1.

Fixed cost:
It is that type of cost which remains constant and does not vary within a period of time and
ranges of activity in spite of fluctuation in textile and apparel production is termed as fixed cost.
Fixed costs are rent, insurance charge, staff salary etc. it is also considered as period costs.

2. Replacement cost:
The cost which can be replaced by the management as a replacement of the existing costs is
known as replacement cost. Replacement costs are textile and apparel machinery replacement
over a certain period of time. It may be 10 years. 

3. Imputed cost:
It is that type of cost which does not involve in any cash outlay is known as imputed cost. It is
not included in cost accounts but are important for taking into consideration while management
decision. Imputed costs are interest on internally generated fund, salary of the proprietor etc. 

4. Variable cost:
The cost which varies directly in proportion to every increase or decrease in the volume of output
or textile and apparel production is known as variable cost. Variable costs are labor wages, labor
cost, power etc.

5. Semi-variable cost:
It does not vary proportionally but simultaneously cannot remain stationary at all the times is
known as semi-variable cost. These are telephone charges, service and repairs etc.

6. Research cost:
Research cost incurred for searching new or improved product such as new application of
products or materials or improved methods. Examples of this costs are courier charge, sample
charge etc.

7. Step cost:
Step cost which remains fixed over a range of activity and then jump to a new level as activity
changes. Steps cost are rental cost of delivery vehicles.

8. Conversion cost:
The cost of transforming direct material into a finished product exclusive of direct material cost
is known as conversion cost. It is normally takes as the aggregate of the cost of direct labor,
direct expense and factory overhead. Converting yarn into fabric and garment is the perfect
example for this type of cost. 
9. Development cost:
The cost of the methods or process which begins with the implementation of the decision to
produce a new or improved product or to employ a new or improved methods and ends with the
commencements of formal production of that product or by that method. Examples of
development costs are sampling charge, product development cost etc. 

10. Shutdown cost:

A manufacturer rendering service may have to suspend its operation for a period of time on
account of some temporary difficulties like raw material shortage, labor shortage, strikes etc.
though no work is done during this period but certain fixed costs such as rent, salary, insurance
etc. have to be incurred.

11. Policy cost:

The cost of formulating the policy, directing the organization and controlling the operation of an
undertaking which is not directly related to apparel or textile production, sales and distribution
activity. Examples of this type of costs are special training for the employees, ISO 9000
implementation etc.

12. Sunk cost:

Suck cost which has been created by a decision that was made in the past and cannot be changed
by any decision that will be made in the future. It is also known as past cost. Examples of sunk
costs are investment in building, plant, textile machineries etc.
Apparel Costing Sheet Analysis | Apparel Costing Format

13. Differential cost:

The difference in total cost between two alternative choices is known as differential cost.
Knit Garments Costing and Consumption in Apparel
Sector:
Fabric consumption and costing is one of the most important tasks for the apparel merchandisers.
To get higher profit percentage from an apparel export order, merchandiser should have
calculated the total costing and consumption by applying accurate fabric consumption
calculation formula.

You may follow Top 20 Knit Garment Factory in Bangladesh

T-Shirt Costing and Consumption Method in Apparel

Industry:
Calculate the price of a round neck T-shirt in from the given measurement chart and apparel
specifications:

Apparel Specifications
Style of T-Shirt Round neck T-shirt
Body - 100% cotton single jersey
Fabric Collar – Self fabric
G.S.M 180
Color Red
Embroidery Embroidery logo at chest
Size Ratio S:M:L:XL = (1:1.5:2:0.5)
Order Quantity 10000 pcs
 Fig: Apparel costing for T-Shirt in apparel industry
Solution:
Fabric Consumption Calculation or Apparel Weight Calculation Formula:
We have to follow the below formula during fabric consumption for the apparel. You may
follow How to calculate fabric consumption for T-shirt.

Apparel weight calculation,

      [{T.L + S.L + (2× H.A) + (2 × S.A)} × (1/2 Chest + S.A)] × G.S.M × 2

= ………………………………………………..…………..……………………         … (1)
                                                      10000

And,

Round neck collar weight calculation,

      {(Neck round + S.A) × (Collar width + S.A) × G.S.M × 2}

= ………………………………………..………………...........……                …….. (2)
                                             10000

Where,
T.L is stands for Total length,
S.A stands for Seam allowance,
H.A stands for Hem allowance,
S.L stands for Sleeve length.

