Apparel Export Merchandising

End Term Jury Assignment

Submitted by:
Aastha Tomar
Jayarekha K
Nidhi Tiwari
Payal Parida
Pratyaksha Sharma
 COST
▪ Cost typically can be defined as ‘the
economic value placed upon the
resources consumed to make a product’.

▪ 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.

▪ Cost does not include a markup 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.
WHAT IS GARMENT In garment manufacturing, costing means the process of estimating
and then determining the total cost of producing a garment or item.
COSTING? It generally includes raw material cost, construction of the garment,
trims, packaging, shipping and operating expenses and manpower,
among others.

Main Factors that Affect Garment Costing

▪ Fabric type

▪ Trims and accessories

▪ Labels and packaging

▪ The cost of making

▪ Shipping and logistics

▪ Profit of the manufacturing organization

▪ Other expenses
COSTING
OF MEN
SHIRT

We have taken an assumption that we have received an order for men’s formal
shirt with 1 pocket, & labels. A total of 50,000 pieces have been ordered in the
following sizes ( XS, S, M, L, XL).
 FABRIC
CONSUMPTION CALCULATION
METHOD
▪ ASSUMPTIONS​

▪ Fabric: Polycotton

▪ Formal shirt with full sleeves

▪ Total fabric consumption of shirt (in meters) = 1.4m

▪ Waste = 3%​

▪ Overheads = 12%

▪ Profit = 20%.

▪ FOB= Rs.37.4
 BACK PART FABRIC CONSUMPTION
30.5”” (Body Length) X 27.5” (1/2 Chest) / 36”X 44” ( Fabric Width) 0.529 YDS CALCULATION
26” (Yoke Length) X 7” (Yoke Width) X 2 (Double Part) / 36” X 44 0.229 YDS

32” (Body Length) X 16.5” (1/2 Chest) X 2 (Double Part / 36” X 44” 0.666 YDS
21.5” ( Collar Band Length) X 2” ( Band 0.067 YDS
Width) X 2 ( Double Part) / 36” X
FRONT PART 44”

32” (Body Length) X 16.5” (1/2 Chest) X 2 (Double Part / 36” X 44” 0.666 YDS

21.5” ( Collar Band Length ) X 2” ( Band Width) X 2 ( 0.054 YDS

SLEEVE Double) / 36” X 44”

23.5” (Sleeve Length) X 25” (Arm Hole) X 2 (Double Part) 36” X 44” 0.741 YDS Pocket

12” (Cuff Length) X 3” ( Cuff Width) X 4 ( 2 X2 Parts) / 36” X 44” 0.99 YDS 8” ( Pocket Length) X 6” ( Pocket Width) / 36” X 44” 0.03 YDS

Collar Total Fabric Consumption 1.406 YDS

COST BREAKDOWN
 DIRECT MATERIAL
S.NO. Description Unit Cost Consumption/pieces Cost/Pieces

Fabric

1. POLYCOTTON meters Rs. 70/meter 1.42 Rs. 99.4

Trims

2 Main Label piece Rs. 1/piece 1 Rs. 1

3 Care/Content Label piece Rs. 0.20/piece 1 Rs. 0.20

4 Size/Country piece Rs. 0.30/piece 1 Rs. 0.30

origin

5 Microdot Fusing meters Rs. 35/meter 0.50 Rs.17.5

6 Buttons meters Rs. 0.05/button 13 Rs. 0.65

7 Thread (For roll Rs. 40/roll 0.076 Rs. 3

stitching shirt

TOTAL RS. 122.05

 S.NO. OPERATION ESTIMATED SKILLED MATRIX COST/UNITS COST/PIECE
SAM
1 INSPECTION 0.1 SKILLED 2.5 RS. 0.25

2 SPREADING AND 0.3 SKILLED 3.0 Rs. 0.90

MARKING

3 CUTTING 0.2 SKILLED 3.0 Rs. 0.60

4 SEWING 22.3 SKILLED 3.0 Rs. 66.9

5 FINISHING 0.5 SEMI-SKILLED 2.5 Rs. 1.25

TOTAL 69.9

PACKAGING EXPENSES

Unit of
S.No. Description Cost(RS) Consumption/piece Cost/Piece
Measurement

1. Carton box Piece 3 0.1 Rs. 0.3

2. Poly Bag Piece 0.6 1 Rs. 0.5

OPERATION COST & 3. Hand Bag Piece 0.4 1 Rs. 0.4

4. Packaging SAM 8 0.1 Rs. 0.8

PACKAGING COST
TOTAL Rs. 2.0
Total cost = No. of pieces * Cost per piece = 50000*293.7 = ₹ 14,685,000

