Garment Costing: How to Calculate Garment Cost using available Information

Question:  I am a merchandising management student, I want to know how to calculate the cost of a garment using the following details.

1. Fabric consumption: 0.8 yards per garment.
2. Fabric wastage allowance 3%
3. Fabric price: $2.7per yard.
4. Total charges for insurance & fright $ 0.3 (per yard). Fabric is being ordered from Hong Kong.
5. Finance charges for fabric purchasing is 15%.
6. Trim cost: $ 1.5 per garment (excluding thread cost).
7. 5000 meter of thread cones being used for sewing, 210 meters of threads needed for a garment and the price of a thread cone is $6.
8. Garment SMV is 40.
9. Labour rate: the selling price of a minute is $ 0.03

... by OCS reader.

Answer:
To calculate the cost of the garment, I will first create a table in excel sheet. Then I will calculate the material cost and labour cost.

Garment costing method

Finally, sum up all cost together to calculate the total cost of the garment. In the following, I have shown you step by step process for calculating the cost of the garment using the information provided on the above.

Step 1: Arrange information in the excel table, provided on the above problem. See the following table, where I have arranged all required information to find the final garment cost. I have given code number to each information A, B, ...J.

I added extra rows where I need to calculate something to calculate sub costs and necessary information. Like M, N, O and P.  



Step 2: Calculate total fabric consumption including wastage percentage (M)
Total fabric consumption per garment = Calculated fabric consumption (1+Wastage%)
Or M=A(1+B)

Step 3: Calculate fabric cost per garment (N): Factory has incurred a cost in insurance and freight and finance charge. I have calculated the fabric-related costs together. 

So, Fabric cost per garment (including freight and finance charge) = (M*(C+D))+(M*C*E)

Step 4: Trim cost: Total cost of the trims has been given.  

Step 5: Calculate thread cost (O): From the thread rate (unit 5000 meters) and thread consumption, thread cost per garment is calculated. 
Here thread cost per garment = G*H/5000

Step 6: Calculate labour cost per garment (P): Labor cost per garment is calculated using garment SMV (standard time) and labour cost per minute.

Labor cost per garment (P) = Garment SMV * Labor cost per minute

Step 7: Calculate the total garment cost (GC):
I have calculated all sub costs required to find total garment cost. 
Total garment cost = (Fabric cost + Trim cost + Thread cost + Labor Cost)

Total garment cost = ($2.81 + $1.50 + $0.25 + $1.20) = $5.76

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