5 Apparel costing for merchandiser This chapter details the steps used in the apparel costing process. The chapter describes the calculation methods of yarn and fabric cost at different stages of fabric manufacturing like knitting or weaving, pre-processing stages like bleaching, dyeing and finishing process. Further the chapter describes the costing activities involved in the various departments of apparel manufactur- ing firm. The cost calculation strategies involved in the cutting department, sewing, trimming, checking, packing departments and shipment costs calcu- lations are explained with adequateexamples. To facilitate the better under- stand of the merchandising costing process, overall cost calculation examples were provided for fabric cost and apparel cost estimation. Keywords: Costing elements, types of costs, fabric cost, processing cost, garment cost 5.1 Introduc' n The process of costing defined as “The technique and process of ascertaining costs” Charted Institute of Management Accountants (CIMA) “Cost — Price paid for something” Oxford Dictionary “Costing is the technique and process of estimating the cost for a product or service or process” = Institute of Cost and Management Accountants, London, Costing of the apparel and textile product is a complex problem, it in- volves numerous number of activities associated with each product. The technique and methods to be used for ascertainment of cost vary from unit to unit depending upon the nature of the industry, type of the product, method of production and the meaning or the sense in which the term cost is used In apparel industry, the process of costing a product is very dynamic. Since, the fashion changes every season and sometimes very often, the product which the manufacturing company receives for manufacturing from the buyer also differs every season. Most of the time, the products176 Apparel Merchandising are manufactured only once. This leads the manufacturing company to work on accurate costing on every product in order to run the business profitable. The knowledge on the costing process is very essential for a merchandiser. Since, he or she is involved from the product development stage, the knowledge on costing is very essential. From medium size to small scale and sometimes in large scale industry also, the responsibility of costing a new product often comes under merchandiser’s responsibil- ity. He or she needs to develop the cost sheet from the product develop- ment stage, with all necessary components that go into the cost sheet. The merchandiser should have a strong understanding about the different ele- ments of cost and their influence on the products pricing. The major role of the merchandiser in the costing process is, after the costing process, he or she should monitor the variables that influence the cost of any product and to analyse it and to adjust it to maintain the profitability of a company in all worst case scenario. This chapter details the various aspects of cost- ing theory and different methods widely adapted in apparel industry to estimate the cost of each process involved in the manufacturing line of an apparel product. 5.2 Elements of cost The material, labour and expensesare the fundamental elements of cost. The Figure 5.1 explains the elements involved in the basie costing process. Elements of Cost t ¥ Y ' ' ' ' ' ' Direct Indirect. ‘Direct’ ~— Indirect Direct _Indirect Production Admin Sales Distribution ‘overheads overheads overheads overheads Figure 5.1. Elements of costApparel costing for merchandiser 177 5.2.1 Material cost It is the cost of commodities supplied to an undertaking. This includes, cost of procurements, freight inward, taxes and insurances. These activities are included in material cost because; they are directly attributable for the acquisition of ma- terial. Here the material can be specified as any substance from which the item is made. It might be in a crude state as raw material, e.g., fibre for fabric and raw chemicals for dyeing, and so on. Additionally it may be also be in a made state — parts, e.g., buttons, zippers, and so on, materials can be direct and indirect. Direct material All materials which become an integral part of the finished product, the cost of which are directly and completely assigned to the specific physical units and charged to the prime cost, are known as direct material. The following are some of the materials that fall under this category: a) Materials which are specifically purchased, acquired or produced for a particular job, order or process. b) Primary packing material (e.g., carton, wrapping, cardboard, etc.). ©) Materials passing from one process to another as inputs. Indirect material + All materials, which cannot be conveniently assigned to specific physical units, are termed as “indirect material”, Such commodities do not form part of the finished products. These items will not be a part of the finished product (physical- ly). Consumables, lubrication oil, stationery and spare parts for the machinery are termed as indirect materials. 5.2.2 Labour cost Human efforts used for conversion of materials into finished products or doing various jobs in the business are known as labour, Payment made to- wards the labour is called labour cost. It can also be direct and indirect. The labour cost is defined as “The cost of remuneration (wages, salary, bonuses,etc.) of anemployee of an undertaking” — CIMA Direct labour Direct labour cost is the wages, salary, or bonuses, or commission paid to the workers or employees who directly involved in converting the raw material178 Apparel Merchandising into the finished product. The wages paid to skilled and unskilled workers for manual work or mechanical work for operating machinery, which can be spe- cifically allocated to a particular unit of production, is known as direct wages or direct labour cost. Indirect labour Labour employed to perform work which is not a part of manufacturing the end product but only to assist the product or operations are known as indirect labour or those engaged for office work, selling and distribution activities are known as “indirect labour”. The wages paid to such workers are known as “indirect wages" or indirect labour cost. Example: Salary paid to the driver of the delivery van used for distribu- tion of the product. 5:23. Expenses All expenditures other than material and labour incurred for manufacturing a product or rendering service are termed as “expenses”. Expenses may be direct or indirect.The Expenses may be defined as “The cost of services provided to an undertaking and notional cost of the use of owned asset” —CIMA. Direct expenses Expenses which are specifically incurred and can be directly and wholly allo- cated to a particular product, job or service are termed as “direct expenses”. Examples of such expense are: hire charges of special machinery hired for the fob, carriage inward, royalty, cost of special and specific drawings, ete. Indirect expenses Alll expenses excluding indirect material and indirect labour, which cannot be directly and wholly attributed to a particular produet, job or service, are termed as “indirect expenses”, Some examples of such expenses are: repairs to machinery, insurance, lighting and rent of the buildings. Prime cost The direct cost of a commodity in terms of the materials and labour involved in its production, excluding fixed costs Prime cost = Direct material + Direct labour + Direct expensesApparel costing for merchandiser 179 5.2.4 Overheads Indirect expenses are called overheads, which include material and labour, Overheads = Indirect material + Indireet labours + Indireet expenses Overheads are classified as: * Production or manufacturing overheads — Connected with factory production function like indirect material labour,etc. + Administrative expenses — Indirect expenditures incurred in general ad- ministrative function, they don’t have any direct connection with produc- tion or sales activity. For examplestationeries used, sweeping brooms, salary of a peon, ete. * Selling expenses — It is the cost of promoting the sales and retaining the customers. For exampleadvertisement and gifts, etc. + Distribution expenses — Alll the expenses incurred from the time of the production completion to the time it reaches its destination, For exam- plepacking material, salary of drivers and insurance of the goods. + Research and development expenses — Any expenses associated with the research and development of a company’s goods or services. Here, + Factory cost = Prime cost + Factory overheads + Cost of production = Factory cost + Office and administrative overheads + Sales cost = Cost of production + Selling and distribution overheads + Selling price = Cost of sales + Profit + Cost/ unit = Selling price / Total production. 