Apparel Product Costing

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Apparel Product Costing

• ...A workshop to transfer information between
  participants for the purpose of doing a more
  accurate and thorough job of product costing.

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SIX STEPS TO HAVING A SUCCESSFUL WORKSHOP

• ASK QUESTIONS
• WORK THE EXAMPLES
• COMPARE RESULTS
• OFFER EXAMPLES FROM YOUR OWN EXPERIENCE
• LISTEN TO OTHER PARTICIPANTS SUGGESTIONS
• BE DETERMINED TO TAKE AWAY USEFUL INFORMATION

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SO WHATS THE BIG DEAL ABOUT COSTING ANYWAY?

• EVERYONE KNOWS HOW TO COST, RIGHT?
• I HAVE BETTER THINGS FOR MY STAFF TO DO!
• ONLY A SMALL PART OF THE BIG PICTURE.
• COSTS DONT MATTER IN THE LONG RUN.

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A FEW MINOR POINTS ABOUT COSTING?

• COSTING IS IMPORTANT!
• COSTING TAKES MANY FORMS!
• COSTS DEPEND UPON MANY VARIABLES!
• THERE IS A RELATIONSHIP BETWEEN COST AND PRICE!

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COSTING IS IMPORTANT!

• IT IS A TOOL TO QUOTE FOR BUSINESS.
• IT SETS OUT HOW A PRODUCT WILL BE MADE.
• IT DICTATES WHAT PEOPLE WILL BE PAID.
• IT IS THE DIFFERENCE BETWEEN PROFIT AND LOSS IN
  UNNOWN SITUATIONS.

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COSTING TAKES MANY FORMS

• COMPANIES ARE NOT ALIKE.
• SCOPE OF BUSINESS DIFFERS.
• CUSTOMER REQUIREMENTS CHANGE.
• ORGANIZATION STRUCTURES DIFFER.
• A RATE IS NOT A RATE IS NOT A RATE.

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COSTING DEPENDS UPON MANY VARIABLES

• STYLE
• SIZE
• COLOR
• MATERIAL
• THREAD
• PUT-UP
• DELIVERY

• SIMILARITY
• MACHINERY REQUIRED
• EMPLOYEES USED
• QUALITY REQUIREMENTS
• ??? OTHERS ???

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THERE IS A RELATIONSHIP BETWEEN COST AND PRICE!

• WHAT IS THE GOAL OF BUSINESS?
• KNOWLEDGE AIDS NEGOTIATION.
• INACCURATE COSTS THE FIRST STEP TO FINDING A NEW
  EMPLOYER!
• LET THE COSTS FALL WHERE THEY MAYOR HONESTY IS
  THE BEST POLICY IN COSTING.

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MAJOR COMPONENTS OF A GARMENT COST

• OVERHEADS
• LABOR
• BENEFITS
• TAXES
• EXPENSES
• MARGINS

• MATERIALS
• FABRIC
• TRIM
• SUPPLIES
• DIRECT LABOR
• STANDARD
• EXCESSES

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THE MULTIPLE or THE OVERHEAD FACTOR

• a means to apply elements of cost that do not
  have a direct relationship to a specific product.

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DISCUSSION TOPIC ONE

• WHATS IN YOUR MULTIPLE NOW, AND WHAT SHOULD BE
  IN IT?

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THE INCLUSIVE MULTIPLE
SEWING LABOR EVERYTHING ELSE
___________________________
SEWING STANDARD
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WHATS WRONG WITH AN INCLUSIVE MULTIPLE? or
PROBLEMS IN PARADISE

• INCLUSIVE MULTIPLE AVERAGES EVERYTHING.
• IT MAY INCLUDE DIRECT ELEMENTS OF COST.
• IT IS DANGEROUS AND FILLED WITH SURPRISES.

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DISCUSSION QUESTION TWO

• ARE EXCESSES ABOVE STANDARD A PART OF THE
  MULTIPLE?

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LABOR PITFALLS

• EXCESSESthey are a part of payments to
  direct-productive labor.
• CUTTINGcan vary by product
• INSPECTION, PRESSING, SHIPPING these are all
  direct labor.

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EXPENSE, SUPPLY, OR TRIM ITEMS?

• THREAD type and usage vary by product and can be
  costed directly.
• BAGS, LABELS, BOXES, STICKERS, are materials that
  can vary by product.
• UTLITIES are difficult to breakdown by product.
• MACHINE RENTALS might be style or contract
  specific

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THE CORRECT FORMULA FOR THE MULTIPLE

• ALL INDIRECT ELEMENTS OF COST
• ALL DIRECT LABOR

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SAMPLES OF PRODUCT COST SHEETS

• THESE ARE ACTUAL COST SHEETS USED BY FORMERLY
  SUCCESSFUL COMPANIES

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PROBLEMS WITH THIS SHEET

• THE MULTIPLE INCLUDES EVERYTHING OTHER THAN
  SEWING LABOR AND FABRIC. THE COST IS FOR
  CUT,MAKE, AND TRIM.
• THE 2.45 MULTIPLE IS BREAKEVEN.
• THE 2.65 MULTIPLE ADDS 20 GROSS MARGIN? OR DOES
  IT?
• (5.5340/5.1163) 1.082
• ONLY 8.2 IS REALLY ADDED.

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PROBLEMS WITH THIS SHEETCMT COST

• INCLUSIVE MULTIPLE CUTTING LABOR
• ONE WASTE FACTOR FOR ALL MATERIAL AND TRIM ITEMS.