How to Calculate Fabric Cutting Cost in Apparel Industry?

Fabric Cutting Cost Estimation:

Fig: Fabric cutting process in apparel industry

Fabric Cutting Cost Calculation Method in Apparel Manufacturing Factory:
Calculate the cutting cost and rate per apparel from the following chart:

Solution:
To find out the actual fabric cutting cost, we have to maintain the following law:

Fabric cutting cost per apparel,

Direct material + Direct labor + Direct expense + Overhead
= …………………………………………………………….…………           …. (1)
Total fabric cutting production

Total Fabric Cutting Production Calculation:

Total cutting production = 10000 apparel

Total Cutting Production Time Calculation:

Total cutting production time,
= (Total production / Production per shift)
= 10000/2000
= 5 shifts

Direct Material Cost Calculation (D.M):

In case of tag,
From the chart we get,
Tag (1 bundle= 1 tag, 1 bundle= 100 parts)

Now,
Total parts = (10000×5) = 50000 parts
Total bundle = (50000/100) = 500 bundles
Total tags = (500×1) = 500 tags
Total cost = (500 × Rs. 0.50) = Rs. 250

In case of sticker,

(From the chart, we get),
(1 part= 1 sticker)

Total parts = 50000
Total stickers = 50000
Sticker cost= {(50000×10)/100} = Rs. 5000

So,
Direct material cost stands at (Rs. 250 + Rs. 5000) = Rs. 5250

Direct Labor Cost Calculation:

Operator wage,
= Number of labor × No. of shift × operator wage per shift
= 5×5× Rs. 200
= Rs. 5000

Direct Expense Cost Calculation:

Direct expense = 0

Overheads Cost Calculation:

In power cost calculation,
= (Cost × 5 shifts) / (30days × 2 shifts in a day) = {(5000 × 5)/60} = Rs. 417

In other expenses cost calculation,
= (Cost × 5 shifts) / (30days × 2 shifts in a day) = {(15000 × 5)/60} = Rs. 1251

In salary cost calculation,
= (Cost × 5 shifts) / (30days × 2 shifts in a day) = {(50000 × 5)/60} = Rs. 4167

In rent cost calculation,
= (Cost × 5 shifts) / (30days × 2 shifts in a day) = {(10000 × 5)/60} = Rs. 834

So,
Total overhead cost stands at,
= Rs. 417 + Rs. 1251 + Rs. 4167 + Rs. 834
= Rs. 6669

Now,
From equation-01, we get,

Fabric cutting cost per kg,
(Rs. 5250 + Rs. 5000 + 0 + Rs. 6669)
= ………………………………………….…..
10000

= Rs. 1.70

After adding 15% profit,

Fabric cutting cost rate stands at
= {1.70/ (1-15%)}
= Rs. 2.00