost, Air
cost) Expenditures, transportation cost, repair, and maintenance expense, etc.
Here the most crucial variable cost is utility cost. We need to carefully
handle the utility section to minimize utility costs.
Hourly
Total Production Capacity of Garments Machinery
To
identify hourly total production capacity, you need to identify the total
number of machines and the capacity of each machine. After that, you need to
multiply the hourly capacity with the machine number.
Daily
Production Capacity of Garments
For
calculating the daily production of your garments, you need to multiply your
hourly effective production capacity into working hours each day.
Monthly
Production Capacity of Garments
To
calculate monthly production capacity you have to multiply your daily
production capacity with the number of working days in a month.
Costing of Utility of
Garments
- Electricity: To get electricity cost you need to identify
the total kW consumption of your factory and then multiply total KW with
the Price of per Kw electricity. Remember the cost of electricity is much
higher in the case of fuel generator and local REB compared with Gas
Generator.
- Water: Water cost is the cost of collecting water
and the filtering cost. Normally in textile and garments, De-Mineralized
(DM) water is used.
- Steam: First identify the total consumption of
steam per machine each hour and then multiply with the number of machines.
- Compressed Air: In case of air you have to identify
the compressed air cost per cubic meter then multiplies with the total
consumption.
The Formula of
Calculating Garments Cost of Making Considering Whole Factory Cost
Monthly Garments Cost of Making (GCM) =
(Monthly Total Cost of Garments Operation)/Monthly Total Output Produced by the
Factory.
- Here Total Cost
include both fixed and variable Cost of your garments factory for one
month
- Monthly total
Production is the output produced by the factory.
Example: Suppose
Your Factory Costing Related Information are;
- Salary & Wages
Expense Tk. 20,000,000
- Monthly Interest on
Bank Loan Tk. 100,000
- Depreciation Expense
is Tk. 50,000
- Rental Expense of
Building is Tk. 200,000
- Transportation Cost
is Tk. 150,000
- Repair &
Maintenance Expense is Tk. 50,000
- Utility Expense is
Tk 10,00,000 where Electricity Cost is Tk 500,000, Steam Tk. 200,000,
Water Cost is Tk. 100,000, Chiller Cost Tk. 100,000, Compressed Air Cost
is Tk. 100,000.
- Total Number of
Machine is 150
- Hourly Production
Capacity of Each Machine 30
- The total Working
hour is 8 hours per day
- The number of
working days in a month is 26 Days.
Total
Cost = 20,000,000 + 100,000 + 50,000 + 200,000 + 150,000 + 50,000 +1,000,000 =
21,550,000
Total
Production = 150 * 30 * 8 * 26 = 936,000
Cost
of Garments Making Per Piece of Garments = (21,550,000/936,000) = Tk. 23.02
(Piece)
Effective Way of Calculation of Garments Cost of Making (CM)
- Total Number of Machine = 180 Unit
- Number of Workers Required = 200 Person
- Total Working Hours a Day = 8 HOurs
- Number of Working Days for a Given Month =
26 Days
- Workers Efficiency = 65%
- SMV of Trouser = 35 Minute
- Available Minute = (200 Workers x 8 Hours x
26 Days x 60 Minute) X 65%
- Available Minute = 16,22,400 Minutes in a Month
Fixed Cost of Garments Factory
- Salary & Wages Expense Tk. 40,00,000
Monthly
- Interest on Bank Loan Tk. 100,000 Monthly
- Depreciation Expense is Tk. 50,000 Monthly
- Rental Expense of Building is Tk. 200,000
Monthly
- Transportation Cost is Tk. 150,000 Monthly
- Repair & Maintenance Expense is Tk.
50,000 Monthly
- Utility Expense is Tk 10,00,000 Monthly
Calculation of Cost Per Minute of Garments
Factory
- Salary = (40,00,000/16,22,400) = 2.47
Taka/Minute
- Interest = (100,000/16,22,400) = 0.06
Taka/Minute
- Depreciation = (50,000/16,22,400) = 0.03
Taka/Minute
- Rental Expense = (2,00,000/16,22,400) = 0.12
Taka/Minute
- Transportation = (150,000/16,22,400) = 0.09
Taka/Minute
- Repair & Maintenance =
(50,000/16,22,400) = 0.03 Taka/Minute
- Utility Expense = (10,00,000/16,22,400) =
0.62 Taka/Minute
- Total Cost Per Minute = 3.42 Taka/Minute
So, the Cost
of Making (CM) of Trouser = 35 Minute x 3.42 Cost Per Minute = 119.7 Taka
Minute
Value or Cost Per Minute of Sewing Line of Garments
For
calculation of garments sewing line cost per minute, you can use the number of
operators and helpers and determine the total available minutes. And then,
divide the total wages and salary expenses of operators and works with the
available minute.
Suppose
Your Sewing Section has 30 machines and for this machine 30 operators and 5
helpers are working.
- Total Salary Expense = ( 30 Operators *
Average Monthly Salary) + (5 Helpers * Average Monthly Salary)
- Salary and Wages Expense = (30*10000 Tk.) +
(5 * 8000 Tk.) = 340000 Tk/Month.
- Available Minute Per Month = ((30
operators+5 helpers)* (8 hours *60 minutes)) * 26 days = 436800 Minutes in
a Month
CM
of Garments = (340000/436800) = .78 Tk./Minute
If
a garments need 45 minutes to make then the total cost of making the cost of
that particular garments will be = (.78 TK * 45 minute) = 35.1 Tk./Per Piece
*(Calculation
based on Assumption)
Here
instead of Taka, you can use any other currency as required.
After
reading this hopefully, you understand how to calculate garments cost of
making. If you have any confusion then please let me know, I will try to
clarify further.
Note: All these
costing information is arbitrarily taken, so these values are not actual
costing value.
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