Questions & Answers #3

In this part of Question & Answers, I have posted questions  asked on garment manufacturing cost and clarify various term used in manufacturing cost.

Following questions were asked by Madhaiyan. OCS Team replied on his questions point by point. He wrote: 'Thanks for updating practical issues and I have gone through your entire article related to costing. I am very much interest to study about garment costing method. I have few doubts and thanks to clear the same.'

1. For product costing you have taken only Cutting & sewing SAM only. Why you did not add the finishing SAM while doing the product costing. If it is not necessary then where we have to add for total product cost.

OCS Team: Article topic says ‘Garment CM cost Estimation’ not manufacturing cost estimation. That’s why I did not include Finishing SAM and its cost. If you want to calculate garment CMT (Cut, Make and Trim) cost then you must add finishing cost.

2. Also for cost of the labour per minute you have consider only the operator average wages (5000 INR) what about the other categories they are also paid from the factory. So, without considering their salary quoting the product cost may be wrong?

OCS Team: It is true that you have to include all costs that is incurred to make the garment in garment costing sheet and to consider all expenses (labor wages) to find true labor average cost. In my article, I have considered single operator to show readers how to calculate labor minute cost. If you like to calculate minute cost per labor considering all direct labors (with variable salary) then use following formula

= [Sum of wages of all labors / (Total minute per month * no. of labors)]

What you do mean by other categories? Other direct labor (helpers, line quality checkers) or all employees (supervisors, managers etc.)?

For the cost comparison purpose per minute cost must be presented in two categories
i) Labor cost per minute – where you need to consider only labor wages (direct labors)
ii) Factory cost per minute – Where you include overheads like - payroll of all employees + factory expenses (electricity+ diesel + print and stationary + consumables etc) + depreciation + interest + building rent etc.
Normally in style costing sheet, labor cost per minute (cost per SAM) and employee overheads is added in two different heads. Factory overheads is put in another head in costing sheet.

3. One of the articles you have mentioned CMT (Cut+Make+Trim). Trim - It means trims & accessories value or finishing value.
OCS Team: Trim under CMT is finishing process.

4. Cost per SAM = garment SMV x Cost factor - In this case, article says the cost factory is the minute cost of the factory. How it would be the minute cost of factory when you consider the operator wage only (Floor in-charges, QCs, Mechanics & helpers are involved for production know)
OCS Team: Cost factor - It is not the minute cost of the factory. It is per minute labor cost to the factory. Because, factory pays makeup to labors due to less line efficiency.

5. Cost per SAM calculation for sewing floor you have considered the efficiency (50%) whereas while doing the CM costing we will not consider the efficiency and simply multiplying with the SAM value Why?

OCS Team: For the projected cost calculation line efficiency must be considered in calculation. Thank you for your feedback.

6. You have provided cost per SAM vs Actual only for Sewing. Why cannot we compare cost per SAM for cut+make+finish and compare with the fixed product cost (CM). Can you explain with an example?
OCS Team: You can compare whatever way you like. Only important thing is that in your projected cost whatever parameters you have considering, the same parameter need to be considered for actual cost calculation.

8. Can you explain the difference between cost per SAM & Cost per piece
OCS Team: If you are presenting both Cost per SAM and Cost per Pieces as planned/projected cost then both are same. But if you present cost per pieces as actual cost then it is a different thing. But in factories (in India) Cost per SAM represents projected garment making cost and Cost per piece represents actual garment making cost.

9. Your article related to costing are very useful. But as an Industrial Engineer I have to present Simple format to the management which covers all the costing related comparison from cut to pack. Please guide me to prepare costing format for the factory (Style cost, cost per piece, cost per minute, line cost, budgeted cost vs achieved cost, factory profit/loss considering sewing floor alone ,Factory cost etc..)
OCS Team: I see you are on the right direction to build format for costing to your own. You can write us if you need specific help on developing above formats.

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