I.

Objectives
Outline the elements of a basic cost sheet of a garment.
Describe cost plus method of pricing the garments.
Prepare final Absorption Costing chart, Marginal Costing chart and Activity
Based Costing chart.

II. Garment Costing

According to ICMA London, Cost Accounting is that part of Management
Accounting which establishes budgets and standard costs, and actual cost of
operations, processes, departments or products and the analysis of
variances, profitability and social use of funds.
Cost Accounting is the classifying, recording and appropriate allocation of
expenditure for the determination of the costs of products or services and for
the presentation of suitably arranged data for purposes of control and
guidance of management.

Apparel costing is used for a number of reasons, including for: Classification

and sub-divisions of Costs, Control of Materials, Labour and Overhead Costs,
and for Business Policies. It helps the management to take decisions. It helps
to create an expansion strategy. Ensures Optimum Profitability, and Helps the
management to take suitable steps to meet seasonal variations in volume
and costs. etc.

Apparel costing is useful for Budgeting and for setting standards for
Measuring Efficiencies. It allows the best use of limited resources and is an
instrument of Management Control. It helps in Cost Audit, and Price
Determination. It ascertains the cost per unit of different products
manufactured and provides a correct analysis of cost both by process and
operations. It discloses sources of wastages and acts as a guide to price
fixation of products manufactured. It ascertains the profitability of each
product that is manufactured and exercises effective control of stocks of raw
materials at various stages. Implements cost control systems. It guides the
management in the formulation and implementation of incentive bonus plans
and helps in preparation of budgets and also helps in implementation of
budgetary control.
III. Elements of Costs
There are three main elements of costs. They are: Materials, Labour and
other expenses. Materials can be either direct material or indirect material.
Labour can be direct or indirect. Other expenses can be direct or indirect.
All Indirect Expenses give rise to Overhead expenses.
This includes: Production or Works overheads, administration overhead,
selling overhead, distribution overhead, research and development
overhead.

1. Direct Materials
Direct materials include: All raw materials, materials specifically purchased,
parts or components purchased or produced, and primary packing materials.

2. Direct Labour
Direct labour includes: Labour engaged on the actual production, labour
engaged in aiding the manufacture, and specially required for production. For
example, Inspectors.

3. Overhead
Overhead is the aggregate cost of indirect materials, indirect materials.

4. Division of Costs
Here are some ways that costs can be divided.
1. Prime Cost = Direct Materials + Direct Labours + Direct Expenses.
2. Works or Factory Cost = Prime Cost + Works or Factory Overheads.
3. Cost of Production = Works Cost + Administration Overheads.
4. Total Cost / Cost of Sales = Cost of Production + Selling Overhead +
Distribution Overhead.

IV. Cost Classifications

Costs can be classified: By nature or elements or analytics, by functions, as
direct or indirect cost, by variability, controllability, normality, time,
according to planning and control and for managerial costs.
1. By Nature, Elements or Analytics
Costs can be classified by Nature, Elements or Analytical classification: This
includes Material, labour and expenses.

2. By Functions
Cost can be classified by functions. Either by: Manufacturing and Production
Cost, or by Commercial Cost. This includes: (1) Administrative Cost. (2)
Selling and Distribution Cost and (3) Research and Development Cost.

3. As Direct or Indirect Cost

Costs can be classified as Direct and Indirect Costs.

4. By Variability
Costs can be classified by variability, such as: Fixed or Period Cost, Variable
or Product Cost and Semi-variability Cost.

5. By Controllability
Costs can be classified by controllability. These are: Controllable costs and
Uncontrollable costs.

6. By Normality
Costs can be classified by normality. These are: Normal costs and Abnormal
costs.

7. By Time
Costs can be classified on the basis of time. These are: Historical costs and
predetermined costs.

8. According to Planning and Control

Costs can be classified according to planning and control. This includes:
Budgeted costs and Standard costs.

