Let's say, you have been given the details of cost of garment manufacturing, profit margin, and the total cost incurred in a production line. Can you find out how many garments were produced by the production line?
In practice (in factories), you may not need to solve this kind of a problem, but this kind of problem is good for students for clarifying there understanding.
I have answered this problem. Have a look and add your comment.
Question:
How many pieces are produced per day per line? Below is the necessary information to determine the answer.
Answer:
From the problem, it is understood that the factory knows the cost of manufacturing (CM) the style that they are manufacturing. In the problem, profit margin information is provided.
Normally, the profit margin is added to the production cost to calculate garment FOB, it is not added to the CM cost to calculate line cost. I think this should be an overhead cost.
If it is a profit margin, then we don’t need to use that (profit margin) factor in calculating production quantity per line per day.
I will show you the calculation of production volume in both scenarios.
Consider produced quantity per day per line is Q Dozens.
Line cost per day = (Production Quantity x CM costs) + Overhead costs % (Production Quantity x CM costs)
= (Production Quantity x CM costs) (1+ Overhead cost %)
In the problem, you have the following information
Cost of manufacturing (CM) =$ 8.00 per dozen
Daily cost per line = $800
Overhead added on the total CM = 20%
Therefore,
$800 = (Q x $8)(1+20%)
Q = 800 / (8 x 1.20) = 100 /1.2 = 83.333 dozens
Let’s convert produced quantity in units = (100 /1.2)x12 = 1000 units per day
Production Quantity (in Dozen) = (Total Line cost / Cost per Dozen)
= $800/ $8
= 100 Dozens
In units daily production volume in (100 x12) = 1200 pieces.
- 20% Profit
- CM=USD 8.00/Dozen
- Per day per line cost =USD 800.00
Answer:
From the problem, it is understood that the factory knows the cost of manufacturing (CM) the style that they are manufacturing. In the problem, profit margin information is provided.
Normally, the profit margin is added to the production cost to calculate garment FOB, it is not added to the CM cost to calculate line cost. I think this should be an overhead cost.
If it is a profit margin, then we don’t need to use that (profit margin) factor in calculating production quantity per line per day.
I will show you the calculation of production volume in both scenarios.
Case#1: When Line overhead cost 20% of labour cost
In this case, you need to use a reverse method of line cost calculation. Let’s use a mathematical formula to find the answer to this problem.Consider produced quantity per day per line is Q Dozens.
Line cost per day = (Production Quantity x CM costs) + Overhead costs % (Production Quantity x CM costs)
= (Production Quantity x CM costs) (1+ Overhead cost %)
In the problem, you have the following information
Cost of manufacturing (CM) =$ 8.00 per dozen
Daily cost per line = $800
Overhead added on the total CM = 20%
Therefore,
$800 = (Q x $8)(1+20%)
Q = 800 / (8 x 1.20) = 100 /1.2 = 83.333 dozens
Let’s convert produced quantity in units = (100 /1.2)x12 = 1000 units per day
Case#2. Considering it is a profit margin of 20%
In that case, we don’t need to consider this factor in the calculation.Production Quantity (in Dozen) = (Total Line cost / Cost per Dozen)
= $800/ $8
= 100 Dozens
In units daily production volume in (100 x12) = 1200 pieces.
How to Calculate Garment Production Cost from SMV and Monthly Salary Data