You are on page 1of 20


Labor Costing

Direct Labor Cost

It is Important to calculate direct labor cost: HOW: Calculate direct labour cost per hour Calculate direct labour cost per item

Direct Labour Cost per hour Employee Working hrs Salary per Payment for per month month time in production A( Skilled Tailor) 208 B( Skilled Tailor) 208 C( semi-Skilled Tailor)208 D(Folding,Pressing) 208 3100.00 3100.00 2500.00 2900.00 3100.00 3100.00 2500.00 2900.00

Labor Cost

832 11600.00 11600/832 Rs 14/hour

Direct labor
Any work that alters the composition,condition,conformation or construction of a product Any operation that advances a product towards its ultimate condition for sale thereby adding to its value

Direct labor cost

Remuneration paid to employees who make the garment-cutters,machinists,pressers etc. 2 options of remuneration: Time based wages(Hrs worked* Wage rate per hour) Piece rates(Pieces produced*rate per piece)

Who sets the rates?

Minimum wage laws In India differ for every state Minimum wages in Delhi-Rs. 2600/month for a 26 working days in a month Each working day is 8 working hours Each working hour=Rs12.50/-

Piece Rates
Often difficult to set Involve work study techniques to measure time taken to perform an operation. Problems associated with Piece rate systems

Piece rate calculation

If operation A takes 75minutes and the rate per SAM is Rs .042 and operator produces 4850 pieces in a week then the weekly earning of this operator=Rs

Labor Costing-Budgeted
Basis for labor costing is time. Labor costs-Direct & Indirect need to be budgeted for a firm to examine its financial commitments & evaluate its capacity to produce a product. Total DLC=No.Of Operators*hours /week* weeks/year*avg hourly earnings. This rep the firms financial commitment to employing a pre determined no.of operators for specific time period.

Labor Costing-Individual Style

Begins with a breakdown of all operations involved in assembling a style. The style can be broken into component parts and sub totaled or the production standards for each operation can be added together for the total garment. Production standard reflects the normal time required to complete one operation using a specified method that will produce expected quality.

Labor Costing- Individual Style

Prodn standards are the basis of establishing standard labor costs and managing available production time. Time values specified in production standards are referred to as SAM/SAH. Prodn time is converted into Re/$ by determining the value of each minute.

Direct Labour Cost

Fashion vs Staple Merchandise Marker Making costs affected by Variations in width of piece goods Fabric design

Spreading Costs
Type of Fabric spread Length of spread Consistency of fabric Spreaders attention to fabric defects Complexity of spread

Cutting Costs
Pattern Configuration Die cutting requirements Fabric type Fabric design Spread Height

Amount of SKUs involved Bundle integration Bundling specifications required

Sewing Operations
Size of sewing bundles Size and color variations Variations in fabrics Utilization of Equipment Quality Specifications

Pros & Cons of Piece Rate System

AdvantagesLabour can be hired on need basis Avoids union activities Can be fired if performance is not of expected level Mfger doesnt have to spend on training

Workers work at their own free will Slow workers are not able to earn as much Mfger might not find the best workers specially during season To earn more workers might produce inferior quality Every time a mfger hires, there needs to be price negotiation. Operators not responsible for upkeep of machines and equipments elaborate records need to be kept of pcs produced.

Working Hours & Overtime Rates

Section 51-Weekly Hours No adult worker shall be required or allowed to work in a factory for more than forty eight hours in any week.
Section 54-Daily hours No adult worker will be required or allowed to work in a factory for more than nine hours in any day

Section 59-Where a worker works in a factory for more than nine hours a day or for more than 48 hours a week, he shall in respect of overtime work be entitled to wages at the rate of twice his ordinary rates of wages Workers in a factory who are paid on piece rate basis, the time rate shall be deemed equivalent to the daily average of their full time earnings for the days on which they actually worked on the same or identical job during the month immediately preceding the calendar month during which the overtime work was done.