5.3 Factors influencing the costing process In continuationto the cost elements, itis essential to know and understand the fundamental factors which affect the cost of the apparel products. An apparel product cost or price includes cost of various activities like fabric purchase, dyeing, cutting, sewing and packing, transportations and other overhead expenses. Hence, the cost of the product will always fluctuate time to time based on other factors The cost of the apparel product also will vary style to style. Since the style complexity decides the number of operations in each process, the cost always changes with styles. The various components of an apparel cost are as follows: + Type of fabric + Trims type and numbers + Cutting, making checking and packing charges180 Apparel Merchandising Value added services-printing, embroidery, washing, appliqué Testing of the garment Quality parameters expected Transportation and logistics cost Profit of the manufacturing organisation. Other than these factors, there are few other things which will affect the cost of an apparel product directly. They are described below. i) Fabric cost -Fabric is generally the most significant factor in costing of garment. Fabric accounts for 60%-70% of the total cost of basic-styled garments.The cost of fabric depends upon the type of fabric that is going to be utilised in the garment. Types of fabrics are: Woven/knitted fabric Power loom/automatic loom fabric Fibre/yarn/fabric dyed fabric Fibre content of fabric i.e. cotton, wool, polyester, silk, blended fab- Tic, ete. ‘Type of dyeing and finish used GSM/Weight of fabric Type of yarn used i.e. ring spun, open ended, or carded/combed, ete. Unit of Measurement (UoM) — The another important information which a merchandiser should be aware for different raw materials. Sometimes, the cost associated with the raw material depends upon the unit of availability. iii) Fabric Minimum Order Quantity (MOQ) ~ This is the information about the minimum or smallest quantity of any raw material which can be bought from ven- dors. The MOQ plays the important role while ordering the fabric as it directly af fects the cost of garment. If the order of fabric is below the estimated MOQ then vendor charges more cost as compared to regular charges. Merchandisers need to ~The cost of the material majorly depends upon the quan- tity ordered. Higher the order quantity, lesser will be the cost of any material (comparatively). v) INCO terms (International commercial terms)—The type of agreement be- tween the buyer and seller with respect to commercial aspects also a major criteria which decides the cost of the product. For example, FOB pricing, FAS pricing, ete. 5.4 Calculation of fabric cost In apparel manufacturing process, most of the time the responsibility of cal- culating the required yarn quantity for any particular order will be on the headApparel costing for merchandiser 181 of merchandiser where he or she will be provided with the fabric specifica- tions required or else with a sample swatch. In the second case, with the ex- isting fabric, merchandiser needs to work back and identify the fabric details like yarn count, Ends per inch, Picks per inch in woven fabric and Course per inch, Wales per inch in case of knitted fabric. Based on those details, the merchandiser needs to arrive for the yarn requirement for the metre square or unit area of the fabric. This will help themerchandiser to estimate the approx imate amount of yarn required for the completion of order. For that the mer- ser must know the consumption requirement of the each garment. As Chapter 3, based on the measurement details, the merchandiser need to estimate the amount of fabrie required to produce individual garment including the waste allowance. With that estimated fabric consumption per garment, he or she can measure the amount of fabric (for knitted in kilograms and for woven in metre) required for the order. Based on this quantity, the company will decide by considering various factors, whether to produce the fabric or to source the fabric directly. In the second case, the merchandiser’s job is little easy where he or she can coordi- nate with different fabric manufacturers and based on the quality requirement and quantity, cost and availability, merchandiser will decide the sourcing pro- cess. But in the case of the first situation, the merchandiser’s responsibility increases multi-fold. Here, merchandiser has to decide, + The fabric consumption / per garment + The fabric quantity need to be purchased + Yarn consumption (in kgs) per square metre + Estimating the process cost like pre-treatment and dyeing * Calculating the total fabric cost of the fabric + Arriving at the fabric cost per garment. 5.4.1 Yarn cost calculation To calculate the yarn cost, as discussed in the Chapter 3, it is necessary to identify the GSM (gram per square metre) of the fabric, for both knitted and woven material. The formula mentioned in Chapter 3, is provided below. It can be used for GSM calculation. i) For woven fabric, EPI x 39.384 x 453.4 x (crimp +100) Warp count x 0.914 x 840 x 100 Warp weight PPI x 39.384 x 453.4 x (crimp +100) Weft weight = Weit count x 0.9140 x 840 x 100182 Apparel Merchandising GSM of woven fabric = Warp weight + Weft weight. ii) For knitted fabric 0.59 x Length in meters Count in Ne = Weight in loop density x (39.384) x (39.384) x loop length in mm Yarn length inm = 1000 _0.59x yarn length in m x (100+ shrinkage) GSM . Count (Ne) x 100 The following example explains the cost calculation of yarn (data provided for cost calculations are approximate values, only for example purpose). 5.1 Yarn Count Conversion Table Example 1: An apparel manufacturing company received an order to de- velop fabric with following description. The fabric is made of 100% linen in warp and 100% acrylic in the weft. The other fabric particulars are 65 EPI, 60 PPLwarp count is 2/100s and the weft count is 120 Denier, the warp and weft crimps are 4% and 8%, respectively. Calculate the cost of the yarn per square metre.Consider the yam price as follows, linen yarn price per kg = Rs. 450,00, Acrylic yarn price per kg = Rs. 285.00. Solution: To calculate the warp weight,Apparel costing for merchandiser 183 PI x 39.384 x 453.4 x (crimp +100) Warp weight = ~~ Warp count x 0.914 x 840 x 100 __ 65 x 39.384. 453.4 x (4 +100) 50 x 0.914 x 840 x 100 =31.44 gram. To calculate the weft weight, PPI x 39.384 x 453.4 (crimp +100) Weft count x 0.9140 x 840 x 100. 60 x 39.384 x 453.4 x(8 +100) Welt count x 0,914 x 840 100 To convert the weft count from denier to English count (Ne), Weft weight = = SHS SBM gon, Denier 120 Hence, 60 x 39.384 x 453.4 x (8+ 100) © 44.29 x 0.914 840 x 100 = 34.02 grams Total weight of the fabric = 34.02 + 31.44 = 65.46 gram. To calculate the cost of the warp yarn, = Weight in gram x yarn cost / kg = 80 as 14.148 3144 x Tg Rs. 14.148. To calculate the cost of the weft yam, = Weight in gram x yarn cost / kg 285 34.02 x 1000 Rs.9.69 Total cost of the yarn per square metre of the fabric = Rs. 14.14 + Rs. 9.69 = Rs. 23.84. Example 2: A knit garment export company received an order to develop knitted fabric with following description. The fabric is made of 100% combed cotton and the other fabric particulars are as follows:85CPI, 80 WPI, warp count 40s Ne and Joop length of 0.95 mm, Calculate the cost of the yam per square metre,Consider the cotton yarn price as Rs. 280.00 per kg and knitting shrinkage of 5%. Solution: loop density x (39.384) x (39.384) x loop length in mm Yarn length in m= 1000184 Apparel Merchandising __ 85x 80 x (39.384) x (39.384) x 0.95 - 1000 = 10020.1 metres 0.59 = yam length in m x (100 + shrinkage) Count (Ne) x 100 19 x 10020.1 x (100+ 5) 40 x 100 55.19 grams per square metre To calculate the yarn cost, = Yarn weight / square metrex Yarn price = 155.19 gx on = Rs. 43.45 per square metre. Based on this cost, we can estimate the total cost of the order. GSM = 5.4.2 Process cost calculation The fabrication process involvesvarious processes like knitting or weav- ing, scouring, bleaching, dyeing, finishing treatments, ete. When the yarn is sourced and converted into fabric, during the costing process to estimate fab- ric cost, we have to add all the cost of processes that the fabric undergoes The final fabric cost will be the cost of the yarn along with the summation of process cost of the fabric i) Knitting or weaving cost For the calculation of knitting or weaving cost, one must know the following factors to estimate the cost of that process. Total number of machines used Number of shifts per day Yarn quantity used ‘Waste percentage Number of operators and helpers Operator wages Other expenditures. Production capacity of the plant or individual machine / shift or day For calculating the cost of any process, the abovementioned data are nec- essary, The following example details the cost calculation of a knitting process. Example 3: A company developed single jersey cotton fabric for the kids wear garment. The company sourced 2000 kg of yarn and the price of theApparel costing for merchandiser 185 yarn is Rs, 240 / kg. The knitting industry works with 5 weft knitting ma- chine with the production capacity of 85 kg / machine. The average waste percentage expected during the operation is 3%. The company works with $ operators and 2 helpers with the wage of Rs. 250 and Rs. 150 per shift, respectively. Calculate the cost of knitting process per kilogram with 20% profit if the company spendsRs. 5000 / month for rent, Rs, 3000 / month for electricity and Rs.15,000 / month as other expenses. Assume company works 26 days per month. Solution: Step 1: Number of shifts required to complete the order. Total production per day = Average machine production x Number of machines =85 *5 = 425 kg/ shift ‘The wastage percentage expected = 3% Hence, 2000 kg ~ (3% of 2000 kg) = the original quantity produced = 2000 ~ (2000 x 2) = 1940 kg 100 ; : Total yarn quantity Total number of shits required = Bro G ction capacity per shift 2000 " 425 4.7 shifts. Step 2: Calculate total labour cost The labour cost = No. of labours x No. of shifts worked to complete cordersWages/shift = Cost of operators + Cost of helpers = (5 x4.7* 250) + (2 4.7 150) = Rs. 5875 + Rs.1410 = Rs. 7285 Step 3: Calculation of direct material cost Yam purchased = 2000 kg with the price of Rs. 240 / kg = 2000 x 240 = Rs. 4,80,000 Step 4: Calculation of overheads Company spends all these overheads per month (26 days). Since, the com- pany works one shift per day, The 1 day or I shift expense as ovethead is as follows, 5000 +3000 +15,000 Overheads = ———————— = Rss. 884.61 26 Since, the company works 4.7 shifts for this order, = 884.61 * 4.7 shifts = Rs. 4157.69186 Apparel Merchandising Step 5: The overall cost of the knitting process ‘The total knitted fabric cost / ke ~ Matetial cost + Labour cost + Overheads Total production Fabricicost / kgm 00: 0004 7285 + 4157.69 5. 6359 1940 Labour cost + Overheads _ 7285 +4157.69 Kiting 681 ig eduction Tad RS 5.89 Knitting rate /kg = 5.89 x 20% profit= 5.89 + (5.89% 72.) = Rs, 7.07 100. 