How to Calculate Raw Material Cost for Garments?

Material Cost is the major cost component of garment manufacturing costs. A correct cost calculation method will give you a better projection of garment cost for a style.

In this article how to calculate direct materials cost have been explained in details. Raw materials required for making a garment is sourced from suppliers. Main materials are like fabric, labels, sewing thread, hang tags, trims etc. So to have correct material cost you must have price knowledge of each item.

Steps used for material costing estimation are –

1. Preparation of material requirement sheet
2. Material price listing
3. Preparation of material cost sheet

1. Prepare material requirement sheet

List down all items required and calculate consumption per unit for all materials to be used in garments.

For example, assume that you are going to calculate the material cost for a polo shirt. To make polo you need knitted fabric – Single jersey/pique, cuff and collar rib. Sourcing of knitted fabric can be done three ways

-          You can directly purchase dyed fabric or

-          You can source yarn, knit fabric, and process the knitted fabric as per your requirement or

-          Purchase dyed yarn and knit.

Let you will purchase yarn and get knitting and dyeing processes done by job workers. To go through this process collect the pricing list of different types of yarn (or at least for the yarn that you will purchase for your product), knitting cost, knitting loss%, dyeing cost per kg and process loss% from suppliers.

 Bill of Material sheet is used for the material requirement.  

2. Material Price listing 

Collect material price quote for all the material you need to purchase from different vendors. Prepare the database for the current market price of raw materials.

For example here is one Price List

Yarn: The costs for different yarns are –

20s Combed – Rs.105/kg

30s Combed – Rs. 115/kg

50s Combed – Rs.140-145/kg

2/60s Combed – Rs.200/Kg

2/60s dyed yarn – Rs.420/Kg dark shade

Knitting cost:

For Single Jersey – Rs.15/kg

For Rib                 - Rs.18/kg

For Interlock        - Rs. 30-35/kg

Knitting loss: 2%

Dyeing cost: Rs. 80/kg for dark shades

Process loss (Dyeing): 6%

Fabric cost: Ready to use fabric cost is calculated using basic calculation as shown in the following table. Cost of the knits fabric is represented in price per Kg.

	Shell Fabric	Collar/Cuff
Fabric Description	2/60s single jersey	2/60s rib
Yarn cost (Rs.)	200.00	200.00
Knitting cost (Rs.)	18.00	20.00
Knitting loss (2%)	4.36	4.40
Processing cost (Dyeing) (Rs.)	80.00	80.00
Processing loss (6%) (Rs.)	18.14	18.26
Cost per Kg	Rs. 320.50	Rs. 322.66

  

Fabric Consumption: Next step is to find the requirement of fabric for the polo. Suppose for this polo shirt you need shell fabric 0.32 Kg and Ribs for cuff and collar 0.080 Kg.

Read how to calculate fabric consumption for a knitted garment to know fabric consumption calculation.

3. Prepare material Cost Sheet 

Once you find fabric cost and fabric consumption prepare material cost sheet including all other material required to make a garment ready for sale. An example of material cost sheet has been shown below.

	Items	Consumption	UOM*	Rate (Rs.)	Amount (Rs.)	Remarks
1	2/60s single jersey	0.32	KGs	320.5	102.56
2	Cuff and collar ribs	0.08	KGs	322.66	25.81
3	Sewing thread	159	Meters		4	approx.
4	Buttons	3	Gross		2	approx.
5	Main label	1	Unit		1	approx.
6	Care label	1	Unit		1	approx.
7	Hang Tags	1	Unit		3	approx.
8	Price Tags	1	Unit		2	approx.
9	Polybags	1	Unit		1	approx.
10	Kimble	1	Unit		0.5	approx.
	Total Cost				142.87

*UOM - Unit of measure 

So, Total fabric cost is Rs. 128.37 and including other material costs total cost of the material for making this Polo Rs. 142.87

Now for each item merchants generally purchase an extra quantity of inventory (from 2% to 7%) as a buffer. This excess cost due to the extra purchase of material is added to the garment costing.