9. For Managerial Costs

Costs can be classified for managerial purposes. This includes: Marginal
costs, opportunity costs, replacement costs, avoidable and unavoidable cost.
Cost is a measurement, in monetary terms, of the amount of resources used
for some purpose. According to the American Accounting Association - Cost is
the foregoing, in monetary terms, incurred or potentially to be incurred in the
realisation of the objective of management which may be manufacturing of a
product or rendering of services.
Fixed or period costs are those costs which remain fixed in total amount, with
increase or decrease in the volume of output for a given point of time.
Fixed Cost per unit decreases as production increases, and increases as
production declines.
Variable or product costs are those costs, which vary in total in direct
proportion to the volume of output. These costs per unit remain relatively
constant with changes in production.
Semi-Variable costs are the costs which are partly fixed and partly variable.
Marginal cost is the total of variable costs that is prime cost plus variable
overhead. Extra cost incurred to manufacture one extra unit of production.
Average Cost = Total Cost / Number of Units Produced
 V. Methods of Costing
1. Job Costing:
Costs are collected and accumulated for each job, work order or project
separately to analyse the cost according to each job.
2. Contract Costing:
When the job is big and spread over long periods of time a separate account
is kept for each individual contract.
3. Batch Costing:
A Batch may represent a number of small orders passed through the factory
in batch. Each batch is treated as an unit of cost and separately costed. It is
an extension of job costing.
4. Process Costing:
A separate account is opened for each process to which all expenditures
incurred thereon are charged so that cost per unit at each process can be
ascertained.
5. Unit Costing:
Here the cost per unit of output and the cost of each item is ascertained. The
manufacture is continuous and units are identical.
6. Operating Costing:
It is used to ascertain the cost of services rendered. Example: Transport
undertakings.
7. Operation Costing:
This takes into consideration the rejections in each operations for calculating
input units and cost. It refers to conversion cost from raw material to finished
products.
8. Multiple Costing:
It represents the application of more than one method of costing in respect
to the same product.

VI. Techniques of Costing

 These are: Uniform costing, Marginal costing, Standard costing, Historical
costing, and Direct costing.
1. Uniform Costing
It is the use of same costing principles and / or practices by several
undertakings for common control or comparison of costs.
2. Marginal Costing
It is the ascertainment of marginal cost by differentiating between fixed and
variable cost. It is used to ascertain the effect of changes in volume or type
of output on profit.
3. Standard Costing:
A comparison is made of the actual cost with a pre-arranged standard and
the cost. The cost of any deviation (called variances) is analysed by causes.
4. Historical Costing:
It is ascertainment of costs after they have been incurred i.e. costs actually
incurred on work done in the past.
5. Direct Costing:
It is the practice of charging all direct costs, variable and some fixed costs
relating to operations leaving all other costs to be written off against profits
in which they arise.
6. Cost Sheet / Statement of Cost
The particulars of the cost sheet includes, Direct materials, direct labour and
direct expenses. The Prime costs are the work overheads. The work cost is
the administrative overheads. The cost of production is the selling and
distribution of overheads. The total cost as well as the cost per unit for each
of these should be calculated. There is no prescribed format for a cost sheet.
It may vary from industry to industry. Here is a specimen format of a cost
sheet. Remember a cost sheet is a statement, which shows the various
components of total cost of a particular product. A cost sheet is prepared on
the basis of: Historical cost and Estimated cost.

VII. Composition of Cost of Garment

In continuation of the other functions, a Production merchandiser is also
required to do the costing of the product. The costing is done by keeping in
mind the cost of the various raw materials, operating cost of the company,
the competition and expected profit of the organization. At the same time, it
is necessary to keep in mind the buyers costing expectations.
The cost of a garment depends on these components: Fabric, trims, cut Make
and Trim charges, value added services: printing, embroidery, washing,
appliqu, testing of the garment, quality, transportation and logistics cost,
profit of the manufacturing organization.
All these components of garment cost depend upon certain parameters
which drastically affects above cost parameters. These parameters play a
vital role when the production merchandiser does the costing of garment; as
these parameters are very dynamic and keep fluctuating frequently. The
parameters that affect the garment cost mostly are; Unit of Measurement,
MOQ, Incoterm decided between raw material vendor and garment
manufacturer, order quantity, etc.