Apparel weight calculation for middle size i.e. L Size:

Let,
Seam allowance =1cm,
Hem allowance = 2cm,

So,
From equation-01, we get,

    [{60+23+ (2×2) + (2×1)} × (50+1)] ×180×2

= ……………………………………………………..
                             10000

= 166.60 gms
= 0.167kg

Again, 

From equation-02, we get,

     {(52+1) × (3+1) ×180×2}

= ………………………………..
                  10000

= 7.8gms
= 0.08kg

So,

L size apparel weight stands at,

= (0.167+0.08) kg
= 0.175kg

Fabric Cost Calculation Per Kg:

SL
No. Particulars Amount
01 Yarn price per kg Rs. 240.00
02 Knitting rate per kg Rs. 8.00
03 Dyeing rate per kg Rs. 70.00
04 Printing rate per kg Rs. 0.00
05 Compacting rate per kg Rs. 6.00
06 Heat setting rate per kg (Synthetic fabric) Rs. 0.00
07 Total Rs. 324.00
08 Process loss (8-10%) (+) Rs. 32.40 (+)
09 Fabric cost per kg Rs. 356.00
Fabric Cost Calculation per Pc Apparel:

Fabric cost per apparel,

= (Apparel weight × Fabric cost per kg)
= (0.175 × Rs. 356.40)
= Rs. 62.37

Apparel Costing Format for T-Shirt:

The cost of the apparel is calculated as follows:
SL
No. Particulars Amount
01 Fabric cost per apparel Rs. 62.37
02 CMT cost Rs. 10.00
03 Special operations Embroidery Rs. 4.00 Rs. 4.00
Main label Rs. 0.60
Wash care label Rs. 0.30
Pouch or Poly
bag Rs. 1.00
Hang tag Rs. 0.50
Insert card Rs. 0.80
Accessories and Barcode sticker Rs. 0.60
 04 trimmings  Hologram sticker Rs.0.75 Rs. 4.55
05 FOB + Packing Rs. 6.00
06 Sub total Rs. 86.92
07 Overhead (10%) (+) Rs. 8.70
08 Sub total Rs. 95.62
09 Rejection (3%) (+) Rs. 2.87
10 Sub total Rs. 98.49
11 Profit (15%) (+) Rs. 14.78
12 Sub total Rs. 113.27
13 Agent’s commission Rs. 5.67
14 Insurance Rs. 1.13
15 Apparel price (FOB) in Rs. Price in Rs. 120.07
Price in US ($) =
16 Apparel price (FOB) in US ($) $2.72
Price in Euro = E
1.91

17 Apparel price (FOB) in Euro.

Unit 2
What are the Elements of Cost in Cost Accounting?
The elements that constitute the cost of manufacture are known as the
elements of cost. Such element of cost is divided into three categories.
In a manufacturing concern, raw materials are converted into a
finished product with the help of labour and other service units. They
are Material, Labour and Expenses.

