Apparel Cost Calculation Method for Export Order

Apparel Costing for Export Order:
To calculate apparel costing or cost of an apparel export order, we have to maintain a process sequence. In this sequence, we have to calculate primary or prime cost, factory cost, office cost and total cost of an export order respectively. 

Apparel costing for export order
Apparel costing for export order
Apparel Costing Methods for Export Order:

Example:
Find out the total cost of 10000 pcs polo shirt with 15% profit. All the data are given in the below:

Cost of yarn used- Rs. 40,0000
Cost of accessories used- Rs. 1,00000
Labor wages- Rs. 90,000
Knitting cost or charge- Rs. 16000
Dyeing charge- Rs. 160000
Compacting charge- Rs. 12000, 
Power- Rs. 50000
(Factory: office: S&D = 3: 1.5:0.5)

Salary- Rs. 150000
(Factory: office: S&D = 1.5: 2.5:1)

Spare parts in factory- Rs. 5000
Stationary- Rs. 6000
(Factory: office: S&D = 1:2.5:1.5)

Transport- Rs. 40000
(Factory: office: S&D = 1:1:2)

Other expenses- Rs. 100000
(Factory: office: S&D = 3:5:2)

Solution:

Primary or Prime Cost Calculation Method:

Prime cost = (Direct material + Direct labor + Direct expenses) …………………….. (1)

Now, 
Direct material,
= Yarn cost + Accessories cost
= 40,0000 + 1,00000
= Rs. 50000

Again, 
Direct labor = Rs. 90000

Again,
Direct expense,
= (Knitting charge + Dyeing charge + compacting charge)
= 160000 + 16000 + 12000
= Rs. 188000

Now, from equation (1), we get,
Prime cost,
= 50000 + 90000 + 188000
= Rs. 778000

Factory Cost Calculation Method:

Factory cost,
= (Prime cost + Factory Overheads)
= (Prime cost + Factory indirect material + Factory indirect labor + indirect expense) …….... (2)

Now,
Factory indirect material,
= Spare parts + Stationary
= 5000 + (1/5*6000)
= 5000 + 1200
= Rs. 6200

Again,
Factory indirect labor,
= Salary (1/5*150000) 
= Rs. 45000

So, Factory indirect labor is 45000

Again,
Factory indirect expense,
= (Power+ transport+ other expense)
= (3/5*50000) + (¼*40000) + (3/10*100000)
= 30000 + 10000 + 30000
= Rs. 70000

Now, from equation (2), we get,
Factory cost,
= 778000 + 6200 + 4500 + 70000
= Rs. 899200

Office Cost Calculation Method:

Office cost,
= (Factory cost + Office Overheads)
= (Factory cost + Office indirect material + Office indirect labor + Office expense) …...... (3)

Now,
Office indirect material,
= Stationary 
= 2.5/5*6000
= Rs. 3000

Again,
Office indirect labor,
= Salary 
= 2.5/5*150000
= Rs. 75000

Again, 
Office expense,
= Power+ transport + other expenses
= (1.5/5*50000) + (1/4*40000) + (5/10*100000)
= 15000 + 10000 + 50000
= Rs. 75000

Now, from equation (3) we get,
Office cost,
= 899200 + 3000 + 75000 + 75000
= Rs. 1052200

Total Cost Calculation Method:

Total cost,
= Office cost + selling and distribution (S&D) overheads
= (Office cost + S&D indirect material + S&D indirect labor + S&D indirect expenses)…...... (4)

Now,
S&D indirect material,
= Stationary
= 1.5/5*6000
= Rs. 1800

Again,
S&D indirect labor,
= Salary 
= 1/5*150000
= Rs. 30000

Again,
S&D indirect expenses,
= Power + Transport + Other expense
= (0.5/5*50000) + (2/4*40000) + (2/10*100000)
= 5000 + 20000 + 20000
= Rs. 45000

Now, from equation (4), we get,
Total cost,
= 1052200 + 1800 + 30000 + 45000
= Rs. 1129000

So, 
Total cost stands at Rs. 1129000
Cost per pcs,
= 1129000/10000
= Rs. 112.90

After adding 15% profit,
Price per pc,
= {Cost/ (1-profit %)}
= {112.90/ (1-15%)}
= Rs. 132.83

So, price per pcs polo shirt stands at Rs. 132.83