Fabric
Fabric is generally the most significant factor in costing of garment. Fabric
accounts for 60 to 70% of the total cost of basic-styled garments. In many
cases, evaluating the quality and the quantity of fabric consumed in the
garment indicates better than any other factor, the cost of producing it. The
cost of fabric depends upon the type of fabric that is going to be utilised in
the garment.
The types of fabrics are: Woven / knitted fabric, power loom /automatic loom
fabric, fibre / yarn / fabric dyed fabric, fibre content of fabric, such as cotton,
wool, polyester, silk, blended fabric etc., type of dyeing and finish used,
gram per square meter / weight of fabric, type of yarn used, such as ring
spun, open ended, or carded / combed etc.
Parameters that Affect the Fabric Cost
They are: Unit of measurement (UOM), fabric Minimum order quantity (MOQ),
order quantity, Incoterm used.
The unit of Measurement (UOM) is a quantity used as a standard of
measurement. The Unit of Measurement for woven fabric is normally in
meters or yard, while knitted fabric measured in Kilograms or some time it is
in yards also. The merchandiser should aware of unit of measurements while
finding out the cost of fabric. Sometimes a buyer specifies the UOM of fabric.

Minimum Order Quantity

Fabric Minimum Order Quantity (MOQ) is nothing, but the smallest quantity
of a product that a fabric manufacturer can supply. The MOQ depends on the
type of fabric and on capacity of vendor. The MOQ plays an important role
while ordering the fabric, as it directly affects the cost of garment.
If the order of fabric is below the estimated MOQ, then the vendor charges
more cost as compared to regular charges. Merchandisers need to keep the
MOQ in mind, while doing the costing of small quantity orders.
The cost of fabric may vary with the order quantity. The more the order
quantity, the cost of fabric can be optimised till a certain level. But again,
this depends on the type of fabric required, and fabric manufacturer capacity
along with negotiations between fabric buyer and supplier.

Incoterm Used
Incoterm used is a factor that makes a huge difference in fabric cost. While
importing the fabric from another country, a merchandiser needs to deal with
the supplier for delivery of the fabric on the basis of incoterms like EXW,
FOB, CIF, DDP etc., based on which it will be decided, as to who will bear the
cost of transportation and risk.
No matter which incoterm is used, all the cost needs to be charged to buyer.
If the fabric is purchased by using EXW incoterm, then the merchandiser
needs to add the transportation cost along with the custom clearance
charges and the price of fabric while calculating the garment cost.

Calculating the Cost of Fabric

The cost of fabric can be calculated by the following way:
Yarn cost + fabric manufacturing cost (knitting or woven) + dyeing
cost + finishing cost = total fabric manufacturing cost
Dyeing cost indicates that if the fabric is yarn dyed or fibre dyed or piece
dyed, the respective cost will be added depending upon the fabric type. The
Finishing cost includes heat setting cost, normal finishing, compacting
(knitted fabric) etc.,

Cost Calculation of Fabric in a Garment

Considering the knitted fabric and t-shirt as an end product, then fabric
consumption can be calculated as:
Fabric consumption in kg:
Fabric Length = Inseam + (Front rise + back rise)/2
= 125.5 cm
Fabric Width = Thigh * 2
= 147 cm

Total Fabric Consumption = 12 * (Length * Width * GSM)/107

= 12 * (125 * 147 * 193)/107
= 0.3546 * 12
= 4.255 kgs/dozen

These methods are used to calculate the fabric consumption roughly at

sampling stage by merchandiser. These formulas will give approximate
calculation for pre-costing stage of the garment. Sometimes fabric
consumption is also done by forming the miniature marker by CAD
department. These are the constraints of fabric consumption: Fabric cutting
width, repeat size, pattern type to be informed to the CAD along with buyer
tech-pack in order to calculate exact width and consumption.

The marker efficiency considered 80-85% depending upon the fabric type i.e.
solid dyed, stripe, checks fabric. Efficiency can be changed depending upon
the fabric parameters, matching parameters of the buyer, type of style.

The buffer in the consumption should be added to the fabric by

merchandiser, generally it is 0.03-0.08% of total fabric consumption. In case
of trim fabric i.e. interlining the 10-20% more buffers is kept while ordering
the interlining, in order to maintain the inventory and to avoid the shortage
during the production and fabric wastage percentages, to be added also,
while calculating the fabric consumption. Considerable wastage depends on
factory practices, type of fabric and type of garment.

Trims
Trims include all materials other than fabric used in the garment. For
example, most garments have accessories such as threads, buttons, zippers,
labels, elastics and miscellaneous items. Quality and quantity of trim and
labour required to apply it on garment are directly related to cost of garment.
The different trims have different UOM; even same trim can have 2-3
different UOMs that can be summarised as:
UOM of Trims Used in UOM
Garments Trims
Thread 6000 meter tube,
Meter Cone
Labels Unit
Zippers Unit

Apparel costing in the garment making process is one of the most complex
procedures. There are lot things that go into pricing a single piece of
clothing. Purchasing of raw materials, cost of dyeing, knitting, printing,
transport cost, packaging, banking charges, overheads and cost of trims and
accessories used all are included in it. The merchandiser and the top
management of a company are actively involved in deciding the cost of a
garment.