5.2 Loom Production To calculate the 100% efficient loom production the following formula can be used, = Revolution per minute (RPM) * Total working hour x 60 (minute per hour) which means, based on the machine RPM the production were calcu- lated. If the machine works at 575 RPM for a 8-hour shift, then the produc- tion will be, = 875 « 8 « 60 = 2,76,000 picks. The main factors which affects the production of a loom are, l. Efficiency 2._ Picks per inch / centimetres. Example 4: A weaving unit with auto looms received an order to produce 40,000 metres of plain woven fabric. The loom shed consist of 36 looms with the capacity of 230 rpm. The company works with 20 weavers, 3 helpers with the salary of Rs.400 / shift and Rs.300 /shift, respectively. The shed is maintained by two supervisors with the salary of Rs.20,000 per month. If the company works with 75% efficiency and produces fabric with averagely 70 picks per inch, calculate the cost of weaving process per metre with 20% profit. The overhead details are, Rs. 3,00,000 / month for power, Rs. 1,50,000 / month for other staff salary, oil and other consumables Rs.50,000 / month. Spares and other parts Rs. 1,00,000/month and Rs. 25,000 / month knotting cost and Rs. 3,50,000 as other expenses and bank interest due. Assume com- pany works 26 days per month and three shifts per day. Solution: The total production need to be done = 40,000 metres Hence, the daily production of the shed can be calculated as follows,Apparel costing formerchandiser 187 RPM Production per machine = 35 neh 3937 %60 (minutes in an hour) x 24 (working hours/day) * 60 x 24 = 120.178 metres / machine / day at 100% efficiency ___ 230 70x 39.37 Production at 75% efficiency = 120.178 x 0.75 = 90.133 metres/machine/ day Total production / day = 36 x 90.133 = 3244.82metres / day. Hence, to complete the current order, The total number of days required is = jy psutton "azaga> — 12:33 days As company works 3 shifts / day, total number of shifts are = 12.33 3 = 36.98shifts Step 2: Labour cost ‘The number of labours used are, 20 machine operators/ weavers with the wage of Rs. 400/shift, 3 machine helper with the wage of Rs, 300/shift and 2 supervisors with the salary of Rs. 20,000 / month. 2.000 oon ‘The supervisor wage per day = = Rs.769.23. Hence, the total labour cost is = (Number of labours x Total working shifts x Wages per shift) = (20 36.98% 400) + (3 x36,98x 300) + (2x 769.23 * 12.33) 2,95,840+ 33,282+18,969.21 = 3,48,091.21 Labour cost = Rs. 3,48,091.21. *Note-:Here, the supervisor alone works in a monthly salary basis, hence, for them the number of days is considered for cost calculation instead of shifts. Step 3: Overhead charges Rs. 3,00,000 / month for power . Rs. 1,50,000 / month for other staff salary .Rs.50,000 / month for oil and other consumables . Rs. 1,00,000/ month for spares and other parts Rs. 25,000 / month as knotting cost Rs,3,50,000 / monthas other expenses Total expenses =Rs. 9,75,000 waUne 2 Since, the factory works 26 days in a month, the daily OH is ‘Total working days 37,500 * 12.33 = Rs.4,62,375 Step 4: Total weaving cost Total cost = labour cost + overheads = Rs. 3,48,091.21 + Rs.4,62,375 Rs. 8,10,466.21188 Apparel Merchandising 8,10,466.21 He ae lee / 0, Rs. 20.26/ metre. Hence, weaving cost / metre = 20 Weaving cost with 20% profit = 20.26 + (20.26% 7) = Rs. 24.31 / metre fabric. 5.3 CALCULATION OF WEAVING COST The other formula used for calculation of weaving cost are, (Yam rate + Sizing cost) « Number of cord 1. Warp cost = Length of yam (840 X yarn count) idth 2. Weft cost = Length of yarn (840 x yarn count) 3. Wastage % 4, Miscellaneous = Weaving charge + Electricity + Maintenance Hence, Weaving cost / yd = Cost of warp yam / yd + Cost of weft yarn / yd + Wastage + Miscellaneous. Example 5.5: A weaving unit with auto looms consists of $2 looms with the capacity of 245 rpm. The company works with 90% efficiency and produces fabric with averagely 70 picks per inch, calculate the cost of a pick with 20% profit. Company works with 40 weavers and 10 helpers with the wage of Rs.350 and Rs.250/shift, respectively. The overhead details are, Rs. 5,00,000/month for power, Rs. 2,75,000/month for other staff salary, oil and other consumables Rs.1,50,000/month. Spares and other parts Rs. 2,50,000/month, Rs. 50,000/ month as knotting cost and Rs.5,00,000/month as other expenses like bank inter~ est dues and etc, Assume company works 30 days amonth and 3 shifis per day. Solution: . . RPM . Production per machine = 557 ingjscaga7% 60 (minutes in an hour) x 24 (working hours/day) = 745 5.60 x 24 = 128.01 metres / machine / day at 100% effici gear .01 metres / machine / day at 100% efficiency Production at 90% efficiency = 128.01 x 0.9 = 115.21 metres / machine / day Total production / day = 52 * 115.21 = 5991.16 metres /day. Since company works 30 days in a month, the total production is, = 5991.16 metres /day x 30 = 1,79,734.82 metres. Step 2: Labour cost The number of labours used are, 40 machine operators/ weavers with the wage of Rs, 350 /shift, 10 machine helper with the wage of Rs, 250/shift. Hence, the total labour cost isApparel costing for merchandiser 189 = (Number of labours x Total working shifts x Wages per shift) 40 (3 *30) x 350) + (10 * (30 x3) x 250) = 12,60,000 + 2,25,000 = 14,85,000 Labour cost = Rs. 14,85,000. Step 3: Overhead charges - Rs. 5,00,000 / month for power, . Rs. 2,75,000 / month for other staff salary, Rs. 1,50,000 / month for oil and other consumables . Rs. 2,50,000/ month for spares and other parts Rs. 50,000 / month as noting cost 6. Rs.50,000 / monthas other expenses Total expenses = Rs. 12,75,000. WRYNS Step 4: Total weaving cost Total cost = labour cost + overheads = Rs. 14,85,000 + Rs.12,75,000 =Rs. 27,60,000 2 TOO. _ py, 15°36) mnctee: Hence, t / metre = = ence, waving cost / mette = > 57343 — Fabric cost per metre _ 15.36 So, pick rate = = = PPL 70 Pick cost with 20% profit = (0.219 + (0.29 = 20/100)) = Rs. 0.26. Uf we consider the above-mentioned example, afier calculating the cost of a single pick, from that we can derive the cost of the woven fabric per metre. The details are as follows: Rs, 0.219/ inch Solution: The cost of the fabric per metre = Fabric width * cost of pick If we assume the fabric (loom) width is 56” then the cost of the fabric is, = 56 x 0.26= Rs.14.56 / metre. 5.4 Crimp Percentage Calculation L-S Crimp % , C= (=>) = 100% where L is warp length, S is cloth length Warp length (L), L=(1+€) x $ $ is cloth length gcloth leng where C is crimp % Cloth length (S), " (1+C) ‘Where L is warp length, C is crimp %190 Apparel Merchandising ii) Pre-treatment, dyeing, printing and finishing cost calculations In the case of pre-treatment, dyeing and printing processes, the cost factor involved in the process differs based on the several process parameters like ‘Types of chemicals and dyes ‘Types of fabric used and shade required Types of dyeing machines and methods used Lab expenditure incurred during shade development Effluent treatment cost. 4a) Pre-treatment and dyeing cost The following examples will provide an initiative to estimate the cost of the pre-treatment and dycing process. The data provided here are approximate and they are used only for the understanding purpose. Example 6: A processing mill received an order from the garment manufacturer to dye a knitted fabric of 700 kg. The average daily production of the company is 400 kgs.The material and the prices used in the process are listed below in Table 5.1. Calculate the dyeing cost per kg with 15% profit, if the company works one shift per day. The total overhead incurred for a month is Rs. 1.5 lakhs including the cost of other staff salary, electricity bill, plant rent and other expenses. Table 5.1 Raw materials used and their prices S.No. Htems used Quantity used | Price in Rs. 1 Reactive dye 4kg 350/kg 2 Reactive dye B 8kg 300/kg 3 Chemical XYZ 10kg 75/kg 4 Chemical ABC ITkg 120/kg 5 Machine operators used 5 375 / shift 6 Machine helpers used 3 250 / shift Solution: Step 1:The total production need to be done = 700 kg Daily production of the company = 400 kg / shift (company works a shift in aday) . ah: _ Order quantity 7008 Hence, the total shifts requited = or action ~ ago = 175 shill Step 2: Labour cost The number of labours used are, 5 machine operators with the wage of Rs. 375/shift and 3 machine helper with the wage of Rs. 250/shift.Apparel costing for merchandiser 191 Hence, the total labour cost is (Number of labours x Total working shifts x Wages per shift) = (5 * 1.75 375) + (3 *1.75*250) = 3281.25+13 12.50 = Rs. 4593.75 Labour cost = Rs. 4593.75. Step 3: Calculation of raw mate 1. Reactive dye = 4 x 350 = 1400 2. Reactive dye B = 8 x 300 = 2400 3, Chemical XYZ = 10 x 75 = 750 4. Chemical ABC = 17 x 120 = 2040 Total raw material cost = Rs. 6590. cost Step 4: Overhead cost Total overhead cost = Rs. 1,50,000 Company works for this order only 1.75 shifts. Hence, the Overhead costs for 1.75 shifts are, 1,50,000 30 Therefore, 5000 x 1.75 = Rs. 8750. (Note: Since company works I shift per day, here, I day = 1 shift.) Overhead / day (shift*) = = Rs. 5000 Step 5: Total cost of the dyeing Total cost = Labour cost + Material cost + Overheads Rs, 4593.75 + Rs.6590 + Rs. 8750 . 19,933.75 Add 15% profit = Rs. 22,923.81 22,923.81 Total dyeing cost / kg = SO) = Rs. 32.7. Note: For the cost estimation of the dyeing process, company / merchandiser must quote the approximate price based on their previous experience. After the completion of dveing process, based on the chemicals consumed and dyes utilized, the exact cost must be calculated. The above said example details the cost based on the overall consumption of all chemicals for a particular order: Example7: A processing unit received an order from the garment manufacturer to dye 1,28,000 metres of woven fabric. The average production per shift in the company is 20,000 metres. The material and the prices used in the process are listed below in Table 5.2.Calculate the dyeing cost per kg with 10% profit, if the company works 2 shifis per day. The ovethead charges incurred are, for steam — Rs. 75,000; forpower — Rs. 25,000; fortransport —Rs. 8000; for rent — Rs. 15,000; for other expenses ~ Rs.85,000 per month (26 days).192 Apparel Merchandising Table 5.2 Raw materials used and their price S.No. Items used Quantity used Price in Rs. I Dye A 35 kg 350/ kg. 2 Chemical 1 80kg. 250/ ke 3 Chemical 2 25 kg 175 / kg. 4 Chemical 3 65 kg 200/ ke 5 Machine operators used 17 375 / shift 6 Machine helpers used 10 250/ shift Solution: Step 1: The total production need to be done = 1,28,000 metres Daily production of the company = 20,000 metres / shift (Company works 2 shifts in a day) Order quantity Daily product 1.28.00 _ 6.4 shifts, Hence, the total shifts required = a Step 2: Labour cost The number of labours used are, 17 machine operators with the wage of Rs, 375/shift and 10 machine helper with the wage of Rs. 250/shift, Hence, the total labour cost is = (Number of labours x Total working shifts Wages per shift) =(17* 6.4 * 375) + (10% 6.4 x 250)=40,800+ 16,000 = Rs. 56,800.00. Labour cost = Rs. 56,800. Step 3: Calculation of raw material cost 1, Dye A= 35 x 350 = 12,250 2. Chemical 1 3. Chemical 2 4. Chemical 3 ‘Total raw material cost = Rs.49,625. Step 4: Overhead cost Total overhead cost=Rs. 75,000+ Rs. 25,000 + Rs. 8000+ Rs. 15,000-+ Rs.85,000 = Rs. 2,08,000 / 26 days Hence, the overhead costs for 6.4 shifis are, 2,08,000 Overhead / day (shift*) =———— 6 =Rs. 8000 Therefore, 8000 x6.4 = Rs. 51,200. Step 5: Total cost of the dyeing Total cost = Labour cost + Material cost + OverheadsApparel costing for merchandiser 193 's. $6,800 + Rs.49,625 + Rs.51,200 =Rs. 1,57,625 Add 10% profit = (1,57,625 + (1,57,625 * 10/100)) = Rs.1,73,387.5 $73 3875 Rs.1,35/ metre of fabric. 1,28,000 Total dyeing cost = b) Printing and other finishing cost The following examples will provide knowledge on how to estimate the cost of the printing and finishing process. The data provided here are approximate and they are used only for the understanding purpose. In the case of finishing and printing cost estimation,the company / merchandiser must quote the approximate price based on their previous experience. After the completion of the process, based on the chemicals consumed and dyes utilised, the exact cost must be calculated. The following example details the cost based on the overall consumption of all chemicals for a particular order. Hence for both finishing and printing process, the following method can be used. Only in the case of printing, few additional charges may need to be included. Those are explained in this section The process of printing is different from the dyeing process, in this method the colours are applied in a localised manner based on the requirement in a patterned way. In this process, the dye materials are mixed with thickeners and other chemicals to make it as a semi solid. The solution is called as printing paste. This paste is applied based on the design either by blocks or screens or rollers, etc,. In this, based on the method used, the following processes are involved; Design development development, screen preparation, printing paste preparation, fabric preparation, printing, drying, curing and washing if needed. The factors affecting the cost of the printing process are: * Type of printing process Pigment, discharge, reactive, resist, block, foil, ete. Size of the design Methods used — screen, block, roller or others Dyes and chemicals used Post treatment ~ curing or drying Number of colours. To calculate the cost of the screen printing process, the following information need to be included in the costing process. i) Designing charges —Once the particular design is received, the manufacturer needs to reproduce the design in the printing screen. For that purpose, the designing process is carried out. The amounts charged for designing a square inch varies from Rs. 1.5 to Rs. 3.50 based on the design complication.194 Apparel Merchandising 5.5 Print Types Plastisol print — Good colour opacity onto dark garments and clear graphic detail with, as the name suggests, a more plasticised texture. Non-PVC ~ Relatively new breed of ink and printing with the benefits of plastisol but without the main toxic components — soft feeling print. High density print — which gives thick prints on the surface of garments. Achieved by either giving more number of coats or by using thickener. Suedo ink print ~ Suede is a milky coloured additive that is added to plastisol. With suede additive you can make any colour of plastisol have “suede” feel. Discharge print — Used to print lighter colours onto dark background fabrics, they work by removing the dye already present in the garment. Sticker print — The plastisol print is already printed on paper and will be transferred on to garment in the fusing process. Pigment print — These penetrate the fabric more than the plastisole inks and create a much softer feel Glitter print — Metallic flakes are suspended in the ink base to create this sparkle effect Metallic print — Similar to glitter, but smaller particles suspended in the ink. Smooth in texture when compared to glitter. Foil print ~ This printing method is based on the use of metallic f paper of aluminium or copper one. Distressed / khadi print — It is the decorative print and it is the activ- ity of making a print to appear aged and older, giving it a “weathered look” Puff print — An additive to plastisol inks which raises the print off the garment, creating a 3D feel. Cavier bead print — A glue is printed in the shape of the design, to which small plastic beads are then applied. Silicone print — To counter inferior wash and weather durability, poor hand feel of some prints like plastisol printing mills tried silicone inks because of their good washing durability, hand feel, elongation proper ties and environmental friendliness. Flock print — This process involves printing of glue on the fabric first, applying the fibre flock on the gel printed by keeping the fabric on spe- cial table (electro statically charged). Organic print — Organic print range covers the natural dyes, and the other pigment dyes which lies under the specifications made by G.O.TS.Apparel costing for merchandiser 195 ii) Frame charges — For screen printing process, the developed films need to be fitted on a frame to fix with a material. If the print designs differs from commercial sizes, then the manufacturer needs to make the frames for that particular order. In that case, the cost of making frames are also included in the total cost. The cost varies from Rs.150 — Rs.500 (not limited) based on the size. iii) Exposing and making charges — After making the designs, to transfer the designs in a film, the making or exposing process is used. The designs are transferred to the film based on colour, i.c., separate film for individual colour. In this example, the design contains six colours. Hence, six films need to be prepared and to complete a full design, the fabric need to be passed through all the six screens. For this process, the exposing charges vary approximately from Rs. 0.50 to Rs. 1.50 for the film size used. iv) Dye selection — Based on the customer requirement, fabric type and print design requirement, the dyes are selected. The cost of the dye depends upon the quality of the product. In general, plastisol, pigments, discharge dyes and non-PVC dyes are commercially used. Example 8: A screen printing industry received an order with 25,000 Tshirts, to print a photo print on T-shirt chest area with six different colours. The colour details are red, blue, grey, white, yellow and green (Table 5.3). For the designing purpose, the company spends Rs.3.00 per square inch, the cost of making of a single frame is Rs. 350, the exposing charges per square inch is Rs. 1.00 and curing charges, Rs.0.25 / garment. The dye quantity consumed colour wise and their price details are in Table 5.3. Calculate the cost of the print / garment with 10% profit, if the company works with 6 labours with a wage of Rs.350 per shift and 2500 garments as their average production per shift. The other overhead charges are, electricity charges Rs. 25,000 / month,transport charges Rs. 3000 / month, steam Rs. 50,000/ month and other expenses Rs, 75,000 / month, Assume company works 28 days in amonth.The design size is 17° 13” and the frame size is 24” 37°. Table 5.3 Raw materials used and their prices S.No. | Particulars _| Consumed quantity in kg | Price / kz 1 | Red colour 12.5 140 2 | Blue colour 15 140 3 | Grey colour 175 120 4 White colour 250 125 3__ | Yellow colour 12.5 120 6 | Green colour 15 120 7__ | Binder 25 160 8 Fixing agent 6.25 140196 Apparel Merchandising Solution: Step 1: Number of shifts required to complete the order. The order quantity = 25,000 garments Daily production = 2500 garments Order quantity _ 25,004 Daily production 2500 The company works | shift per day.No. of days to complete the order is 10. ‘No. of shifts required to complete the order= =10 shifts Step 2: Calculation of labour cost Total printing personnel used are 6 with a wage of Rs.350 each. Hence, the total labour cost is, = (Number of labours x Total working shifts x Wages per shift) = (6*350 * 10) = Rs. 21,000 Labour cost = Rs. 21,000. Step 3: Calculation of raw material cost i) Designing charges Total design area = 17 x 13 Total number of colour Charge per square inch = Rs, 3 Total cost = (17 x 13) x 6 x 3 = Rs. 3978 ii) Frame charges ~ Given as Rs. 350. Since 6 colour required, for this design we need 6 frames. So total cost is, 350 x 6=Rs. 2100. Note: Here the design area is totally different from the frame area. iii) Making charges ~ Per square inch Rs.1 Total area is = 24 x 37 = 888 inch? Since it has 6 colours = 888 x 6 = $328 inch? (Total area) Total making cost = 5328 « 1 = Rs, 5328. iv) Curing charges = Rs. 0.25 / garment. Total cost = 25,000 * 0.25 = Rs. 6250 Dye and chemical costs (Table 5.4) Table 5.4 Dyes and chemicals used and their total cost Consumed | pice ‘Total cost in Rs = quantity in kg ‘| (quantity used * price) 1 | Red colour 12.5 140 1750 S.No. | Particulars 2 | Blue colour 15 140 2100Apparel costing for merchandiser. 197 3_| Grey colour 175 120 2100 White 2 2 4 | colour = 2 31.250 Yellow 2 5 | colour Be id 1500 Green 2 colour B 10 1800 7_|__ Binder 25 160 4000 8 _| Fixing agent 6.25 140 875 Total cost Rs. 45,375 Raw material cost = 3978 + 2100 + $328 + 6250 +45375 = Rs. 63,031. Step 4: Overhead cost a) Electricity charges Rs. 25,000 / month, b) Transport charges Rs. 3000 / month, ©) Steam Rs. 50,000/ month d) Other expenses Rs. 75,000 / month. 1,53,000 Sdays per month For this order company works 10 days hence, the total overhead cost= Rs. $4,643. Total c =Rs. 5464 / day Step 5: Total cost = Labour cost + Raw material cost + Overhead = Rs. 21,000 + Rs. 63,031 + Rs. 54,643 = Rs. 1,38,674 c 138.674 a 555 ‘ost per garment = 23,000 ~ RSS r 10 With 10% profit = 5.55+ (5.85 <1 }= Rs. 6.10. 