Costing

COSTING

Costing is a system for assigning costs to an

element of a business
 COSTING

Costing is used for

Internal Reporting – Management uses costing
to learn about the cost of operations so that it
can work on refining the operations to
improve PROFITABILITY.
 COSTING
Terms Associated with costing:
1. Fixed Costs – costs that do not vary with
respect to changes in output and would incur
even if there was no output was produced.

E.G. Rent, Interest, taxes, salaries of employees

on a per monthly basis.
 COSTING
2. Variable Costs – Costs that changes
proportionately to the level of output.

e.g. Materials, Salaries of employees on a per

product salary
 COSTING

3. Total Cost – It is defined as the sum of the

fixed and variable costs.
 COSTING EQUATION

Direct Materials + Direct Labor + Overhead =

Total Cost
 COSTING EQUATION
MATERIALS

Direct Material – Materials found in the

garment used for its production
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MATERIALS

• Fabrication – Self
/Shell(Outer Material)
e.g. Silks, wools, etc.
• Lining – usually a
thinner material (e.g.
Geena Silk, Acetate,
etc.)
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MATERIALS
Materials placed in between the self and lining are

• Interlining - is fabric added to a garment when more

warmth is needed, like in a winter coat.

• It may be a heavy fabric with batting added, or a

lighter weight one like flannel or fleece. Interlining
can be constructed separately from the actual
garment (it’s sometimes removable), or used as an
underlining.
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MATERIALS
Interlining
E.g.
Fleece, Flannel etc.
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MATERIALS
Materials placed in between the self and lining are

• Interfacing – is a kind of support “fabric” to

support the fabrics and used to keep the
stability of the fabric. Interfacing is common in
collars, cuffs, waistband, and hems, or the
whole of the garment . Generally, you can
find more than one type used within a single
garment.
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MATERIALS
Interfacing
E.g.
Fusible Interfacing (Ironed on), Sewn on Interfacing
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MATERIALS

• Lace and Beads

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MATERIALS
• Closures – Zippers
and Buttons
• Notions – Thread,
needles, etc.
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LABOR

• Direct LABOR – Actual labor done on the

garment
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Labor
• Patternmaking and cutting
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Labor
• Sewing and Ironing
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Labor
• Hand work such as beading, tucking,
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Overhead
• Overhead – Indirect costs incurred for the
completion and delivery of the garments.
e.g.
Packaging,
Delivery,
Utilities,
Rental
 COSTING EQUATION

Direct Materials + Direct Labor + Overhead =

Total Cost
COSTING EQUATION
Client Specifications:
1. Fitted Bodice but no to
serpentinas. Tulle Skirt
2. All ivory and fully embellished
bodice.
3. Gazaar base on the top.
4. Small train
 COSTING EQUATION
Materials (Fabric/Textiles/Fusibles)

Invoice No. Fabric Qty Cost per Yard Total

Tulle 42 50 2,100.00
Crinoline 6 180 1,080.00
White Geena 9 35 315.00
White Gazaar 1 275 275.00

White Duchess 6 90 540.00

Lace 1 2500 2,500.00
Fish Net 5 50 250.00
Maasin Fuse 1.5 85 127.50
Jersey 1.5 35 52.50
Beads - - 5,000.00

Total Fabric Cost 12,240.00

 COSTING EQUATION

Supplies (Thread/Bust Pads Etc.)

Invoice No. Supply Cost Per Unit Qty Total

Zipper 15 1 15.00

Bust Pads 30 1 30.00

Stick bone 5 5 25.00

Thread 95 1 95.00

Total Supplies 165.00

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Labor (Pattern and Sew)

Invoice No. Direct Labor Cost Total

Sewing 3000 3,000.00

Beadwork 5000 5,000.00

Pattern and Cutting 3500 3,500.00

Total Labor Expense 11,500.00

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Overhead (Transpo and etc.)

Invoice No. Overhead Cost Total

Box 550 550.00

Label 5 5.00

Secondary Items -

Pillow 250 250.00

Chord 180 180.00

Secondary Veil 50 50.00

Garter 50 50.00

Primary Veil 720 720.00

Actual Delivery cost 500 500.00

Total Overhead Cost 2,305.00

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Total Expense Schedule (Sch 1)

Materials 12,240.00
Supplies 165.00
Labor 11,500.00
Overhead 2,305.00 26,210.00
Total Expense 26,210.00

Possible Selling Price (suggested for total items)

Total Expense Times Selling Price Vat (12%) Total Selling Price

26,210 2 52,420 1.12 58,710.4

3 78,630 1.12 88,065.6

4 104,840 1.12 117,420.8

 COSTING EQUATION

INCOME COMPUTATION
Income Statement for gown 1 Income Statement
Item Actual Sales Price
Gown 1 40,000.00 Gross SALES
Cost of Goods Sold
Total 40,000.00 Other Expenses
Rental 35,000
Total Expense (sch. 1) 26,210.00 Utilities 10,000

Total Net Income 13,790.00

Total (45,000.00)
Balance
 COSTING EQUATION

WHAT IF WE APPROPRIATE A CERTAIN AMOUNT OF THE UTILITIES AND

RENTAL TO THE COST OF THE GARMENT BEFORE COSTING?

FOR RENTAL – DIVIDE THE TOTAL RENT WITH ACTUAL GARMENT COUNT
IN PRODUCTION

35,0000/ 10 = 3,500

FOR UTILITIES – YOU MAY OPT FOR THE AVERAGE ALSO WITH THE
ACTUAL GARMENT COUNT IN PRODUCTION

10,000/10 = 1,000
 COSTING EQUATION
Total Expense Schedule (Sch 1)
Materials 12,240.00
Supplies 165.00
Labor 11,500.00
Overhead 6,805.00 30,710.00

Total Expense 30,710.00

Possible Selling Price (suggested for total items)

Total Expense Times Selling Price Vat (12%) Total Selling Price

30,710.00 2.00 61,420.00 1.12 68,790.40

3.00 92,130.00 1.12 103,185.60

4.00 122,840.00 1.12 137,580.80

COSTING EQUATION

INCOME COMPUTATION

Income Statement
Actual Sales
Item Price

Gown 1 40,000.00

Total 40,000.00

Total Expense (sch.

1) 30,710.00

Total Net Income 9,290.00

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