Professional Documents
Culture Documents
PRODUCTS
Session I
in a product
Price-Amount of money asked or
received in x-change for a product.
The difference between the two is the
profit or loss on that product.
Revenue is the total of all receipts
from the sale of companys product
during a stated period.
Direct Costs
Indirect Costs
Retail Price
FOB price+
Cost of Freight/Insurance+
Import Duty+
Cost of distribution(number of variables)+
Cost of managing a store( if own stores)+
Profit Margin=
Retail Price
PROBLEM SOLVING
MORE PROBLEMS..
ANSWERS
40%
Yd/x
Rs. 234/ 48.80 %
Rs. 1180/-*
Rs. 20/- & Rs. 21/
COSTING OF APPAREL
PRODUCTS
Session II
FINANCIAL MANAGEMENT
Management of procurement of funds and
efficient use of resources
Closely Linked
Accounting is sub function of Finance
Accounting generates data/Information
The End Product of Accounting assists in Past performances & Future
Directions
Difference
Treatment of Funds
Accrual system for measuring Funds Vs Cash inflow & outflow
Decision Making
Collection of Data Vs financial Planning, Controlling & decision
Making
Investment Analysis
Working capital Management
Sources & cost of Funds
Determination of capital structure
Dividend Policy
Analysis of risk & returns
Primary disciplines
accounting
Macroeconomics
Microeconomics
Marketing
Production
Quantitative Methods
Traditional Approach
Procurement of Funds
Accounting generates data/Information
The End Product of Accounting assists in Past performances & Future
Directions
Modern Approach
Investment Decision
Capital Budgeting
Working Capital
Financial decision
Dividend Policy decision -
Capital Budgeting
The Long Term assets & and their composition
The Business Risk Complexion of the firm
Concept & Measurement of the Cost of the Capital
Working Capital
An Overview of Working Capital Management as a Whole
Efficient Management of the Individual Current Assets eg. Cash,
Receivables, Inventory
COSTING OF APPAREL
PRODUCTS
Session III
Profit Maximization
Wealth Maximization
Ambiguity
Timing of Benefits
Quality of Benefits
MD/Chairman
VP/Director (Finance)
Treasurer
Controller
Cash Manager
Tax Manager
Credit Manager
Portfolio Manager
Finance/Accounting Manager
REVIEW QUESTIONES
Wealth Maximization Decision Criterion
What are the Major Management decisions a Finance
Manager Takes?
Finance is Beyond Procurement of Funds? Comment.
The Wealth Maximization objectives provide a
operationally appropriate decision criterion?
Profit, Profitability & Wealth Maximization, Explain?
Consideration of Quality & Quantity Dimension of
Benefits
COSTING OF APPAREL
PRODUCTS
Session IV
SOURCE OF CAPITAL
SOURCE OF CAPITAL
ANALYSIS TECHNIQUES
COSTING OF APPAREL
PRODUCTS
Session V
Manufacturing Costs
Manufacturing Costs
Manufacturing costs
Variable(O/H) costs-Machine
parts,repairs,marker paper,needles
Other overhead costs-Materials
management,Machinery and equipment
costs.
Materials costing
Materials costing
Fabric Costing
Fabric Costing
2 types of costs Value added process cost
Commercial cost
VAP Cost-Starts from the fiber/yarn stage
and goes on till the fabric is ready.
Commercial Cost-Rate at which the fabric
is selling in the marketplace.
VAP cost
Commercial cost
The price at which the fabric is being sold
in the market.
This cost is VAP cost+Profit of the
manufacturer or agent.
Example
Quality Considerations
Fabric Inspection
Identification & removal of fabric defects
through out manufacturing cycle
Loss of fabric yield due to defect splice out
Additional cutting room costs
Sewing room costs to re-cut and re sew
defective panels
Fall out effect of irregulars during final
inspection
Case Study -1
Fabric color Up-charges
>
Color
Sky blue
Khaki
White
Pink
Fuschia
Lime
>
Burgundy
>
>
>
>
>
Yardage
36,800
29,900
75,900
46,000
16,100
20,700
4,600
Case Study -2
First Quality Fabric v/s Off Quality
Fabrics
TOTAL
$4.752/dz
1 st quality
Off Quality
@$2.55
@$2.20
Yds Reqd
$49.09
$42.35
Addnl Handling
0 $4.75
Total
$49.09
$47.10
Net Saving
$1.99-4%
Case Study -3
Costing for Material variances
Projected Actual
Cn/doz 15.0204mts/doz 19.24mts/doz
Size Mix
3 5 7 9 11
5 7 9 11 13
(Cn=19.2450 on
48
to 19.8420 on
48)
Fabric Cost
3.1875(60)
2.55(48)
Basic Trousers
Fashion Tops
Deal
/mill,finishers,jobbers
Small dye lots
No replacement of fabric
Physical features
Co-op reqd. at 3 levels
Sewing FeaturesPredictable
Lead time-Long
832 11600.00
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
Piece Rates
Often difficult to set
Involve work study techniques to measure
time taken to perform an operation.
