How to Calculate Garments Cost of Manufacturing (CM)

The Cost of Manufacturing (CM) is one of the most critical aspects of garment pricing in the textile industry. It includes labor, overheads, and other direct costs involved in producing a garment. Accurate calculation of CM ensures competitive pricing, profitability, and effective cost control. Here's how to calculate the CM for knit garments.

 

What is the Cost of Manufacturing (CM)?

The CM refers to the total cost incurred during the manufacturing of garments. It includes:

• Direct Labor Cost: Salaries or wages of workers.
• Factory Overheads: Utilities, rent, depreciation, etc.
• Machine Costs: Maintenance and operational costs of machinery.

CM excludes the cost of raw materials like fabric, trims, and accessories.

 

Factors Affecting CM

1. Order Quantity: Higher quantities usually reduce the CM due to economies of scale.
2. Style Complexity: Designs with intricate patterns or additional processes (e.g., printing, embroidery) have higher CM.
3. Production Efficiency: Efficient factories with lower wastage have lower CM.
4. Country of Manufacturing: Labor and operational costs vary by country.

 

Knit Garments CM Calculation Formula

To calculate the CM for knit garments, follow this formula:

CM per Piece = (Total Factory Cost per Month ÷ Total Produced Minutes per Month) × Average Garment SAM × Mark-Up Factor

 

Breaking Down the Formula

1. Total Factory Cost per Month:
   Includes all monthly expenses such as wages, utilities, rent, and other overheads.

Example:

• Worker Salaries = $30,000
• Utilities = $5,000
• Rent = $3,000
• Other Expenses = $2,000
  Total Factory Cost = $40,000
1. Total Produced Minutes per Month:
   Total minutes produced in a month by all workers.

Formula:
Total Produced Minutes = Total Workforce × Working Hours per Day × Working Days × Efficiency (%)

Example:

• Workforce = 100 workers
• Working Hours per Day = 8 hours
• Working Days = 25 days
• Efficiency = 80%
  Total Produced Minutes = 100 × 8 × 25 × 0.8 × 60 = 960,000 minutes
2. Average Garment SAM (Standard Allowed Minute):
   The SAM is the time taken to complete a garment.

Example:
If a knit t-shirt has a SAM of 10 minutes, this value will be used in the formula.

4. Mark-Up Factor:
   Factories apply a mark-up factor (e.g., 1.2 or 1.5) to account for profit margins.

 

Example Calculation

Given Data:

• Total Factory Cost: $40,000
• Total Produced Minutes: 960,000 minutes
• Garment SAM: 10 minutes
• Mark-Up Factor: 1.2

Step-by-Step Calculation:

1. CM per Minute:
   CM per Minute = Total Factory Cost ÷ Total Produced Minutes
   CM per Minute = $40,000 ÷ 960,000 = $0.0417
2. CM per Piece:
   CM per Piece = CM per Minute × SAM × Mark-Up Factor
   CM per Piece = $0.0417 × 10 × 1.2 = $0.50

Thus, the CM for a knit t-shirt is $0.50 per piece.

 

Additional Tips

• Adjust for Seasonal Fluctuations: Account for changes in factory utilization and costs during peak or low seasons.
• Monitor Efficiency: Regularly improve efficiency to reduce CM.
• Style-Based CM: Use different SAM values for varying garment styles to ensure accurate costing.

 

Conclusion

Accurate calculation of the Cost of Manufacturing (CM) is vital for pricing and profitability in the knit garment industry. By using the provided formula and considering all relevant factors, manufacturers can effectively determine their costs and remain competitive in the market.

For more insights into garment manufacturing and textile processes, visit Learn Easy Textile.