(Study Program)
Introduction
The costing processes both before and after the manufacturing process are quite intricate practices. Thanks to the conventional methods of garment-related costing, the industry follows patterns and guidelines already laid out. As such, tracing every cost in the process is quite a daunting task. However, in the modern estimation methods of garment costing, industries follow some standard procedures that take into account all activities pertaining to the manufacture of a garment. Such activities include; cost of raw material, accessories, knitting fabrics, sewing, transport, general overheads, etc.
Foe effective garment costing, companies familiarize themselves with the costs, techniques, benefits and risk events associated with the garment manufacturing activities. The personnel should also be aware of how to tackle problematic situations as and when they arise, thereby making appropriate and timely substitute decisions. It is also essential to understand that there are laws of demand and supply that serve to regulate the economy, and as such, there will always be fluctuations in prices. The factors mostly affected by demand and supply include; raw materials, transport and conveyance, knitting charges, etc. It is, therefore, imperative to be aware of the current market trends and the costs of the various materials at any point in time since they will always differ. It is equally important to have knowledge in the best methods and practices that apply in the industry.
The price is always dependent on the quality. Good-quality garments have high price labels while low-quality garments, on the other hand, have low prices. Companies, in most cases, rarely produce only one type of garment. Additionally, they do not manufacture garments for only one customer. Such factors that include; customer prices, quality, quantity, and terms of payments need consideration in the garment-costing process.
Commercially producing a garment involves three main processes. They include; designing, manufacturing and selling. A garment manufacturing company may allow the placements of garment orders even before manufacturing takes place. Such orders should take into consideration the minimum manufactured quantity allowed. Manufacturers will usually drop garments ordered in insufficient quantities from their production lines. The wholesale price is the price associated with the price paid by retailers to wholesalers after purchasing the garments.
The basics of calculating the wholesale price by each manufacturer is dependent on the cost of producing a dozen garments. The final calculated cost has basis on two main types of costs that include; pre-costs and final costs. Pre-costs are those costs estimates accrued before the manufacturing of the garment. The designer, in this case, retains records detailing the costs of all materials used in the manufacture of each garment. The designer then sets out a worksheet to calculate the overall estimate of the garment. A decision then follows of whether or not to incorporate the garment into the manufacturer’s price model. Every manufacturing company eventually comes up with a range of prices for their merchandise well understood by the customers. Merchandise pricing at times creates demand for certain manufacturer’s merchandise.
The final costs represent the exact calculation of the cost of the garment. The costing department is in charge of deriving the final costs. The department must oversee detailed cost analysis for each garment in the manufacturer’s line of products. The designer worksheet plays an important role in estimating the final cost. The cost sheet comprises of the following cost estimates:
- Fabric: Multiplying the total yardage of each fabric used in the manufacture of a garment by the cost per yard for each fabric yields the total cost of the individual fabric. Adding the costs of individual fabrics together yields the total cost of all fabrics.
In order to determine the yardage required for the fabric, it is important to decide on the number of patterns needed and the measure for each of them.
In the example above, the layout saves on fabric that eventually translates to saving money. The total yardage is 1.1 Yards and the price per yard = $8.5. Therefore, the total cost foe the fabric is 1.1 * 8.5 = $9.35. The garment must also have some form of interlining. Assuming the cost of interlining is $0.69/yard and the use of only 30% of per yard, then the total interlining costs become 0.69 * 0.3 = $0.207 that is approximately $0.21. The total cost for the fabric, therefore, = 0.21 + 9.35 = $9.56.
- Trimmings: The designer must identify the exact cost of each trim and then multiply by the number of trims to get the total estimate for all trims. In this case the requirements for trimming include; eight buttons, 30’’ spaghetti loop, 1 main label, 1 size label, and 1 care label.
Buttons:
The requirement is 8 buttons per garment with the price per gross being $20.16. So 1 gross = 12 dozens= 120 pieces. Therefore, Price per unit: $ 20.16 / 120 = $0.14.