The garment industry follows different

Fig 1: Process of apparel
techniques to determine the cost. However, costing
broadly the following things are taken into
consideration: type of fabric, trims used,
garment testing, cost of logistics, profit of the
organization, and value added services (printing, embroidery, washing).
There are other details that go into calculating the cost of a garment like unit
of measurement, quantity of the order, and type of dyeing and finishes used.

Fabric consumption

Once the sample is approved and a pattern is developed, the amount of

fabric required per unit is calculated. The fabric cost constitutes 60 to 70
percent of the total garment making cost. The fibre content, spinning process
used, fabric GSM (Gram Square Meter), and the percentage of shrinkage and
wastage in the fabric are also determined while deriving the cost. The
consumption for knitted garments is determined in kilograms while for woven
it is determined in yards. Two popular systems used for the calculation of
amount of fabric required per garment are mathematical and marker
planning systems.

The mathematical system provides a rough estimate to the manufacturer

and is generally used in the sampling stage of production. The consumption
of fabric for producing a certain style of garment is calculated by measuring
the length and the width of each and every piece of the garment pattern.
Either by using software like Computer Aided Design (CAD) and Computer
Aided Manufacturing (CAM) or manually the marker planning can be done.

Weaving or knitting cost

For knitted garments, the Gram Square Meter (GSM) of the fabric plays a
vital role in costing. The type of machines, fabrics & blends, and
configurations used for knitting the fabric of the garment affects the price of
making. Similarly for woven apparels, the Ends per Inch (EPI) are taken into
account. The bigger the beaming length, the lesser will be the cost of
weaving. Hence, the beam size can increase or decrease the cost of making
a garment. The kinds of weave like twill, satin, and plain and the sort of
machineries used for the particular garment influence the weaving cost.
Dyeing cost

The use of a particular kind of dye and a certain shade of color impacts the
dyeing cost of a garment. For example dyeing a fabric in lighter shades costs
less and VAT dyes are costlier than reactive ones. Dyeing of specific colors
like red and turquoise cost more than basic colors like black and white.

Cost of Trims and accessories

Besides the fabrics, trims and accessories used to make the complete
garment such as zippers, buttons, sewing threads, embellishments, care
labels, elastics, and cartons add up to the cost. Threads used in a garment
depend on the kind of seam used in it. There are various ways to measure
the amount of thread being used. At times, the amount of thread used is
calculated at the sample making stage itself. The weight of the thread cone
is measured before and after using the quantity, and the difference is
calculated to identify the amount actually consumed. The size, shape, and
material used in trims like zippers, buttons, and labels also sums up the cost
of making a garment.

Value added services

Out of the ordinary processes carried out by the manufacturer like washing,
printing, and embroidery for the order of a particular buyer. Wet processing
chemicals consist of bleaching, softening, and neutralizing processes. Unique
and advanced finishes for fabrics can increase the cost of making a garment.

The above costs combine to determine the garment costing in an

organization. However, every company has their own method of deriving the
cost of making a garment. The following are the different methods of costing
incorporated in the textile industry:

Marginal costing:
Marginal costs are variable costs consisting of labor and material costs, plus
an estimated portion of fixed costs (such as administration overheads and
selling expenses). In companies where average costs are fairly constant,
marginal cost is usually equal to average cost. However, in industries that
require heavy capital investment (automobile plants, airlines, mines) and
have high average costs, it is comparatively very low.

The concept of marginal cost is critically important in resource allocation

because, for optimum results, management must concentrate its resources
where the excess of marginal revenue over the marginal cost is maximum.
Also called choice cost, differential cost, or incremental cost.

2. Activity based costing:

Cost accounting approach concerned with matching costs with activities
(called cost drivers) that cause those costs. It is a more sophisticated kind of
absorption-costing and replaces labor based costing system. ABC states that
(1) products consume activities, (2) it is the activities (and not the products)
that consume resources, (3) activities are the cost drivers, and (4) that
activities are not necessarily based on the volume of production. