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Garment Costing
CONTENT

• What is the Cost of a Garment? ................................................................................. 3

• Stages of Costing .......................................................................................................... 3

• Products Cost ............................................................................................................... 4

• Pricing Strategies ......................................................................................................... 5

• How to Get the Best Pricing from Suppliers? ........................................................... 6

• Garment costing method and techniques .................................................................. 7

• Bill of material (BOM)............................................................................................... 10

• Example Of Costing Sheet......................................................................................... 12

• How To Request a Price Quotation from A Garment Manufacturer ................... 14

• How to execute a garment production order ........................................................... 15

• Main Factors that Affect Garment Costing............................................................. 16

• References ................................................................................................................... 21

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Garment Costing
What is the Cost of a Garment?
In a business, cost is the
amount of money that is spent on
the production or creation of a
garment. From a seller’s point of
view, cost is the amount of money
spent to produce a product. If
sellers sold their goods at the same
price as they cost to produce, then
they would break even. This
means that they would not lose
Figure 1
money on their sales, but their
company would not make a profit either. Cost does not include a mark-up for profit.
Therefore, the cost of a product from the buyer’s point of view can be called the price.
This is the amount charged for a product by the seller, and it includes both the cost to make the
product and the mark-up cost added by the seller to produce a profit. Pricing of the garment
can be done by manufacturing cost added with estimated mark-up or profit % to it.
In fashion manufacturing, costing means the process of estimating and then determining
the total cost of producing a garment or item. It generally includes raw material cost,
construction of the garment, trims, packaging, shipping and operating expenses and manpower,
among others.
The cost of the garment is calculated by combining the cost of various raw materials,
operating cost of the company and the expected profit. It is also necessary to acknowledge the
buyer’s costing expectations.

Stages of Costing
Costing is done at four broad stages in the entire garment manufacturing process:

● Preliminary or pre-costing done during the pre-adoption phase of the

product development process, i.e., before the samples are made. This gives a
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rough estimate as to what to expect from the design, based on similar styles. This
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Garment Costing
 facilitates weeding out or modification of designs that are too costly for
manufacturing.

● Cost of line adoption done to determine the expected investment required

for the design in materials, labour and overhead. In this stage, the style is broken
down into components and the assembly procedures to establish its financial
viability and producibility of the design at a specific price point. This is based on
the samples and standard data available.

● Post adoption or Pre-Production Costing, also known as Detailed

Costing or Tech Design Costs, which include detailed costing, based on specific
production methods (machine type, SPI, material handling methods, layout, etc.)
and costing standards (in-house standards, PMTS, etc.). It is conducted during
the post-adoption stage, prior to the start of actual production.

● Actual costs, estimated during and after production. It includes the material
and labour costs, compared to the allowed budget for the style. This costing can
also be used to force changes in the style to limit the expense to the allocated
budget.

Products Cost
According to Jeffrey and Evans (2011, 8), the three main categories of costs for garment
manufacturers are, direct materials — contributing about 50% to the total cost, direct labour —
contributing about 20% to the total cost and, overheads — contributing about 30% to the total
cost

• Material Costs: As the name itself suggests, this cost head consists of all the
material costs of the product like fabric, thread, trims, etc.
• Labour Costs: This head chronicles the wages of the employees directly
involved with the garment production, like the cutting, sewing, and finishing
helpers and operators.
• Overheads: This section comprises of both the variable and fixed, indirect
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manufacturing costs. This includes indirect labour costs (managerial labour,

Garment Costing
 service personnel, quality control staff, etc. or the staff not directly involved in
product manufacturing), occupancy costs like rent, depreciation, property taxes,
insurance, and security; and other overheads like administrative costs, material
management (carrying costs), machinery and equipment costs, compliance, and
regulation costs, etc.

Pricing Strategies
When it comes to garment manufacturing, there are three main costing methods or
strategies used, namely, direct costing, absorption costing and activity-based costing (ABC).

● Direct Costing: In this method of costing, only the variable costs like the
direct material cost, the production labour costs, and the sales commissions are a
part of the product cost. The fixed costs here are treated as time-period costs. So,
using this strategy, it becomes easy to clearly identify individual product costs,
and compare each product/style and their level of contribution to the factory’s
bottom line.

● Absorption Costing: This strategy includes both the variable and fixed
manufacturing cost in product costing. Here, the overheads are allocated with an
application rate. This application rate is a percentage of the direct labour costs.

𝑂𝑣𝑒𝑟ℎ𝑒𝑎𝑑 𝐴𝑝𝑝𝑙𝑖𝑐𝑎𝑡𝑖𝑜𝑛 𝑅𝑎𝑡𝑒

= 𝑇𝑜𝑡𝑎𝑙 𝑓𝑎𝑐𝑡𝑜𝑟𝑦 𝑂𝑣𝑒𝑟ℎ𝑒𝑎𝑑
÷ 𝑇𝑜𝑡𝑎𝑙 𝐷𝑖𝑟𝑒𝑐𝑡 𝐿𝑎𝑏𝑜𝑟 𝐶𝑜𝑠𝑡𝑠 (𝑓𝑜𝑟 𝑡ℎ𝑒 𝑔𝑖𝑣𝑒𝑛 𝑝𝑒𝑟𝑖𝑜𝑑)

Accurate determination of the overhead application rate is tough and thus often
leads to distortion of the actual value of the profit potential of products/styles.

• Activity Based Costing (ABC): This is a much more realistic approach that
the above two. Every activity creates a cost, and these costs can be associated
directly with the product, customer, or supplier for which the activity is being
done. All the factory overheads here as allocated to activity centres like design,
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MIS, merchandising, quality, and distribution.

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Garment Costing
How to Get the Best Pricing from Suppliers?
One of the main elements of the garment’s cost is the material. What material you select
for your product will define its quality, it’s manufacturing cost and the final price for your
customer. Therefore, knowing how to maintain a good relationship with the supplier of your
choice plays a crucial role in product manufacturing.

1. Get quotes from multiple suppliers:

It’s essential to obtain quotes from different suppliers before purchasing an order.
You’ll gain a better understanding of the overall market rate for certain items. If
you accept the first quote a supplier offers, you might be disappointed later when
you discover there were better options available.
2. Ask suppliers for the BOM and itemized pricing:
We can learn a lot about how a supplier has priced a product just by looking at its
bill of materials, or BOM. The BOM is a list of raw materials, sub-components, and
parts (and quantities of each) that are used in manufacturing a product. This
information can reveal why an item is priced a certain way.
Depending on the detail of the BOM, we can learn all of this and more before
placing an order. Knowing order details like these will help you better understand
how the supplier has priced the product. Seeing the BOM also helps you ensure
your product specifications are being met. For example, you may find the supplier
had planned to use the wrong component and instruct them accordingly.
3. Don’t negotiate pricing too low with suppliers:
Some importers mistakenly think that getting the best price from suppliers means
getting the lowest price possible. But the age-old proverb, “you get what you pay
for” is as true here as anywhere else.

Experienced importers know that a lower price often comes with an equal or greater
decrease in product quality. This is especially true for suppliers that work on very tight margins.
Some suppliers will often try to recover margins lost in negotiations by using cheaper, sub-
standard parts and materials, often without your approval. Others may simply refuse your order
altogether.

Negotiating very low on price early on can also make your supplier generally less
cooperative. So, what’s the best way to negotiate with a supplier? Be upfront with suppliers
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and offer a target price. Many importers get anxious when suppliers ask for a “target price”

Garment Costing
early on in negotiation. They’re often worried they'll end up paying too much if they reveal
their expectation too soon. But in fact, it’s usually a good sign when a supplier asks for a target
price. It typically shows that they're capable of producing at multiple levels of quality. This is
true of most well-established suppliers.

If you’re accustomed to paying ₹20 per unit for ballpoint pens and you tell a prospective
supplier directly, you’re likely to arrive at a similar pricing and quality level with them. But if
you set your target price lower—at ₹10 or ₹15, for example—you’ll probably find that the
supplier will agree. But that quality will be lower than what you’ve seen in the past, when
paying the higher price.

It’s generally best to be upfront and open with prospective suppliers about how much
you expect to pay for a product. Make your expectations for quality clear to them as well. They
may not be able to meet your price and quality level immediately. But perhaps there’s a way
by substituting different parts or materials or increasing the order volume. It’s difficult to be
sure without an open discussion.

If you want added assurance of product quality before finalizing an order with a
supplier, ask them for a product sample. It may also be wise to carry out lab testing, particularly
to verify the quality of materials or to check product performance against a benchmark.

Garment costing method and techniques

Cost is the economic value of the resources used to make a product. Garment costing
is the process of evaluating the total cost of garment production. Apparel costing in the garment
making process is one of the most complex procedures. As there are lot things that go into
pricing a single piece of clothing. Purchasing of raw materials, cost of dyeing, knitting,
printing, transport cost, packaging, banking charges, overheads and cost of trims and
accessories used all are included in it. The merchandiser and the top management of a company
are actively involved in deciding the cost of a garment.

The garment industry follows different techniques to determine the cost. However,
broadly the following things are taken into consideration: type of fabric, trims used, garment
testing, cost of logistics, profit of the organization, and value-added services (printing,
embroidery, washing). There are other details that go into calculating the cost of a garment like
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unit of measurement, quantity of the order, and type of dyeing and finishes used.
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Garment Costing
Fabric consumption

Once the sample is approved and a pattern is developed, the amount of fabric required
per unit is calculated. The fabric cost constitutes 60 to 70 percent of the total garment making
cost. The fiber content, spinning process used, fabric GSM (Gram Square Meter), and the
percentage of shrinkage and wastage in the fabric are also determined while deriving the cost.
The consumption for knitted garments is determined in kilograms while for woven it is
determined in yards. Two popular systems used for the calculation of amount of fabric required
per garment are mathematical and marker planning systems.

The mathematical system provides a rough estimate to the manufacturer and is

generally used in the sampling stage of production. The consumption of fabric for producing a
certain style of garment is calculated by measuring the length and the width of each piece of
the garment pattern. Either by using software like Computer Aided Design (CAD) and
Computer Aided Manufacturing (CAM) or manually the marker planning can be done. And
once the fabric consumption is determined then we to calculate cost of fabric by multiplying
the cost of fabric per yard with the number of yards used to make the garment.

For example: - $7/yard *3 yards used = $21

Weaving or knitting cost

For knitted garments, the Gram Square Meter (GSM) of the fabric plays a vital role in
costing. The type of machines, fabrics & blends, and configurations used for knitting the fabric
of the garment affects the price of making. Similarly for woven apparels, the Ends per Inch
(EPI) are considered. The bigger the beaming length, the lesser will be the cost of weaving.
Hence, the beam size can increase or decrease the cost of making a garment. The kinds of
weave like twill, satin, and plain and the sort of machineries used for the garment influence the
weaving cost.

Dyeing cost

The use of a particular kind of dye and a certain shade of colour impacts the dyeing cost
of a garment. For example, dyeing a fabric in lighter shades costs less and VAT dyes are costlier
than reactive ones. Dyeing of specific colours like red and turquoise cost more than basic
colours like black and white.
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Garment Costing
Cost of Trims and accessories

Besides the fabrics, trims and accessories used to make the complete garment such as
zippers, buttons, sewing threads, embellishments, care labels, elastics, and cartons add up to
the cost. Threads used in a garment depend on the kind of seam used in it. There are various
ways to measure the amount of thread being used. At times, the amount of thread used is
calculated at the sample making stage itself. The weight of the thread cone is measured before
and after using the quantity, and the difference is calculated to identify the amount consumed.
The size, shape, and material used in trims like zippers, buttons, and labels also sums up the
cost of making a garment.

Labour cost of sewing and cutting

Labours plays a vital role in the garment manufacturing without labour garment
manufacturing can’t be done so to determine the garment costing labour cost needs to
determine and to calculate the labour cost we need to multiply the hour labour worked to
manufacture the garment with the amount you are willing to pay to the labour per hour.

For example: - 1 hour work done by labour * $ 8 an hour wage = $8.00

Overhead costs

Overhead cost is another thing that needs to take into consideration, as overhead cover
resources needed to operate, such as facility rent or utility costs. So, to estimate the overhead
cost we need to add 12% of the subtotal to your cost.

For example: - 89.84* .12 = $10.78 (Overhead) and then 10.78 to 89.84= $100.62 new subtotal.

Marginal cost

This cost is added for the extra time it takes to make just one piece instead of multiple
at once. So, to determine the marginal cost we need to add 20% of the subtotal to your cost.

For example: - 100.62*.20=$20.12(margin) and then add 20.12 to 100.62= $120.74

$120.74 is the total cost to make your garment.

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Garment Costing
Bill of material (BOM)
BOM stands for a bill of material. It is a list of raw materials that are needed to be
sourced for making the garments. It should be prepared and sourced the materials before
starting the garment production. Before preparing the bill of material, the garment
merchandiser should be aware of the shipping date of the garment.

In the readymade apparel industry, BOM is normally prepared by a factory

merchandiser or production merchandiser. After that, it is approved by the responsible person
from the factory owner and handed over to the purchasing department to purchase and in-house
the required raw materials in a timely.

Bill of material contains the below information’s:

1.Details description of raw materials,

2.Consumption of raw materials per each garment,

3.The person name, who is responsible for sourcing,

4.Supplier name,

5.The projected cost per each item,

6.Product quality,

7.Product specification,

8.Product color name or color code,

9.Raw material price,

10.Sourcing date,

11.Cuttable Width,

12.The total cost of raw material,

13.Product code (It is often called a style no. for fabric or input),

14.Size (buttons) or length (zippers).

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Garment Costing
 Table 1

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Garment Costing
Example Of Costing Sheet
Each type of the product has different specifics and therefore a different Costing table.
Each one has essential elements that you don’t want to miss. Cost sheet is a document which
provides for the assembly of the estimated detailed cost in respect of a cost center or a cost
unit. It is a detailed statement of the elements of cost arranged in a logical order under different
heads. It is prepared to show the detailed cost of the total output for a certain period.

It is only a memorandum statement and does not form part of the double entry system.
Additional columns can be provided to indicate cost per unit at different stages of production
or to enable comparison to be made of the current costs with that of historical costs.

The number of details always depends on the complexity of the garments. To calculate
the final cost of the garment you will need to clearly specify each piece that goes into making.
For example: main fabric, lining, interfacing, trims, buttons, zippers, embellishments,
appliques, etc. All of these details have to be included in the Costing Table. Quantities of each
item must be listed, ideally on another column to make the visualization and calculation easier.

There are parts that are commonly used for all types of products. Things like tags, labels,
sewing thread, packaging materials will be a part of any Costing Table no matter what type of
product you are creating. So, make sure to add those too.

Add supplier’s name to every material that goes into your Costing Table, that will save
you time in future if you run out of any of the parts and will need to order more. Tracking the
status of each order is useful too - whether it’s in stock or needs to be placed on the backorder.

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Garment Costing
 Table 2

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Garment Costing
How To Request a Price Quotation from A Garment
Manufacturer

Step 1. Ensure your tech pack is complete

First thing first, make sure all your product details are clearly laid out in a tech pack.
Include your design's flat sketches, bill of materials, colorway specs, POMs (Points of
Measure) for your product in all sizes, plus the list of embellishments and branding artwork if
it applies.

Step 2. Make a list of potential suppliers

Try to gather at least three, but ideally, you should have ten or more, if possible. The
more choices you have, the better as it’s not usually wise to accept the first price you obtain.
This will allow you to compare and shortlist the best suppliers and you’ll gain a better
understanding of the overall market cost for certain items. What’s more, you will also have
backup options if there is an issue with your first choice.

Step 3. Get in touch

Now it's time to reach out to your shortlisted manufacturers. Send over your complete
tech pack and request suppliers to provide the following information: the MOQ (minimum
order quantity), payment terms, price breakdown, quality checks, shipping, timings, list with
country destinations.

