In apparel industry, cost of making (CM) is an important
factor for garment merchandisers. As its importance in garments industry, every
merchandiser should know the actual calculation method of it. Otherwise,
factory may fall in huge loss.
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| CM Calculation for Knit Garments |
- Total monthly expenditure (electricity bill, rent, water bill, transportation, commercial cost, worker & stuff wages etc.) of the factory.
- Total running machine of the following month
- Total no of machine quantity to complete the layout of mentioned order items.
- Daily (8 hours/day) production target of the mention order items (excluding alter & reject).
- Total working days of the following month.
- Dollar conversation rate (if expenditure amount is rather then US dollar)
Suppose,
- Total monthly factory expense- 70,00,000 BDT
- Total running machine of the following month is - 180 machines
- Total working days of the following month- 26 days
- Daily factory expense: 70,00,000 / 26 = 269,230.77 BDT (Formula: total month factory expenses / total working days of the following month)
- Daily expense of 1 machine: 269,230.77 / 180 = 1495.73 BDT (Formula: daily factory expense / total running machine of the following month )
- Total machine quantity to complete the layout - 18 machines
- Daily cost of the mention order item's layout: 18 X 1495.73 = 26,923 BDT (Formula: machine quantity to complete layout X daily expenditure for 1 machine )
- Hourly production quantity of following mention order layout - 200 pcs
- Normal daily working hours- 8 hours
- So, daily production of the following layout: 200 X 8 = 1600 pcs (Formula: hourly production of the layout X daily working hours )
- Cost of Manufacture for 1 pcs: 26,923 / 1600 = 16.83 BDT (Formula: daily cost of the layout / daily production of the layout )
- So, CM (Cost of Manufacture for 12 garments ): 16.83 X 12 = 202 BDT (Formula: manufacturing cost for 1 pcs X 12 )
- Dollar conversion rate: 1USD = 78 BDT
- So, CM (Cost of Manufacture for 12 garments ): 202 / 78 = US $2.5897
- Need to add 20-25% profit. So, after 20% added: $ 2.5897 + 0.5179 = 3.11 $ US
- So, Final CM = $ 3.11 US
CM (Cost of Making):
Formula: Overhead machine cost X require machine / production quantity= [{ monthly factory expenditure of following month / (total working days of the month X total running machine of the following month) X (Number of machine to complete the layout / Production quantity of the following layout) }]
= [{70,00,000 / (26 X 180) X 18) / 1800)}] X 12
= [{1495.73 X 18 / 1800}] X 12
= 14.96 X 12
= 179.49
= $2.30 /dzn [ 1$ = 78 BDT]
Another Simple example of CM (Cost of Manufacture ):
After starting the new salary of Bangladesh, we calculate the CM of any items consider the overhead sewing machine cost of 1200 BDT to 1400 BDT per day. For compliance factory we calculate per day overhead sewing machine cost of 1800 BDT to 2100 BDT.Q. Suppose, A compliance factory per day overhead of sewing machine is 2100 BDT. Total machine quantity to complete the layout- 18 machines. Daily production comes from one existing layout- 1800 pcs. Dollar conversion rate is 1$ = 78 BDT. Now find out the CM for 12 pcs garments?
Solution:
CM cost = Overhead of sewing machine cost X total require machine to complete the layout / production quantity X 12
= 2100 X 18 / 1800 X 12
= 21 X 12
= 252 BDT
= $ 3.23 / dzn [ 1$ = 78 BDT ]