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 manufacturers 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
Here in this article, 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:
- Total Cost (TC) = Fixed Cost (FC) + Variable Cost (VC)
- Production Capacity of Your Machine (Hourly)
- Total Effective Working Hours Per Day
- Number of Days Operation in a Month
Fixed Cost of Garments Making
Fixed Costs are those costs of garment manufacturing that 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, rental expense of your factory building, depreciation expense of your fixed assets, etc.
Variable Cost of Garments Making
Variable cost is the cost that is change over an additional number of units of production. But per unit variable cost is fixed. The variable expense of garment making is; Utility (Electricity cost, Water cost, steam cost, Air cost) Expenditures, transportation cost, repair, 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 the total KW with the Price of per Kw electricity. Remember the cost of electricity is much higher in the case of fuel generators and local REB compared with Gas Generators.
- Water: Water cost is the cost of collecting water and the filtering cost. Normally in textiles and garments, De-Mineralized (DM) water is used.
- Steam: First identify the total consumption of steam per machine each hour and then multiply by the number of machines.
- Compressed Air: In the case of air you have to identify the compressed air cost per cubic meter then multiply 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 Costs include both fixed and variable Costs 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
- The rental Expense of the 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 Machines = 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
- The rental Expense of the 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 the 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 workers 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 garments need 45 minutes to make then the total cost of making the cost of that particular garment 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 garment’s cost of making. If you have any confusion then please let me know, and I will try to clarify further.
Note: All these costing information is arbitrarily taken, so these values are not actual costing value.