Elements of Cost in Cost Accounting

Again, these elements of cost are divided into two categories such
as Direct Material and Indirect Material, Direct Labour and Indirect
Labour, Direct Expenses and Indirect Expenses. All direct material,
direct labour and direct expenses are added to get prime cost. Likewise
all indirect material, indirect labour and indirect expenses are added
to get overhead. Again, overhead is divided into four categories. They
are factory overhead, administration overhead, selling overhead and
distribution overhead.
1. Direct Material: It refers to material out of which a product is to be
produced or manufactured. The cost of direct material is varying
according to the level of output. For example: Milk is the direct
material of butter.
2. Indirect Material: It refers to material required to produce a product
but not directly and does not form a part of a finished product. For
example: Nails are used in furniture. The cost of indirect material is
not varying in direct proportion of product.
3. Direct Labour: It refers to the amount paid to the workers who are
directly engaged in the production of goods. It varies directly with the
output.
4. Indirect Labour: It refers to the amount paid to the workers who are
indirectly engaged in the production of goods. It does not vary directly
with the output.
5. Direct Expenses: It refers to the expenses that are specifically
incurred by the company to produce a product. A product cannot be
produced without incurring such expenses. It varies directly with the
level of output.
6. Indirect Expenses: It refers to the expenses that are incurred by the
organization to produce a product. But, these expenses cannot be
easily found out accurately. For example: Power used for production.
7. Overhead: It is the combination of all indirect materials, indirect
labour and indirect expenses.
8. Factory Overhead: It is otherwise called Production Overhead or
Works Overhead. It refers to the expenses that are incurred in the
production place or within factory premises. For example: Indirect
material, rent, rates and taxes of factory, canteen expenses etc.
9. Administration Overhead: It is otherwise called Office Overhead. It
refers to the expenses that are incurred in connection with the general
administration of the company. For example: Salary of administrative
staff, postage, telegram and telephone, stationery etc.
10. Selling Overhead: It refers to all expenses incurred in connection
with sales. For example: Salary of sales department staff, travelers’
commission, advertisement etc.
11. Distribution Overhead: It refers to all expenses incurred in
connection with the delivery or distribution of goods and services from
the producer to the consumer. For example: Delivery van expenses.
loading and unloading, customs duty, salary of deliverymen etc.

Elements of Cost

The elements of cost are those elements which constitute the cost of
manufacture of a product. We can broadly divide these elements of cost
into three categories. In a manufacturing organization, we convert raw
materials into a finished product with the help of labor and other
services. These services are Material, Labour and Expenses.

Elements of Cost
Again, we can bifurcate these elements of cost into two categories such
as Direct Material and Indirect Material, Direct Labour and Indirect
Labour, Direct Expenses and Indirect Expenses. We need to add all
direct material, direct labor, and direct expenses to calculate the prime
cost.
Likewise, we add all indirect material, indirect labor, and indirect
expenses to calculate the overhead cost. Again, we can bifurcate the
overheads into four categories. They are factory overhead,
administrative overhead, selling overhead and distribution overhead.

1. Direct Material

It represents the raw material or goods necessary to produce or

manufacture a product. The cost of direct material varies according to
the level of output. For example, Milk is the direct material of ghee.

2. Indirect Material

It refers to the material which we require to produce a product but is not

directly identifiable. It does not form a part of a finished product. For
example, the use of nails to make a table. The cost of indirect material
does not vary in the direct proportion of product.

Learn more about Meaning of Cost, Costing and Cost Accounting

here in detail

3. Direct Labour

It refers to the amount which paid to the workers who are directly
engaged in the production of goods. It varies directly with the level of
output.

4. Indirect Labour

It represents the amount paid to workers who are indirectly engaged in

the production of goods. It does not vary directly with the level of
output.
5. Direct Expenses

It refers to the expenses that are specifically incurred by the enterprises

to produce a product. The production cannot take place without
incurring these expenses. It varies directly with the level of production.

6. Indirect Expenses

It represents the expenses that are incurred by the organization to

produce a product. These expenses cannot be easily identified
accurately. For example, Power expenses for the production of pens.

Source: freepik.com

7. Overhead

It refers to all indirect materials, indirect labour, or and indirect

expenses.

8. Factory Overhead

Factory overhead or Production Overhead or Works Overhead refers to

the expenses which a firm incurs in the production area or within
factory premises.

Indirect material, rent, rates and taxes of factory, canteen expenses

etc.are example of factory overhead.
9. Administration Overhead

Administrative or Office Overhead refers to the expenses which are

incurred in connection with the general administration of the
organizations.

Salary of administrative staff, postage, telegram and telephone,

stationery etc.are examples of administration overhead.

10. Selling Overhead

All expenses that a firm incurs in connection with sales are selling
overheads. Salary of sales department staff, travelers’ commission,
advertisement etc.are example of selling overhead.

11. Distribution Overhead

It represents all expenses incurred in connection with the delivery or

distribution of finished goods and services from the manufacturer to the
consumer. F Delivery van expenses. loading and unloading, customs
duty, the salary of deliverymen are examples of distribution overhead.