How to Calculate Fabric Cutting Cost in Apparel Industry?

Fabric Cutting Cost Estimation:
Cutting department is one of the most important departments in clothing manufacturing factory. Fabric cutting cost estimation has great impact in the total cost of apparel manufacturing. So, to know this calculating method is mandatory for the persons related with apparel production. 

Fabric cutting process in apparel industry
Fig: Fabric cutting process in apparel industry
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Fabric Cutting Cost Calculation Method in Apparel Manufacturing Factory:

Calculate the cutting cost and rate per apparel from the following chart:

SL No.
Parameters
Quantity and Cost
01
Order quantity
10000pcs
02
Number of cutting master
5
03
Wage of cutting master
Rs. 200 per shift
04
Production per shift
2000 apparel
05
1 day
2 shifts (1 shift= 8hrs)
06
1 bundle
100pcs
07
1 bundle
1 tag
08
1 apparel
5 parts
09
1 part
1 sticker (1 bundle= 1 part)
10
Tag price
Rs. 0.50
11
Sticker price
Rs. 10 per 100 stickers
12
1 day
2 shifts
13
Power
Rs. 5000 per month
14
Salary
Rs. 50000 per month
15
Rent
Rs. 10000 per month
16
Other expenses
Rs. 15000 per month
17
Profit
15%
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