Problems associated with Piece rate
systems
Labor Costing-Budgeted
Labor Costing-Budgeted
Labor Costing-Budgeted
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
Assembly/Bundling
Amount of SKUs involved
Bundle integration
Bundling specifications required
Sewing Operations
Size of sewing bundles
Size and color variations
Variations in fabrics
Utilisation of Equipment
Quality Specifications
Dis-advantages
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
Cost Centers
Departments of the factory for which costs can
be identified.
Production Cost Centers
Service cost centers
Within service cost centers all costs are
overhead costs
Hence these costs have to be allocated to the
products.
Cost Centers-Advantages
The entire factory is divided into smaller
depts.
Each dept. hence is accountable for
cost control
Allows costs to be appropriately
distributed
SCC are shared out to PCC on based onFactory Personnel-in proportion of estimtaed
DL hrs.
Maintenance-half to sewing room,remainder
equally divided between cutting and press
rooms
Indirect
Costs
All other
costs, except direct costs, that is
required for running a business.
Depreciation-Loss of value of
equipment.The total cost is divided by the
number of years of expected use.
Depreciation normally calculated for
equipment of -High value and that lasts
for a long time.
Depreciation calculations is based on
accounting regulations
Indirect Costs
Stages of Costing
Pre-costing
Costing done prior to adoption of line
Costing done prior to production
Post production costing
Pre Costing
Detailed costing
Done after styles are adopted in line.
Picks up any cost that may have been missed
during cost estimation.
Accurate account of product costs.
Based on specific production methods for
each operation including machine type,stitches
per inch,workplace lay out,pre determined time
systems and material handling methods.
Detailed costing
Changes may be made to economize on
fabrics or sewing time.
Provide basis for establishing production
budgets.
Actual costing
Determined by using actual data from
production.
Costs are monitored throughout
production.
Costing
MethodsDirect
Costing
No consideration given to absorbing fixed
O/H
Variable O/H is usually treated as a part of
direct cost.
It is Pure Cost
This method weakens the impact of
managerial responsibility.
Most important impact-Proper allocation of
semi variable expenses
Direct cost advocates feel, fixed O/H should
be tracked but not charged to product costs.
Costing Methods-Absorption
Costing
ABSORPTION COSTING
All costs including an appropriate share of
overheads are borne by all products
Some costs are easily traceable while others
are not
Problems with factory overheads Overheads have to be added in some way and
then divided amongst all the products
Some overheads are accounted over longish
period of time
Hence some overheads are estimated in
advance
Absorption
Costing
Considers all
mfging costs( variable &
non variable)
O/H is allocated with application rate
which is a % of direct labor cost
O/H application rate-Factory
overhead/Total direct labor cost
RISKS-DLC calculation might not be accurate
-O/H application rate might not be accurate
-As DLC reduces it shows reduction in O/H
Garment Costing
Overhead Costs
Mfging OH consist of all expenses that are
not directly connected w/mfging
Fixed OH
Variable OH
Better
Impact of Changes
Overhead recovery
Other methods:
Percentage of Direct material cost
Percentage of Direct labour cost
Percentage of Prime cost
Costing-Michael Jeffrey
P/copy page 6.
Exercise on page 10.
Define fixed and variable costs.
Exercise on page 14.
Costing
Direct Materials
Direct Labor
Direct Expenses
Factory Overhead
Selling & Distribution Cost
Administration & Finance overhead
Costing
Fixed Costs-Those costs which are not
affected by the output of business
Variable Costs-That increase with the
output of business.
Divide costs into VC,FC.
Costing
Group Two
Group One
Group Three
Group Four
Dupioni silk
Indian Madras (hand
dyed-power/hand loom)
Indian Silk
Linen and Linen blends
Muslin
Patchwork