COST SHEET
Product Men’s Formal Shirt XYZ Colour
Style Number A002 Country India

Buyer XYZ Fabric POLYCOTTON

Width 42”
Particulars Details Cost(RS)
Direct Material Rs. 122.05
Direct Wages Rs. 60
Direct Expenses Rs. 2.0
PRIME COST Rs. 184.05

Overheads 12% Rs. 22.086

TOTAL FACTORY COST Rs. 206.13

Waste 3% Rs. 6.184

Cost of Sales Rs. 212.314

Profit 15% Rs. 3.1971
Total Cost Rs. 215.511
FOB US$ 37.4 Rs. 253 Approx.
Total Price Rs. 253
CASE STUDY
BRIEF 2
 ▪ Mr. Rohit and Mr. Vinay are partners in a leather exporting business from Jan 1997.
▪ 75k initial capital invested by each, 70k of the total deposited in bank.
CASE No. 1 ▪ Got their IEC code no. and approached Trade Information Centre.
Exchange rate has been specified. ▪ Got order from Lionel trains on Feb 25,1997.1500 leather bags for 15k USD FOB.
( USD = INR 35 )
▪ To receive 2k USD early payment. Shipping before 31May
▪ DD of 2k received on March 2. 1998.
▪ Loan from Ravi and XYZ Ltd. taken ₹1,30,000 and ₹70,000 respectively.
▪ For supply of Hand bags and supply of packaging, ₹2,71,250 and ₹37,800 to be paid.
▪ Lack of funds. So credit being sought.
M/s R.V. International do not have sufficient funds to execute this order.
Mr. Vikas Khanna would like to apply for pre shipment finance. He is
not sure whether he would be able to obtain the funds from the bank. He
seeks your advice on the matter.

?
 PRE–SHIPMENT
LOAN

▪ Pre-shipment Finance is a loan provided by a finance provider to a seller of goods and/or services for the sourcing, manufacture or
conversion of raw materials or semi-finished goods into finished goods and/or services, which are then delivered to a buyer.

▪ Bank Payment Obligation, issued on behalf of the buyer, in favor of the seller is often a key ingredient in motivating the finance in
addition to the ability of the seller to perform under the contract with the buyer.

▪ Bank and non-bank finance providers are active in this type of financing particularly in Asia.
 Free on Board Chart for R.V. International &
M.S. Lionel Trains Inc.

VARIABLES COST ₹ / piece

Purchasing Price / Bag 175
Office overhead 17.5
Packaging 25.2
Documentation & Agent fee 1.05
Total ( FOB / Bag ) 220.50
Insurance 1.75
FOB Ex- New Delhi 350
Total Margin 129.5

Cost borne by the Cost borne by the Cost borne by the both
Exporter Importer
 R.V. International
Profit & Loss A/C for the period 1.1.1997 to 28.2.1997
Total Expenses ₹ Total Revenue ₹
Printing Expenses 1500 By
Stationery 1500 Net Operating Loss 80600
Fees for IEC no. 1000
Liaison Expenses 1500
Rent 10000
Salaries to staff 13500
Telephone bill 3000
Electricity bill 1600
Payment to couriers 900
Payment to consultant 5000
Free sample 35000
Interest accrued on Loans from Ravi Khanna 1300

Int. on Loans from XYZ Finance 800

Office Expenses 4000
Total 80,600 Total 80,600
 R.V. International
Balance Sheet as on 28.2.1997

Liabilities ₹ Asset ₹

Capital A/Cs, Rohit 75000 Cash in Hand 6500

Vikas 75000 Cash at Bank 30,000

Loan from Ravi 1,30,000 Furniture 1,40,000

Loan from XYZ Ltd. 70,000 Computer 50,000

Interest on loan by Ravi 1300 Inventories 45000

Interest on loan by XYZ Ltd. 800 Net Operating Loss 80,600

Total 3,52,100 Total 3,52,100

▪ Seeing all the financial statements, we don’t think that the bank will lend them the money because they already have

huge amount of loans and also they have huge operating losses which diminishes their chances to generate enough

cash to repay the banks on time. Nor do they have much collateral.

