Definition of Process Costing | Steps of Process Costing in Apparel Industry

What is Process Costing in Apparel Sector?
Process costing involves the costing of various process involved in apparel manufacturing such as knitting, dyeing, printing, cutting, sewing, checking, packing and also the costing of shipping and forwarding. This article will be very effective for those specially entrepreneurs who do their own these processes and who does job work to the apparel manufacturers.

Process costing in apparel industry
Process costing in apparel industry
Process Costing Calculation Formulas:
All the data given for calculation are approximate values, while doing real time calculation the latest data from the industry should be taken. From the components of cost sheet we know that,

1. Total cost,
= Office cost+ selling and distribution (S&D) overhead
= Factory cost+ Office overhead+ selling and distribution (S&D) overhead
= Prime cost+ Factory overhead+ + Office overhead+ selling and distribution (S&D) overhead
= Direct material+ direct labor+ direct expense+ all overheads

2. Cost per unit apparel,

    Direct material+ direct labor+ direct expense+ all overheads
= ……………………………………………………………........……….
                          Total apparel production

Or,

          DM+DL+DE+OH
= ………………………………..
   Total apparel production

Process Costing Steps in Textile and Apparel Industry:
Steps involved in process costing are in the below:
  1. Total production,
  2. Total process time,
  3. Direct material cost,
  4. Direct labor cost,
  5. Direct expense cost,
  6. Overheads.
All the above matters have explained in the following:

1. Total Production:
It is the total output of the process or total input of raw materials used in the particular process. In case of some processes, the input quantity will be taken as production quantity and in some processes; the output quantity will be taken as the production quantity.

2. Total Process Time:
The total time taken to complete the particular process is known as total process time. The unit of time may be kept in hour or shift or day or week or months which are dependent on the process and the convenience. Sometimes, the total process time is given directly or in some cases it has to be calculated using the following formula:

Total process time,

            Total production
= ………………………………….........
   Production capacity per shift

3. Direct Material Cost:
It is the cost of all direct materials which are used in the particular processes. The cost of each material is calculated individually as per quantity consumed and the corresponding price of the material and then total direct material cost is calculated. It can be calculated by using the below formula:

Direct material cost = Material price × quantity of material used

4. Direct labor Cost:
Direct labor cost is the cost of all direct labors like operators, helpers in apparel production or textile production etc. employed in the particular process and for the particular period of process completion that means total process time. It can be calculated by using the following formula:

Direct labor cost = No. of labors × wage per shift × total process time in shift

5. Direct Expense Cost:
Direct expense cost is the cost of re-work or reprocessing or the amount spent on doing job work for the definite operation in the process such as embroidery, button sewing, curing, hiring of machine for the production etc.

6. Overheads:
Overheads are all indirect costs which will be calculated generally per month like rent, power, salary etc. Here, the reach indirect cost is calculated for the particular process time from the monthly cost. Here, salary can be calculated by using the following law:

Salary,

    Monthly salary × Total process time in shifts or day
= …………………………………………………….....……….
             No. of shifts or days per month