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Friday, November 16, 2012

Garments -- How to calculate the CM (Cost of Making) of a Garments?



Please consider the below points first:

Monthly Total Expenditure of the Factory (MTE): Suppose – BDT. 5,000,000.00
This expenditure is included of the below items:
a)      Factory Rent,
b)      Commercial Cost,
c)       Electricity Bill,
d)      Water Bill,
e)      Transportation cost,
f)       Worker and Staff wages (8 hours/day – WHD),
g)      Miscellaneous cost, etc.

* Number of Running Machine of the factory (NRMof the following month (which total expenditure need to be considered here). Suppose – 100 machines.
* Number of machine to complete the layout (NMLfor the relevant item. Suppose – 25 machines.
* Hourly Production Target/Capacity (PCHof the relevant item, excluding alter & reject. Suppose – 200 pcs.
* Total working day (TWDof the relevant month. Suppose – 26 days.
* If the CM needs to be converted in US$ , then conversion rate (CR) would be 1 US$ = BDT. 75.00

The Formula of Cost of Making:

CM = [{(MTE / TWD) / (NRM / NML)} / (PCH x WHD)] x 12 / CR)}

The Calculation will be as below:
CM = [{(5,000,000.00 / 26) / (100 / 25)} / (200 x 8)] x 12 / 75
CM = US$ 4.81 / Dz

MTE
(in BDT.)
TWD
(Days)
NRM
(unit)
NML
(unit)
PCH
(pcs)
WHD
(hours)
Dozen
(pcs)
CR
(BDT.)
CM/Dz
(in US$)
5,000,000.00
26
100
25
200
8
12
75
$4.81

But after starting the new salary scale in Bangladesh, the CM might be calculated by considering the overhead sewing machine cost as below:

* For a Non-compliance Factory:
To be considered the overhead sewing machine cost (OSMC) @BDT. 1,400 to 1,600.00 per day.

* For a Compliance Factory:
To be considered the overhead sewing machine cost (OSMC) @BDT. 2,000 to 2,400.00 per day.

So, if any factory produces any item 200 x 8 = 1,600 pcs per day by using 25 machines, then the CM will be as below:

For a Non-compliance Factory:
  CM = {(OSMC x 25 / 1,600) x 12} / 75
  CM = {(1,600 x 25 / 1,600) x 12} / 75 = US$ 4.00/Dz
     
        * For a Compliance Factory:
  CM = {(OSMC x 25 / 1,600) x 12} / 75
  CM = {(2,400 x 25 / 1,600) x 12} / 75 = US$ 6.00/Dz


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