5.5 Fabric cost calculation The above-mentioned examples will help to understand the estimations of fabric cost per kilogram or per metre individually at different stages of fabric manufacturing. With the help of those methods, the merchandiser will derive the cost of the overall processes and he or she will conclude the cost of the fabric per kg or for an individual garment or for the order quantity required. With this value, the merchandiser will seck for the sources to reduce the cost in every processing stage from the yarn sourcing to the finishing. Since, the198 Apparel Merchandising cost of the fabric or raw material is a major driving factor for the cost of the product, the merchandiser or manufacturer will try to keep it as low as possible always to compete in the real time environment. This section will showcase the consolidated estimation of total fabric cost from the yarn to finishing including all process stages. Example 9: A woven fabric manufacturing industry received an order to develop fabric with following description with an order quantity of 25,000 metres. The fabrie made of 100% cotton in warp and weft with 75 EPI, 70 PPI, Warp count is 60s Ne and the weft count is 40s Ne and the warp and weft crimps are 5% and 6%, respectively. Considering the fabric add on and the other cost details that are provided in Table 5.5, calculate the cost of the fabric per square metre. The weaving shed produces fabric width of 56 inches. Table 5.5 Fabric particulars and their costs S.No. _| Particulars (add on) Price in Rs/kg. 1 [60s cotton yan 310 2 40s cotton yam. 285 3 Rate of a pick 0.21 4 | Scouring and bleaching 125 S| Dyeing (5%) 85 6 __ | Silicone finishing (8%) 65 Solution: To calculate the warp weight, EPI x 39,384 x 453.4 x (crimp +100) Warp count * 0.914 840x100 __ 75x 39.384 x 453.4 x (5+ 100) 60 x 0.914 x 840 x 100 = 30.52 gram, To calculate the weft weight, Warp weight = PPL x 39,384 x 453.4 x (crimp +100) Weft weight = Weft count 0.9140 840x100 70 x 39.384 x 453.4 x (6 + 100) 400.914 x 840% 100 43.14 gramsApparel costing for merchandiser 199 ‘Total weight of the fabric = 30.52 + 43.14 = 73.66 gram per square metre. To calculate the cost of the warp yarn, = Weight in gram x yarn cost / kg =3052x 2) = Rs. $.99 : 7 ayy, 65:62 _ Dyeing cost = Rs.70/ kg; cost per square metre = 70% 7 = Rs. 4.59 Finishing cost = Rs.105/kg; cost per square metre = 105% 28 — Rs, 7.30 1000 Total processing cost = Rs.27.53. Final fabric cost = Grey fabric cost + Processing cost = 41.82 + 27.53 = Rs. 69.35. If the fabric consumption per shirt is 1.75 square metre, The fabric cost per garment is = 1.75 x69.35 = Rs.121.36. Example 11: Find out GSM of knitted fabric, cost of yarn, fabric and quantity of yarn to be procured for executing an order of Men’s Polo T-shirt made out of 100% mercerised cotton with the following details as in Table 5.7.202 Apparel Merchandising Table 5.7 Order details of Men's polo T-shirt Knit structure 1x1 Yam price (40s Ne) | Rs. 365/kg interlock Yarn count 405 Ne Knitting charge Rs. 26/kg Courses per inch 62 Scouring charge Rs. 67/kg Wales per inch 48. Bleaching charge Rs. 42/kg Loop length 0.58 mm Mercerisation Rs, 65/ kg Fabric dimensional | 8% Dyeing charge Rs. 85/kg shrinkage (reactive) ‘Compacting @5% level_| Wrinkle free finish Rs. $0/kg Wrinkle free @8% level | Compacting charge Rs. 8/kg finish Solution: loop density x (39.384) x (39.384) x loop length in mm 1000 — 62x48 x (39.384) x (39.384) x 0.58 1000 Yarn length in m = = 2677.32 metres Gsm = 2.52% yam length in m> (100+ shrinkage) Count(Ne) «100 — 0,59x 2677.32 (100 +8) 40100 = 42.65 grams per square metre GSM after compacting = (42.65 + (42.65 5/100))= 44.78 GSM after finish = (44.78 + (44.78 8/100) = 48.36 grams To calculate the yarn cost, = Yarn weight / square metrex Yarn price 365 1000 = 42.65 gx = Rs. 15.57 per square metre. Process charges: i) Knitting charge = 42.65% 26/1000 = Rs. 1.11 ii) Scouring charge = 42.65% 67/1000 = Rs. 2.86Apparel costing for merchandiser 203 iii) Bleaching charge = 42.65x 42/1000 = Rs. 1.79 iv) Mercerisation=42.65x 65/1000 = Rs. 2.77 v) Dyeing charge (reactive)=42.65%85/1000 = Rs. 3.63 vi) Wrinkle free finish =-48.36% 50/1000 = Rs.2.42 vii) Compacting charge = 44.78% 8 /1000 =Rs. 0.36 Total fabric cost = (15.57 + 14.94) = Rs. 30.51 / sq.m. 5.6 Cost calculation in apparel production departments The process and yarn cost discussed in the previous sections are basically considered as fabric cost. So, whenever merchandisers of a company are into a situation to manufacture the fabric with their own facility, all those above mentioned criteria are necessary. In some other situation, the apparel manufacturing industry making woven or knitted garment, irrespective of the type of industry, sources the required fabric as per the buyer’s specification from the leading fabric manufacturers in the market. In that case, these calculations will help the merchandiser to work out actual cost of the fabric on their own. So, the merchandiser will seek for the correct fabric price from the available vendors. However, the foremost and important task for the merchandiser is, to arrive at the cost of various departmental activities inside an apparel manufacturing firm and to derive the overall cost of the product. Most of the time it is named as Cut Make Trim (CMT) cost or Cut Make Packing (CMP) cost. In all cases, the merchandiser job is to estimate the cost of the all activities involved in the product manufacturing facility. This section will detail the simple cost calculation procedures normally followed in the industry to estimate the departmental cost for any order. 5.6.1 Cutting department costs In cutting department of an apparel industry, the general process flow will be, a) Relaxing of the fabric b) Marker planning c) Spreading and marker making d) Cutting ¢) Bundling and sticking sticker in the pieces. In calculation of the cutting cost, one has to consider the various raw materials involved in the cach stage of the manufacturing process and labours involved in the process. Other than these, there are few other technical204 Apparel Merchandising parameters that are listed here, which have direct influence in the costing process of the cutting department. They are, + Number of plies used per spread — this determines the time required to complete the order. More number of plies per spread will reduce the operating time and so the cost of the process. + ‘Type of cutting used — manual cutting or machine cutting. In ma- chine also, the type of machine. Normal straight knife, band knife or computer controlled cutting machine. Based on the type of machine, the cost factor will vary. The computer controlled cutting machine completes the process in a short time than the manual and other machine. But the operating cost of the machine and labour cost are slightly higher than the other methods. + Fabric type — The thickness, fibers used and structures decides the number of layers, spreading methods and direction. + Marker planning —Based on the maximum fabric utilisation, the marker planning may suggest few changes in the spreading length width and number of plies, which has direct influence in the cost of the cutting process. + Ply direction —The fabric type decides the of ply direction. It has direct influence on the number of plies and spreads. + Style complication of the garment and number of components. The following examples will clearly explain the method of calculating the cost for cutting department. Example 12: A company received an order with the order quantity of 20,000 garments. The factory works with fourcutting masters and three helpers. The wages the company provides are Rs. 250 /shift for masters and Rs. 100 /shift for helpers. The average day production per shift is 2000 garments and the company works two shifts per day. After cutting process, they have to prepare the cut material for the sewing process. For that, they have to make 100 cut parts together onto a bundle and every bundle is tagged with one tag which details the description of the part. After bundling, all the pieces in the bundle are stocked with a size sticker. Each garment consists of five parts. Calculate the cutting cost for the order with 15% profit, if the price of the tag is Rs. 0.50 and the sticker is Rs.10/100 sticker and the company spends Rs.2000 for power per month, Rs, 1,00,000 for other salary/ month, Rs.20,000 for building rent per month. Solution: Step 1: Number of shifts required to complete the order. The order quantity = 20,000 garments Daily production = 2000 garmentsApparel costing for merchandiser 205 Order quantity Daily production 2000 0,000 Saar 10 No. of shifis required to complete the order= shifts The company works twoshifts per day, Hence the number of days required to complete the order is _ Total shifts to finish order _10 _ Shifis / day 2 No. of days to complete the order is 5 Step 2: Calculation of labour cost In the department,foureutting masters and threehelpers are involved in the work with the wage of Rs. 250 and Rs. 100 per shift. Hence, the total labour cost is (Number of labours x Total working shifts x Wages per shift) (4%250%10)+(3 «100%10) = 10,000+3000 = Rs. 13,000 Labour cost = Rs. 13,000. Step 3: Calculation of raw material cost The garment consists of five components and the order quantity is 20,000 garments. Bundles The cut components were made as bundle of 100 pieces. Each garment has five parts. Hence, for 20,000 garments, Number of parts = 5 x 20,000 = 1,00,000 parts. 1,00,000 100 So the number of bundles = 1000 bundles. Stickers ‘* Totally 1,00,000 components were cut. Hence 1,00,000 stickers are used. ‘The cost of the sticker = Rs.10/100 sticker Hence, for 1,00,000 components = 1,00,000 = => = Rs. 10,000. Sticker cost =Rs.10,000. ‘Tag The price of tag = Rs. 0.50 Total number of bundles = 1000 bundles 1 bundle =Itag. Therefore, for 1000 bundle =1000 tags Price of tag =Rs.0.30 x 1000 = Rs.500 Total material cost = 10,000 + 500 = Rs. 10,500. Step 4: Calculation of overhead costs The company spends following costs as overhead. Assume company works 30days per month.206 Apparel Merchandising © Rs.2000 for power per month, * Rs. 1,00,000 for other salary/ month, * Rs.20,000 for building rent per month. = Rs.2000 + Rs.1,00,000 + Rs.20,000 = Rs. 1,22,000 1,22,000 30 Company works for this order only for 5 days. Hence, the cost of five days can be made as = Overhead cost of a day x 5 = 4066.66 * 5 = Rs. 20,333.33. ‘alculation of total cost -abour cost + Material cost + Overheads = Rs.13,000+Rs.10,500 +Rs.20,333.33 '8.43,833.33 15 Adding 15% profit = 43,833+ {43,833 « Too } =Rs. 50,408.32 Cost / da Rs.4066.66 Total cutting cost of the order = Rs. 50,408.32 Total cos _ 50,408.32 i / = = Cutting cost / garment= Ce aatiyy 20,000 = Rs. 2.52 The cutting cost of the garment is Rs. 2.52. Example 13: A company received an order with the order quantity of 10,000 garments. The factory works with five cutting masters and two helpers. The wages the company provides are, Rs. 200 /shift for masters and Rs, 150 /shift for helpers. For cutting process, the company used one band knife machine and four straight knife machines throughout the order processing time. In this, the band knife machine was rented from a supplier for the cost of Rs. 2500 per day and the straight knife was company owned. For that straight knife company spends Rs. 250 / machine after every shift for cleaning and knife changing during the working time. By using these machines, the average day production per shift is 1500 garments and the company works one shift for every day. After cutting process, they have to prepare the cut material for the sewing process. For that, they have to make 25cut parts together onto a bundle and every bundle is tagged with one tag which details the description of the part. After bundling all the pieces, the bundles are stocked with a size sticker. Each garment consists of 12 parts. Calculate the cutting cost for the order with 8% profit, if the price of the tag is Rs, 1.50 and the sticker is Rs,12/125 sticker and the company spends Rs.5000 for power per month, Rs. 50,000 for other salary/ month, Rs.15,000 for building rent per monthApparel costing for merchandiser. 