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Hello, my dear merchandiser. Hope all of you doing well in your workplace. Garment costing is very common to all of you. All of you know about the procedure by which one can calculate the cost of manufacturing goods. You can give a quotation for a product which is also important for a merchandiser. Here, I like to share my experience with you. I think that could be very helpful for fresh merchandisers and experienced merchandisers who have practical experience in this field. hence, it is important to know about the garments’ cost for merchandising.
Garments Costing For Merchandising
Garment costing is defined as the expenditure incurred to manufacture a garment or carry out a process or render a service. The garment is the fashion of the world. Nowadays, men take apparel as a fashion. Apparel manufacturers produce different types of apparel or garments. Garment costing is done by considering all the costs regarding manufacturing the garment. Costing is the process to estimate the total cost of apparel manufacturing. A merchandiser fixed the price of the garment by considering the cost of the raw materials to the final product cost. Costing also considers the quotation process and profit of the products. By doing all of that’s a task the merchandiser fixed the price of the garments.
Major Considering Points Before Garment Costing
Garment costing is a very easy task if anyone has enough knowledge about all the process stages of manufacturing. Here, I have mentioned some major points which should consider before garment costing. They are
- Fabrication: The manufacturer is the seller of the products. The manufacturer makes the products at the will of the buyer. Before taking an order the merchandiser should confirm the fabrication of the products. The merchandiser should confirm the strong source of fabric supply.
- Fabric Color: Merchandiser should confirm the fabric color. How many colors and styles will be? What is the color ratio of the total quantity?
- Size Specification: The buyer will confirm the size of the garment. They will give the approved sample for bulk production. Merchandiser will confirm the PO sheet which is considered before garment costing.
- Quantity: Merchandiser will confirm the approximate quantity before garment costing.
- Shipment Date: Merchandiser will fix the shipment date by discussing it with the buyer.
- Test Requirement: Merchandiser will confirm whether the product shall test or not.
- Inspection: Most buyer inspects the product before taking the delivery. Merchandiser will confirm the inspection process whether it inspect directly by the buyer or a third party. If a third party inspects the products then who will pay the charges?
- L/C Payment Terms: Merchandiser will follow all the terms and conditions of L/C.
- GSP: GSP is another important term before garment costing.
Surely, there are lots of points that must be considered by a merchandiser before garment costing. This cost could be in a buying house or in the export department of a garment manufacturing unit.
Types of Cost in Garment Business
We know that there are mainly two types of cost: fixed cost and variable cost involved with any unit related to production or service. Here, I have listed different types of costs which are involved with the costing of garment items. They are-
- Fixed cost
- Variable cost
- Semi-variable cost
- Replacement cost
- Development cost
- Imputed cos
- Research cost
- Policy cost
- Step cost
- Conversion cost
- Shutdown cost
- Sunk cost
- Differential cost
The above cost is calculated to make pricing a product.
Garment Costing Techniques
Garment costing is a critical task. The following techniques can help to make efficient and effective garment pricing. They are-
- Total or Absorption Costing: This method of cost analysis added up all of the fixed and variable expenses incurred in the production of the goods.
- Standard Costing: It is a predetermined cost based on management’s guidelines for effective operation. These fixed costs are referred to as standard costs.
- Marginal Costing: A fluctuation in the output volume of one unit results in a change in the total cost, which is represented by marginal costing.
- Budgetary Control: This is a forward costing because it aims to limit the concern’s future actions by creating budgets.
- Activity-based Costing: This is a phrase used to describe the process by which accounting strives to ascertain the actual expenses related to supplying various clients.
- Target Costing: During the product development phase, firms utilize this strategic cost management strategy to meet client requirements, reach a specific cost objective, and keep the profit margins they want.
Strategies of a Good Costing Technique
I have outlined various methods for costing clothing above. Therefore, when choosing the costing procedures, the manufacturer should take into account the following criteria. Those are
The following specifications ought to be met by the costing system a company uses:
- A costing method should be straightforward, practical, and effective.
- The costing method that will be used must be compatible with the demands of the firm.
- This system should make it simple to gather and categorize spending on productive and non-productive services.
- The methods used should make it possible to compare costs and estimations with those of similar tasks that have been completed in the past by the company.
- The costing system must offer accurate data in sufficient depth to support future projections.
- This system must provide quick, accurate, dependable, and comprehensive cost information related to operation, process, and output units in all of their constituent parts.
- The costing system ought to be moderately priced.
In sum, the merchandiser must have deep knowledge of garment costing.