Total price per garment: $ 0.14 x 8 = $1.12
Spaghetti loop:
Requirement per garment is 30’’
Conversion: 36’’= 1 yard
Therefore 30’’ / 36’ ≈ 0.8333 = 0.83 of a yard
The wholesale price is $11 / 50 yard
Price per yard: $11 / 50 = $0.22
Total price per garment: $0.22 x 0.83 = $0.1826 Rounded to $0.18
Main Label
There is only one main label required for the garment.
Price: $300/1000 units
Price per unit/ total price per garment: $300 / 1000 = $ 0.3
4) Size Label
There is only one size label required for this garment
Price: $ 195 / 1000 units
Price per unit/ total price per garment: $195/1000=$.195 = $ 0.2
Care Label
There is only one care label required for the garment
Price: $ 195 / 1000 units
Price per unit / total price per garment: $195 / 1000 = $0.195 = $0.2
Total trim cost per garment
= the cost of buttons + the cost of the spaghetti loop + the cost of the main label + the cost of size label + the cost of care label.
=$ 1.12 + $ 0.18 + $ 0.3 + $ 0.2 +$ 0.2
= $ 2
- Labor: Garments may be made by the manufacturer or sent out to a specialized factory. The production directors decide on the location for the manufacture based on the one with the least expenses.
- Patterns, grading and marking: The designer must make patterns from the original design, grade to the size range produced by the manufacturer and mark them with information on how to construct the garment. The manufacturer may make, grade and mark the patterns outsources pattern services. In either case, the cost of the garment will be ratio of the total cost to the number of garments cut. In this case we assume the cost of $ 15 per size and a standard of $ 0.55 per garment.
- Cutting: cutting costs depend on the number of garments cut, usually in dozen lots. If fabric cutting happens at the manufacturer’s premises, calculation of cost is on the cutter’s hourly wage multiplied by the number of hours needed to cut all garments in a particular style. If the manufacturer contracts the cutting services, the contractor’s fee applies which forms part of the cost. For a vendor who charges sewing costs at the rate of $ 500 for every 50 units, then the price per unit = $ 500 / 50 = $ 10 per unit. The total cost for the garment, therefore, becomes:
Total cost per garment = Cost of fabric + trims + cut and sewing + pattern making and grading.
Total cost = $ 9.56 + 2.0 + 10 + 0.55 = $ 22.11.
- Construction: In some companies, the total cost is the addition of the costs of each operation needed to make a garment and the costs of individual operations. In other companies, cost computation involves multiplying the average time needed to make one garment by the hourly wage paid to the workers.
- Trucking or air freight: the cost of shipping the completed garments to the retail store also forms part of the manufacturing cost.
Wholesale Pricing
Wholesale price refers to the total price that takes into account the labor costs, materials costs, and markup. The markup comprises of the sales commission offered to the manufacturer’s sales representative, discounts, overheads, shortages, and profits. Most companies usually add a markup of between 40% and 50% to the total cost of manufacturing the garment. The manufacturing cost plus the markup constitute the wholesale price quoted to the retailers. In the example above, with the total cost for manufacturing the garment pegged at $ 22.11, the wholesale price may have a figure of $ 35. The gross margin will be = $ 35 – $ 22.11 = $ 12.89.
Retail Price
Retail store owners order their merchandise from different manufacturers. The retail price to consumers also includes an additional markup. In some cases, the retailers may add as much as 100% of the wholesale price as a markup. Such is because the retail price must meet the operating expenses and also retain profits. The average expenses determine the markup per item. Since the average operating expenses are different for different retailers, the corresponding retail prices amongst the retailers may also be different. From the above example, with a wholesale price of $ 35 and a markup of 100%, the retail price becomes (100% of $ 35) + $35% = $ 70. Such is the price that the customer will pay for the garment at the buying price.
References
Garment Costing. (n.d.). Retrieved December 3, 2014, from http://www.textileschool.com/articles/173/garment-costing
Kothari, V. (2013). Fashion Merchandising: Garment Costing. Retrieved December 3, 2014, from http://www.textiletoday.com.bd/magazine/715
Sykes, B. (2004). Do you sew for profit? A guide for wholesale, retail, and consignment. Chino Hills, CA: Collins Publications.