▪ They already have liabilities of ₹3,52,100 and over it operating losses of ₹80,600 ( Total Liability = ₹4,32,700 ), whereas

as per the calculated margin the payment to be received is ₹1,94,250.

▪ And even if bank agrees to lend them money, it would be at a much higher rate of interest than the market.
 R.V. International
Balance Sheet as on 28.2.1997

Liabilities ₹ Asset ₹

Capital A/Cs, Rohit 75000 Cash in Hand 6500

Vikas 75000 Cash at Bank 30,000
Loan from Ravi 1,30,000 Furniture 1,40,000
Loan from XYZ Ltd. 70,000 Computer 50,000
Interest on loan by Ravi 1300 Inventories 45000
Interest on loan by XYZ Ltd. 800 Profit 1,94,250

Payment for Handbags 1,21,250

Payment for Packing 20,800 Net Operating Loss 1,09,000

Fixed Expenses 80,600

Total 5,74,750 Total 5,74,750
 EXECUTION OF EXPORT ORDER CASE No. 2
▪ A purchase order placed by M/s R.S Office Products from Germany with M/s
Viraj Global Exporters, Saket, New Delhi, the exporter from India.

▪ Order Placed by : R.S. OFFICE PRODUCTS D-68519 BERLIN GERMANY

▪ Order No. : 48588

▪ Date : 26.08.96

▪ Supplier : VIRAJ GLOBAL EXPORTERS H-53C, SAKET NEW DELHI 110017

▪ Colour / Print : Blue / Printed Marigold Binding band at back

▪ In Colour 200 pcs

▪ Delivery Date : 30.10.96

▪ Packing Instruction : Shipment in standard cartons with polybags single piece

packing according to our shipping instructions.

▪ Total Amount : DM 8000.00

As a team leader, you are required to prepare a detailed

plan for the implementation of this order to ensure the

shipment is sent in time.

?
▪ As a team leader we would first review the detailed contract, so we don’t miss out the deadline as we will be paying a fine of 0.5%
per calendar day if the stipulated delivery dates (Latest date of shipment – 30/10/96) are not met.

▪ Then a sample would be sent to Germany to the client’s Quality control team to verify the quality of the product by 27/08/96 as the
purchase order has been placed by 26/08/96.

▪ Production can only be started after verification and approval of the sample.

▪ In the meanwhile, we would be identifying teams for separate operations. For ex – Contract team will identify the clauses related to
this order and will make sure it is taken care of.
▪ Production team would ensure all the inventory is in proper working condition and to its full efficiency.

▪ After the approval, production of 200 pieces t-shirts will be started and latest completed by 27/10/96 .

▪ The order would then undergo pre-shipment inspection and quality check.

▪ Then we as exporters will obtain a delivery order for container pick up. Then the goods will be picked and sealed in the
containers.

▪ It will be then transported to the Indian Airport (Port of origin)

▪ There will be one other physical verification, document check and custom clearance of goods is done.

▪ After the check, it will be loaded into the carrier and it will depart from the origin.

▪ We both parties will be able to track the order.

▪ Containers will arrive at the destination and go through import custom clearance and after the importer pays the
custom duty, it is delivered to the client on time.
REFERENCES

• https://www.scribd.com/document/314772600/Costing-of-shirt
• https://www.zoho.com/finance/essential-business-guides/books/guides/cost-
sheet.html
• https://www.textiletoday.com.bd/fashion-merchandising-garment-costing/
• https://techpacker.com/blog/design/everything-you-need-to-know-about-
garment-costing-and-pricing/
• https://www.onlineclothingstudy.com/2018/11/importance-of-post-shipment-
garment.html?m=1
THANK YOU