207 Solution: Step 1:Number of shifts required to complete the order. The order quantity = 10,000 garments Daily production = 1500 garments Order quantity _ 10,000 _ Daily production 1500 Number of shiftsrequiredto completetheorder= 6.66 shifts = 7 shifts The company works oneshift per day, hence, the number of days required to complete the order is = 7 Step 2: Calculation of labour cost In this department, five cutting masters and two helpers are involved in the work with the wage of Rs. 200 and Rs. 150 per shift. Hence, the total labour cost is = (Number of labours x Total working shifts x Wages per shift) = (5 * 200 x 7) + (2 x 150 x 7) = 7000+2100 = Rs. 9100 Labour cost = Rs. 9100. Step 3: Calculation of raw material cost The garment consists of 12 components and the order quantity is 10,000 garments. Bundles The cut components were made as bundle of 25 pieces. Each garment has 12 parts. Hence, for 10,000 garments = 12 * 10,000 = 1,20,000 parts. 1,20,000 So the number of bundles 95. 4800 bundles. Stickers © Totally 1,20,000 components were cut. Hence 1,20,000 stickers are used, The cost of the sticker = Rs.12/125 sticker 12 Hence, for 1,20,000 components = 1,20,000 x Ds Rs. 11,520. Sticker cost =Rs.11,520.00. Tag The price of tag = Rs.1.50 Total number of bundles = 4800 bundles 1 bundle = Itag. Therefore, for 4800 bundle = 4800 tags Price of tag = Rs.1.50 « 4800 = Rs.7200 ‘Total material cost = 11,520 + 7200 = Rs. 18,720.208 — Apparel Merchandising Step 4: Calculation of other expenses The company works 7 days to complete the order. Hence, the band knife machine is rented for 7 days. The rental amount for a day is Rs. 2500 Hence for 7 days, = 2500 x 7=Rs. 17,500 The number of straight knife machine used = 4 and the amount spent / shift / machine is = Rs.250 The company works oneshift per day, Hence, Expenses occurred on the straight knife machine = 4 «250 x 7 (shifts) = Rs.7000 Total machine expenses = 7000 + 17,500 = Rs. 24,500.00. Step 5: Calculation of overhead costs The company spends following costs as overhead. Assume company works 26 days per month © Rs.5000 for power per month, © Rs. 50,000 for other salary/ month, © Rs.15,000 for building rent per month. =Rs.5000 + Rs.50,000 + Rs.15,000 = Rs. 70,000 70,000 26 Company works for this order only 7 days. Hence, the cost of 7 days can be made as = Overhead cost of a day x7 =2692.30*7 = Rs. 18846.10. Cost / day = = Rs. 2692.30 Step 4: Calculation of total cost Total cost = Labour cost + Material cost + Machine cost + Overheads Rs.9100 + Rs.18,720 + Rs.24,500 + Rs.18,846.10 = Rs.71,166.10 Adding 8% profit = 71,166.10+ {71,166.10% = } = Rs. 76,859.38 Total cutting cost of the order = Rs. 76,859.36 Total cost 76,859.36 ‘Order quantity =~ 10,000 = Rs: 7.68 Cutting cost / garment = The cutting cost of the garment is Rs. 7.68. 5.6.2 Sewing department costs In the sewing department ofan apparel industry, the costing processes involved are based on the machine types involved. Since, the operators are paid basedApparel costing for merchandiser 209 on their operating machine, it is essential to a merchandiser to know where a particular type of seam is used, In general, the sewing department uses three fundamental machine namely single needle lock stitch machine, overlock machine and flat lock machine for both woven and knitted material. In sewing department, based on the garment style, sometimes there may be a requirement of special machines, in that situation, the company use to rent that machine from different firms. In that case, the rent amount also needs to be included in the costing process. Hence, on an overall aspect, the merchandiser should understand the detailed operation breakup and stitches and seams used for any given garment. So that based on the target date, he/she can decide the number of operators to be set in a line and can arrive at the total costing of the sewing department, Other than this, there are few raw material like buttons, zippers, tapes and hooks which arealso directly used during sewing process. Cost of any material that will remain in the final garment which is used in sewing process will be added in sewing process cost as direct raw material cost. In general, the influencing factors are: a) Garment style details and number of operation — Based on the style complication, the number of machines and operators need to be used will vary. This will influence the cost of the garment. b) Number of component and the size ~The number of components and size of the garment influence the operator handling and thus reduces the working efficiency. Hence, the required time to complete the par- ticular operation or garment will be high. c) Type of fabric — The type of fabric has direct influence of the production. d) — Special operations — Sometimes, a special operation may require a spe- cial machine to perform it. Thus, the rental cost of the machine and operator cost may hike the total garment cost. ¢) Quality requirements The quality details defines expected require- ments. Hence, to achieve the required quality, the sequence of opera- tion or number of steps performed in any operation may be altered and hence the cost of the process increases. The following examples detail the costing procedure in the sewing department. Example 14: An apparel manufacturing firm works with 12 single needle operators, 18 over lock machine operators and 8 flat lock machine operators to complete an order quantity of 10,000 garments with the average production of 1667 garments per shift. The wages of the operator were Rs. 250.00, Rs. 200.00 and Rs. 150.00 per shift, respectively for flat lock, single needle and over lock machine. The factory uses 8 helpers for this line alone with the wage210 — Apparel Merchandising of Rs.120.00 per shifi. Other than this during sewing, for construction, each garment consumes 70 metres of sewing thread, 1.5 metre of twill tape and 7 buttons. The cost of the sewing thread is Rs.75 per cone, cost of the twill tape is Rs.5.00 per metre and cost of the button is Rs. 100/ gross. The other overheads incurred are Rs.25,000 / month for salary of other staff, Rs. 20,000 / month for building rent and Rs.1,50,000 for other expenses. Calculate the sewing cost of the factory with 15% profit, if the company works one shift per day. Solution: Step 1: Number of shifts required to complete the order. The order quantity = 10,000 garments Daily production = 1667 garments Order quantity _ 10,000 _ Daily production 1667 Numberofshiftsrequired tocompletetheorder= 5.99 ~6 shifts The company worksone shift per day, hence number of days to complete the order is 6. Step 2: Calculation of labour cost The operators in this department are 12 single needle operators, 18 over lock machine operators and 8 flat lock machine operators and 8 helpers Hence, the total labour cost is Number of labours x Total working shifts x Wages per shift) 12(Single needle machine) * 200 x 6) + (8(Flatlock machine) * 250 x 6) + (18(Over lock machine) 150 x 6) + (8(Helpers) x 120 x 6) Note: Since different machine operators were paid different wages, the total expenditure is calculated machine wise and then added together. = 14,400 + 12,000 + 16,200 + 5760 = Rs. 48,360 Labour cost = Rs. 48,360. Step 3: Calculation of raw material cost Sewing thread During sewing, each garment consumes 70 metres of sewing thread. Total number of garments = 10,000 = 70 * 10,000 = 7,00,000 metres Normally, sewing thread for industrial usage comes in 5000 metre cones. For domestic purpose, it is available in 2000 metre spools. Hence, the cost provided is the cost of one cone with 5000 metre 7,00, 000 So the number of cones required to finish the order = = 140 conesApparel costing for merchandiser 211 Cost of one cone is Rs. 75.00, hence, the total cost of the sewing thread is, =75 x 140 = Rs. 10,500. Twill tape During sewing, each garment consumes 1.5 metres of twill tape. Total number of garments = 10,000 = 1.5 * 10,000 = 15,000 metres Cost of tape is Rs. 5, hence, the total cost of the twill tape is, = 5 « 15,000 = Rs. 75,000. Button During sewing, each garment consumes sevenbuttons. Total number of garments = 10,000 =7 = 10,000 = 70,000 buttons Note: Buttons generally available in the unit of gross (12 dozen) Each gross consist of 144 buttons. Hence, the price of the button is usually provided for a unit (gross) Cost of button / gro required is, = 70,000 _ 486.11 ~ 487 gross. 