Step 4. Keep track of your requests

Be sure to follow up! Some manufacturers might be handling a lot of orders and
requests and perhaps yours got lost in the crowd. Calling is a good idea to ensure they’ve
received your quote request.

Step 5: Review Quotations

After you have gathered a few quotation files, take the time to study each one and
compare them to see what works best for you.

Step 6: Shortlist the best candidates

It’s always a good idea to request samples from more than one supplier. It’s a good way to
test the manufacturer before you ask for the full order and spend your production budget. It
also gives you an initial idea on how they work and communicate, and this is key.
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Garment Costing
How to execute a garment production order

After conducting a careful search to find the right manufacturer, the time to produce a
collection has come. These are the next steps to ensure everything goes smoothly to execute
garment production order:

1) Write a clear and detailed manufacturing agreement

Manufacturing agreement will help protect business in the event of a production issue,
therefore it’s crucial. For example, in case you need to make a claim if there are defects in the
final products, which is a common occurrence, this document will help prevent
misunderstandings.

But before starting drafting agreements make sure to have tech packs ready. Tech pack serves
as a contract with suppliers that clearly lays out what to expect from them to produce. So be as
detailed as possible: list things like thread count, a supplier list (for other trims and materials
your manufacturer doesn't provide), colours, measurements and tolerances, fabric type, etc.

2) Deposit of initial payment

The agreed-upon payment terms should be well confirmed before placing the order.
This is essential to build solid relationships with suppliers, so establish favourable contract
terms before signing the payment document.

Production should begin from the date of transfer the upfront payment manufacturers
require. In most cases, this is 30% of the (FOB) value. The remaining 70% should only be
issued once the order passes the respective quality tests.

3) Overseeing the production process

After paying the initial deposit, the supplier should execute the production according to
the plan. One must have enough time in planning and production schedule to navigate and
correct errors. If you work closely with your clothing manufacturer, you should have the
opportunity to negotiate turnaround times and factor in any issue they might encounter when
producing your clothing.
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Garment Costing
 After you've agreed on a shipping deadline, you must check in with them periodically
to get updates on things like the reception of the raw materials or if the production has officially
started. This can help you anticipate any delays and plan accordingly.

Main Factors that Affect Garment Costing

In the garments manufacturing sector, a business totally depends on garment costing.
But some key factors have a considerable effect on garments costing. As its importance on
garments business.

● Fabric:
Before providing the costing of an order to the buyer, a garments merchandiser must
take a clear idea regarding the fabrication from the buyer. In the case of woven garments
fabrication, it can be 10%cotton denim, 2/1 RHT twill, stretch denim, etc. and in the
case of Knit garments, it can be Jersey, Piquet, etc.

Fabric is generally the most significant factor in the costing of a garment. Fabric
accounts for 60 to 70% of the total cost of basic-styled garments.

The parameters that affect the fabric cost:

● UOM: Unit of Measurement (UOM) is a standard measurement that is used. The

UOM for woven fabric is normally in meters or yard.

● MOQ: Fabric Minimum Order Quantity (MOQ) is nothing but the smallest
quantity of a product that a fabric manufacturer can supply.

● Order quantity: The cost of fabric may depend on the order quantity. This
depends on the type of fabric required and fabric manufacturer capacity along
with negotiation between fabric buyer and supplier.

● Incoterm used: This factor makes a huge difference in fabric cost. While
importing the fabric from another country merchandiser needs to deal with the
supplier for delivery of the fabric based on incoterms like EXW, FOB, CIF, DDP
etc. based on which it will be decided who covers the cost of transportation and
risk.
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Other parameters that affect the fabric cost, they are also called the value-added
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services:

Garment Costing
 ● Weaving or knitting cost.

● Dyeing cost.

● Trims, Thread, Buttons, Zippers, and other Accessories:

Apart from main fabric garment construction include other materials like trims, buttons,
thread, zippers, elastics, etc. Their quality and quantity affect the cost of the garment.
The size, shape, and material used in trims like zippers, buttons, and labels also sums
up the cost of making a garment.

