How to prepare product costing?

Costing is the most sensitive issues in the aspect of profit and loss in any kind of dealings. “Costing means calculation process of a product to fix profit and loss mathematically.” RGM sector is a business where so many guys have to perform to achieve a particular target. It is a hard working track where every minute is counted. Costing of garments is a mandatory task for an RMG merchandiser, especially in soft-line. Overall chance of getting order and profit depends on it simultaneously. Product costing is a vital matter to know profit and loss in the apparel industry. It is not only mandatory in apparel industry but also other industry should calculate product costing accurately. Otherwise, that business will not run a long time. It’s probably one of the toughest tasks for someone to find out accurate product pricing. There are two main hazards, and someone should be aware of under-pricing and overpricing while evaluating and planning overall business strategies. Cause, both elements are harmful for any organization. It’s a general trend for all to gain profit by selling a product.

Profit is the key element of all companies except charity firms, NGO’s or other specialized companies. But now a day’s most of the companies emphasize on profit as well as doing some social responsibility. They are working on the theme of “profit is the by-product of your total performance.” It’s a long-term business strategy. They always prefer consumer’s satisfaction than profit margin. If consumers become pleased, it is easier to gain profit. You may desire to gain profit but that should not be your main target. You should count every item and labor cost what used to make the product during costing. We should use any suitable format for costing then the percentage of mistake can be reduced during costing.

Usually, buyer provides a worksheet to the vendor to prepare proto sample as well as to submit competitive costing. Based on tech-pack pattern maker adjust pattern for consumption and meantime merchandiser has to check all other necessary trims price and fabric’s price. Once get consumption from pattern maker then need to calculate fabrics price, trims price (including air cost & up charges if necessary) print cost (if applicable), washing cost, CM (cost of manufacturing) etc.

Costing is one of the important issues that used to submit buyer or higher management during proto stage. So, someone should collect accurate consumption, material price from respective departments or concern parties.

Based on product costing, merchandiser has to submit price quotation to respective buyer. You should remember that every buyer refers their product to some manufacturer to compare price quotation. When buyer gets back price quotation from several manufacturers, then they will justify all.

If your price quotation does not satisfy buyer, they will not give you bulk order. So, get ready to think and make a plan how can start to achieve buyer’s requirement. Hence, all have to be more careful to calculate product costing. Usually, product costing is the process of tracking and studying all the various operating expense that are accumulated in the production and sale of a product, from raw materials procurement to expenses linked with transporting the final product to retail enterprises. Usually, when income incurs above break-even point that time it is considered as profit. When two vendors ethical standard like sample, compliance, working environment, logistic service equal to each other that time costing plays a vital role to convince the buyer. There are some parameters which should be taken into consideration while doing costing.

Whenever you wish to evaluate the total cost of any garments item, it is very important to fix its selling price and to determine whether the garment is worth manufacturing.

Some factors directly influence us to determine product cost such as:

* Type of garments (woven, cut & sewn knits, sweater)

* Manufacturing condition applied (SMV, CMT, and CM)

*Business nature of the company (trading firm, manufacturer)

* Payment method (FOB, C.I.F)

Method of garment costing may differ from company to company, tailor to the individual’s requirement. However, the same data is required no matter if any variation exists or not.

Please assess your pricing factors regularly to make sure you are striking your revenue target perfectly. Everyone wants to know profit and loss from their running business. If costing is not perfect and authentic, a producer cannot survive a long time. Till now it has to express the urgency of costing let know how and when the costing job should be done.

Please find a simple equation to calculate the cost of a garment is:

{Fabric or yarn cost + Accessories or Trim cost + Local transportation cost + Shipping or documentation cost + Duty cost (if applicable) + Washing/Print/Embroidery cost + Miscellaneous cost (Up charges if necessary or overhead cost) + Labor cost (cm i.e. cost of manufacturing) + profit margin} = Product selling price

So, today I will show you a cost format so that you can estimate cost of a particular product without difficulty. Please find the cost format below.

Anyway, this format is not always kept fixed. It could be flexible or variable depends on practical situations.

If you wish to get the excel file, please download the cost format from my google drive link. Please hit the link to download your desired file.

Please find another costing format from my google drive link for your reference.

It is notable that attach format is based on apparel business, but other entrepreneurs can use this form by inputting their material cost. Just replace material items and modify according to your wish. I am sure this format will be helpful for you. If anyone failed to download it from my google drive link, then please mail me for your desired file. I will try to send your desired file as soon as possible through mail.

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