144 Hence the total button cost = 100 x 487 = Rs. 48,700 Total material cost = 10,500 +75,000+48,700 = Rs, 1,34,200. is Rs.100; hence, the total number of button Step 4: Calculation of overhead costs The company spends following costs as overhead. Assume company works 30 days per month, © Rs.25,000 / month for salary of other staff, * Rs. 20,000/month for building rent © — Rs.1,50,000 for other expenses = Rs.25,000 + Rs.20,000 + Rs.1,50,000 = Rs. 1,95,000 1,95,000 Cost / day = = Rs. 6500. Company works for this order only 6 days. Hence, the cost of six days can be made as = Overhead cost of a day * 6 =6500 * 6 = Rs. 39,000.00. Step 5: Calculation of total cost Total cost = Labour cost + Material cost + Overheads = Rs. 48,360 + Rs.1,34,200 + Rs. 39,000 =Rs. 2,21,560.212 Apparel Merchandising Adding 15% profit = 2,21,560+ {2,21,560% = } = Rs. 2,54,794.00 Total sewing cost of the order = Rs. 2,54,794. t/ t= —Zotalcost_ _ 2,54,794 _p. s6 45 8 cost garment ‘Order quantity 10,000 The sewing cost of the garment is Rs. 25.48. Se 5.6 COST PER MINUTE OF A SEWING LINE Total salary of the sewing line Total number of man power * Daily working hour's * 60 * Line efficiency% Actual salary per day of all the operators and helpers Total number of garments produced Standard allowed minute (SAM) of garment This formula can be used for the any operation or department to estimates the cost of the process or department, provided the required information Example 15: An apparel manufacturing unit received a T-shirt order with the order quantity of 9720 garments. The detailed illustration of the T-shirt is provided in Figure 5.2. Calculate the sewing cost of the garment if the operator wages for the machines are Rs.300 (over lock), Rs. 350 (single needle lock stiteh) and Rs, 375 (flat lock) per shift. The actual target date is 3 days from today. Consider the company works two shifts per day. Woven Twill Tape Brand and size lable Top stitch on armhole é » | Lo — rib Slit on both side Figure 5.2 Description of a T-shirtApparel costing for merchandiser 213 During the manufacturing process, the company rented the button hole and button attaching machines externally from a vendor for this order. The button hole making machine is rented based on hour and the button attaching machine is rented in shift basis. For button attaching machine, the rent per shift is Rs. 1800 and for the button hole making machine, the rent per hour is Rs, 250. The average production of button attaching machine is 200 garments per hour and for the button hole machine is 350 per hour. For construction of one garment 75 metres of sewing thread, 0.5 meters of twill tape and three buttons are used. The cost of the sewing thread is Rs. 80/cone, twill tape is Rs.2/meters and button cost is Rs.90, The cost spent for embroidery per gar ment is Rs.2.50. Calculate the sewing cost with 8% profit. Solution: Step 1: Number of shifis required to complete the order. The order quantity = 9720 garments Target date = 3 days ‘Number of days required to complete the order = “Target days ae = 3240 garments/day Since the company works two shifts per day, 3240 . the production requirement / shift = > = 1620 garments / shift 1620 Target per hour = == 202.5 ~ 203 garments / hour. Step 2: Calculation of labour cost Since, no information regarding the labours was provided in the detail, by using the garment picture, we can derive the actual number of labours required to complete the order. From Figure 5.2, we can develop the operation break up as provided in Table 5.8 Table 5.8 Operation break up and SMV allocation 5. operation wucasa | sy | Omet? [Set Tag: 2 pens hw 1 Placket preparation SNLS 03 200 1 2 Placket attach SNLS 0.6 100 2 4 Size and brand label attach SNLS 0.25 240 1 5 Shoulder attach (both the sides) OL 06 100 2214 Apparel Merchandising |G | Sleeve nib tach (both the o | os | 20 : sleeves) 7__| Sleeve attach (both) or__| os 120 | 109-2 8 | Collar tach or | 06 100 2 9 | Collar finishing sNis_| 04 iso | 135~1 10 | Collartape attach SNLS_| 0s 120 Zz 11__[ Slitpreparation ov | 03 | 200 1 12__| Side seam o | 06 100 2 13 | Bottom hem FL_ | od 150 1 14 [Top stitch on arm hole FL_ | 06 100 2 Toalsmv | 6.25 | tt | 2 To achieve the provided target, the company needs to use totally 21 operators with the following breakup. a) — Single needle machine ~ 8 operators, b) Overlock machine ~10 operators ©) Flat lock machine ~ 3 operators Hence, the total labour cost is = (Number of labours x Total working shifts x Wages per shift) = (8(Single needle machine) «350% 6) + (3(Flatlock machine) x375% 6) + (10(Over lock machine) «300 6) Note: Since different machine operators were paid different wages, the total expenditure calculated machine wise and then added together. = 16,800+6750+18,000 =Rs. 41,350 Labour cost = Rs. 41,550. Step 3: Calculation of other expenses ~ Machine rental costs i) Button hole machine — rented hourly basis ‘Average production / hour = 350 Rent / hour = Rs. 250 Order quantity _9720 Hence, the total requirement of the machine is = vet a = 27.7Thour ~ 28 hours Hence, the total cost spent = 28 * 250 = Rs. 7000.Apparel costing for merchandiser 215 ii) Button attaching machine — rented shift basis Rent per shift is Rs. 1800 Average production is 200 garments per hour Order quantity _ 9720 200 48.6 hours = as = 6.07 shifts ~ 6 shifts Hence, the total cost spent = 6.07* 1800 = Rs. 10,926. The total rental expenses for this order is = 7000 + 10,926 = Rs. 17,926. Step 4: Calculation of raw material cost Sewing thread During sewing, each garment consumes 75 metres of sewing thread. Total number of garments = 9720 = 75%9720 = 7,29,000 metres 1, So the number of cones required to finish the order = 145.8 ~ 146 cones Cost of one cone is Rs. 80.00, hence, the total cost of the sewing thread is, 80 « 146 = Rs. 11,680. ‘Twill tape During sewing, each garment consumes 0.5 metres of twill tape. Total number of garments = 9720 = 0.5 x 9720 = 4860 metres Cost of tape is Rs. 2/ metre, hence, the total cost of the twill tape is, = 2x 4860 = Rs. 9720. Button During sewing, each garment consumes three buttons. Total number of garments = 9720 = 3x 9720 = 29,160 buttons Cost of button / gross is Rs.90; hence, the total number of button required is, = 202.5 ~ 203 gross. Hence the total button cost = 90203 = Rs. 18,270. 29160 144216 — Apparel Merchandising Embroidery 5.7 Embroidery Cost The factors which affect the cost of the embroidery is * Stitch quantity of the design © Rate of per unit. Here, a unit is considered as 1000 stitches. (Mostly for a dozen of gar ments unit is considered as 12,000 stitches). The formula is _ Stitchquantity 1000 For example, if the designs requires 7580 stitches and the cost of the em- broidery process is Rs. 0.50, the cost of embroidery per garment is, _ 7580 1000 x Rate per unit x 0,5 = Rs. 3.79. Cost of the embroidery / garment = Rs. 2.50 Total cost = 2.50 = 9720 = Rs. 24,300. Total material cost = 11,680 + 9720 +18,270 + 24,300 = Rs. 63,970. Note: Information regarding overhead costs is not provided. Hence, it is not included in the calculations. However, in industry if the information is not available (unable to collect or exists) the merchandisers will assume the overhead as 120% of direct labour cost (based on requirement risk factor involved with the order). iculation of total cost aabour cost + Material cost + Other expenses + Overheads = Rs, 41,550+4Rs. 63,970 +Rs.17,926+ [41,550+ {41,550 * 2 I Step 5: Total cost = Rs.2,14, Adding 8% profit = 2,14,856 + {2,14,856« s = Rs. 232,044.48 ‘Total sewing cost of the order = Rs. 2,32,044.48. A Total cost 2,32,044.48 Sewing cost / garment = Sojec quantity 7 gp 7 RS 2887 The sewing cost of the garment is Rs. 23.87.Apparel costing for merchandiser 217 5.8 Factors Affecting Cost of Embroidery * Number of stitch + Type of embroidery + Time require to complete one batch * Colour of thread + Cutting of appliqué + Place of embroidery + Resource and hand involves in doing embroidery + Any restriction on selection on embroidery machine + Any compliance requirement + Any restriction on use of embroidery thread + Any lab test requirement. 5.6.3 Trimming and checking department cost In trimming department, based on the factory size, either machine trimming or manual trimming process is performed. Here, the efficiency and quality of the operation depends upon the labour skill. The work of the checking department is totally manual. The stitched garments will be inspected visually for damages or quality deviations from the requirements are evaluated. Here, the damages or quality imperfections are identified and the garments are sent to rework for sewing department. Those garments are re checked after re stitching and then passed to the next department. In trimming and checking, no additional raw materials are used in general. Hence, the cost of this department will generally will be labour cost or sometimes along with it the trimming machine running cost will be included. In few cases, the companies will also do job order. Note: Job order or outsourcing: Any particular process e.g.,checking will be given to external firms those who are specialised in that process and they get the work done. In that case, the manufacturing company will pay the external firm on the basis of rupees per garment, Based on the style complication, the cost will be finalised by both the parties In trimming and checking department, the cost factor depends up on the following factors: i) Size and style complication of the garment In trimming ~ For complicated styled garments, the number of stitched components will be higher. This leads to more places to trim and thus increases the time per garment. With respect to larger garments, the handling will delay the process time per garment.218 — Apparel Merchandising In checking — More number of parts or complicated styles lead to deviate from the standard checking procedure and hence, the time consumption increases. ii) Quality requirement — Based on the specific requirement for individ- ual styles, the trimming and checking points are increased. This will lead to higher cost consumption. Following examples will detail the steps involved in the checking department cost calculation process Example 16: An apparel firm performs checking process after receiving the garments from sewing department. The average production of the checking department is 1200 garments and the order quantity is 20,000 garments. The number of checkers used for the checking operations is 15 with the wages of Rs.225 per shift. Calculate the cost of the checking department with 10% profit if the company works one shift per day. The other overheads spent by the company are Rs.15,000 for power, Rs.5000 for other salary,Rs.7000 for building rent per month, Solution: Step 1: Number of shifts required to complete the order. The order quantity = 20,000 garments Daily production = 1200 garments Order quantity Daily production = 16.66~ 17 shifts The company works oneshifi per day, hence number of days to complete the order is 17. Step 2: Calculation of labour cost The operators in this department are 15. Wages per shift = Rs. 225 Hence, the total labour cost is = (Number of labours x Total working shifts x Wages per shift) = (15* 225 x17) = 57,375 Labour cost = Rs. 57,375. 