● Labels and Packaging:

The cost of labels depends on size and material you are choosing, in mass production
the amount of labels ordered plays a significant role too.

The cost of poly bags and cartons used for shipping is highly dependent on thickness,
dimension and raw material used. The cost of packaging is equally important as it gives
a significant difference when we consider the whole order quantity. Hand tags or price
tags are used as packing material, the cost of hand tags are dependent upon material
used, printing on it, and MOQ (Minimum Order Quantity).

● Cost of making:
The cost of making is based on the total cost per hour multiplied by the number of hours
it takes to make the style and divided by the number of units produced if the making is
done by a contractor. The contractor adds profit on to this amount.

● Size specification:

It’s an important point for garments costing. After receiving an order, a garments
merchandiser must confirm the correct size specification given by the buyer with the
order. Occasionally it’s seen that the PO sheet has come with different sizes which were
not during the costing
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Garment Costing
 ● Fabric consumption:

Fabric consumption is another one that has so much importance on garment costing.
Here, a garments merchandiser must count all the required fabrics needed for making
that garment such as - Body fabric, Rib, Neck tape, Appliqué, and other fabrics with
wastage.

● Fabric color:

Here, a garment merchandiser must confirm the fabric color by discussing with the
buyer, that how many colors in the style of garments and also confirm color-wise order
quantity ratio.

● Print:

If the garments have print, then a garment merchandiser must follow the clear artwork
of that, also confirm the mentioned print quality and dimension. It will help the
merchandiser to make accurate costing.

● Embroidery:

If the garments have embroidery, then a garment merchandiser must confirm the correct
price quotation after discussing with suppliers.

● Wash:

It’s another important one for garments costing. In running a garments business,
maximum garments have a wash process. So, here a garment merchandiser must
confirm the correct wash price after discussing with the wash factory.

● Order Quantity:

Here, a garments merchandiser must try to take information regarding order quantity
from the buyer. Sometimes it’s seen that garments price varies according to order
quantity.
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Garment Costing
 ● Test requirement:

Test requirement of garments is an important point for garments costing. A garment

merchandiser must confirm it by discussing it with the buyer before providing the final
costing.

● Inspection:

Here, a garment merchandiser must confirm the inspection terms by discussing with
the buyer, that who will inspect the goods. If third party inspection, then who will pay
their charges.

● GSP:

GSP is an important factor that affects garments costing. A garments merchandiser must
confirm about GSP by discussing with the buyer has needed the GSP or not.

● L/C payment term:

Here, the garments merchandiser must collect a previous L/C copy from a buyer and
discuss with the buying commercial department regarding all the terms along with
payment.

● Commercial cost:

Normally, buying a house has added 3% of total purchase (Fabric cost + Accessories
cost + others item cost) as commercial cost if the L/C payment term is as sight. If the
L/C is 60 days deferred, then you can add 7.5% additional cost of the total price and it
will be 15% for 90 days L/C deferred.

● Profit:

Normally in the case of buying a house, profit added 20% of CM (Cost of making) cost.
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Garment Costing
 ● Shipment date:

It is one of the important points for discussing with the buyer. Here a clothing
merchandiser must confirm the shipment date by discussing with the production
department.

● Other expenses:
Come up with the amount that helps you pay the bills like rent, employees’ salaries,
utilities and include it in the cost of your final product.

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Garment Costing
References

● https://www.onlineclothingstudy.com/2011/11/garment-costing-sheet.html

● https://ordnur.com/apparel/costing-sheet-of-garments-manufacturing/

● https://medium.com/@stitchdiary/how-is-costing-done-in-the-garment-
industry-9046a0872c50

● https://garmentsmerchandising.com/factors-affecting-garments-costing/

● https://garmentsmerchandising.com/15-garment-costing-terms-used-in-
apparel-industry/

● https://techpacker.com/blog/design/everything-you-need-to-know-about-
garment-costing-and-pricing/#how-to-request-a-price-quotation-from-a-
garment-manufacturer

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