20,000 1200 Number of shifts required to complete the order = Step 3: Calculation of overhead costs The company spends following costs as overhead. Assume company works 30 days per month. * Rs, 15,000 / month for power, Rs, 5000/month for staff salary ¢ —Rs.7000 for rent.Apparel costing for merchandiser 219 = Rs.15,000+Rs.5000+Rs.7000 = Rs. 27,000 Consider, company works 26 days in a month, then the =Rs. 1038.46 21, 26 ‘Company works for this order only 17 days. Hence, the ovethead cost of 17 days will be = Overhead cost of a day * 17 =1038.46 x 17 = Rs. 17,653.84. Cost / day is = Step 4: Calculation of total cost Total cost = Labour cost + Overheads = Rs. 57,375 + Rs. 17,653.84 = Rs. 75,028.84. Adding 10% profit = 75,028.84 + {75,028.84« * } = Rs. 82,531.73. Total checking cost of the order = Rs. 82,531.73. Total cost 82,531.73 Checking cost / garment = ‘Order quantity = 20,000 The checking cost of the garment is Rs. 4.12. =Rs.4.12 Example 17: A trimming and checking department of a company received an order quantity of 10,000 garments. The total number of labour used in the trimming and checking process are 8 and 15, respectively. The wages spent are Rs.225 and Rs. 275 respectively for the trimming and checking personnel. The average production of the department (for similar garments) is 800 garments per day and the department works 2 shifts per day. Due to the complexity of the garment, two checking personnel are used for the rechecking process with the same wage but one shift per day. Calculate the checking cost of the style with 5% profit. Solution: Step 1: Number of shifts required to complete the order. The order quantity = 10,000 garments Daily production = 800 garments Number of shifts required to complete the order=_Order quantity _ 10,000 _ Daily production 800 12.5 shifts Since, the company works two shifts per day, they need to work 6.25 days to complete the order. Step 2: Calculation of labour cost The operators in this department are 8 trimming persons and 15 checking persons and 2 re checking persons.220 Apparel Merchandising Wages per shift = Rs, 225 for trimming persons and Rs, 275 for checking persons, Note: The rechecking personnel work I shift per day. Hence, for 6.25 days they will work only 6.25 shifis. But the trimming and checking department personnel will work for 12.5 shifts in 6.25 days. Hence, the total labour cost is = (Number of labours x Total working shifts x Wages per shift) = (8% 225 x 12.5) + (15 x 275 * 12.5) + (2 * 275 x 6.25) = Rs, 22,500 + Rs. 51,562.5 + Rs.3437.5, Labour cost = Rs. 77,500. Step 3: Calculation of overhead costs Since, the overhead details are not provided, the 120% of the direct labour cost will be used as overhead for the 6.25 days. 120 Overhead cost for the total order running days = Direet labour cost * (=>) 120 = 77,500 x (—) = Rs. 93,000. 100 Step 4: Calculation of total cost Total cost = Labour cost + Overheads .77,500+ Rs. 93,000 ‘Rs.1,70,500 Adding 5% profit = 1,70,500 + {1,70,500« >} = Rs. 1,79,025 100 Total checking cost of the order = Rs. 1,79,025. Total cost 1,79,025 ‘Trimming and checking cost /garment= G55 cuantiy 10,000 =Rs.17.90 The trimming and checking cost of the garment is Rs. 17.90. 5.6.4 Packing department costs The process of packing department includes the following as a part of it. They are a) Pressing the garments b) Folding and packing (primary packing like poly bag) c) Attachment of packing materials like tags, stickers and ete.Apparel costing for merchandiser 224 d) — Assorting and packing into carton boxes ©) Strapping and tapping the boxes. In these activities, the skill level requirement of the labour varies at different situations, the outer packing and pressing / ironing process involves hard jobs where mostly men workers are used. In the case of primary packing and packing material attachment processes, the women workers are used based on the physical difficulties involved with the job. Following are the important factors which have direct influence on the packing cost of the garment. i) Style feature of the garment — based on the style of the garment, the pressing process and fold time will increase and so the cost of the product also will increase. ii) Type of packing methods (Primary) used — The method of folding and packing also causes huge delay in some cases due to the practical difficulties like finding outthe following: “where the tags are to be inserted?”,“which part of the garments should be labelled?” and“Whether the stickers are to be placed inside the primary packing or outside of the pack?” Al these processes affect the costing. Number of packing material - When the number of packing material increases, the complexity in the placement of the packing also increases. Hence, the packing process time gets delayed for each material ivyType of assortment and outer packing ~ Assortment is the process of arranging the primary packed material into the carton boxes. This is one of the requirements of the customer. Hence, the criteria should be strictly followed. The different types of assortments are a) Solid size and solid colour ~ Each box contains one size in one colour b) Solid size and assorted colour — Each box contains one size in different colours c) Assorted size and solid colour - Each box contains different size as per requirement of the customer and all those in one colour. The ratios of size will be based on customer requirement d) Assorted size and assorted colour —Each box contains one size and different colours as per requirement of the customer. The ratios of colour will be based on customer requirement. The following examples will detail the cost calculation process involved with the pressing and packing department.222 Apparel Merchandising Example 18: A packing department received an order of polo T-shirt with quantity of 9550 garments. The department needs to press the garments and pack it in the following method. Four T-shirts are needs to be packed with a single pouch with an insert card for each garment and each garment must be tagged with a brand name tag. The bullet tag is used for each tagging process. Each pouchis stuck with one small barcode sticker and a size sticker. Each carton box consists of 50 pouches. One big barcode sticker is stuck on each carton box. After that, the carton box is taped with a brown gum tape. Each tape roll can be used to pack five carton boxes. The company works with pressing and packing production capacity of 1050 garment per day if the company works one shift per day. The pressing department consists of eight labours with the wage of Rs.280 per shift. The number of packing person used in the department is 10 and their wage is Rs. 250 per shift. Calculate the packing cost of the order with 3% profit. The cost details of the raw material are provided as follows: The cost of a pouch -Rs. 3, Carton box is Rs.50, Insert card isRs. 0.90, Price of a tag is Rs.0.40, Small barcode sticker price is Rs. 0.20, Size sticker price is Rs. 0.20, Bullet (to tag brand tag) price is Rs. 15/100 bullet, Big barcode sticker price is Rs. 1.00 and the price of the gum tape is Rs. 20 / roll. The average overhead expenditure for the department is Rs. 850 per day. Solution: Step 1: Number of shifis required to complete the order. The order quantity = 9550 garments Daily production = 1050 garments Order quantity _ 9550 Number of shifts requited to complete the onder= FT crion 10507 = 9.09 ~9 shifts The company works one shift per day, hence number of days to complete the order is 9. Step 2: Calculation of labour cost The operators in this department are 8 operators in pressing, 10 persons in packing, Hence, the total labour cost is = (Number of labours x Total working shifts x Wages per shift) * 280 x 9) + (10 x 250 x 9) = 20,160 + 22,500 =Rs. 42,660 Labour cost = Rs. 42,660. Step 3: Calculation of raw material cost Pouch During packing, four garment packed in one pouchApparel costing for merchandiser 223 Total number of garments = 9550 . 9550 Number of pouch required to complete the order = —~ = 2387.5 ~ 2388 pouches The cost of one pouch is Rs. 3, hence, the cost of the pouch is, = 2388 x 3 = Rs.7164. Carton box Each carton box consists of $0 pouches. Hence, the number of carton 2388 box required to complete the order quantity is = =~ =47.76 ~ 48 carton box. Cost of one carton box is Rs. 50, hence, the total cost is, = 50 = 48 = Rs. 2400. Insert card The price of the card is Rs. 0.90 Each garment is inserted with a card. Hence 9550 cards used for the order. The total cost is = 0.90 x 9550 = Rs. 8595. Brand tag The price of the tag is Rs. 0.40 Each garment is tagged with the tag. Hence 9550 tags used for the order. The total cost is = 0.40 x 9550 = Rs.3820. Bullets The price of the bullet is Rs. 15 / 100 bullet. So, Rs. 0.15 per bullet Each garment is tagged with the tag. Hence 9550 bullets used for the order. The total cost 0.15 x 9550 = Rs.1432.50. Stickers Cost of the small barcode sticker is Rs. 0.20 and the size sticker isRs. 0.20 Each pouch consists of one barcode and one size sticker. Hence the cost of the sticker is, = (0.2 « 2388) + (0.2 2388) = Rs. 955.20. Big barcode sticker and gum tape Total number of carton box used for the order is 48, Hence, the number of big barcode sticker required is 48. So the cost of the barcode sticker is, =48 x 1=Rs. 48. Each gum tape roll can be used for fiveboxes, Hence, number of rolls required 48 =75 = 9.6~ 10 rolls224 — Apparel Merchandising Cost of one roll is Rs. 20. Hence the total cost is = 10 x 20 = Rs. 200. Total material cost = Rs.7164 + Rs. 2400 + Rs. 8595 + Rs.3820 + Rs. 1432.50 + Rs.955.20+ Rs. 48 + Rs. 200 = Rs.24,614.70. Step 4: Calculation of overhead costs The average overhead expenditure / day is Rs. 850 The total number of working day is 9 Hence, the cost is, =850 x 9= Rs, 7650. Step 5: Calculation of total cost Total cost = Labour cost + Material cost + Overheads = Rs. 42,660 + Rs. 24,614.70 + Rs. 7650 = Rs, 74,924.7. Adding 3% profit = 74,924.7+ {74,924.7 3)

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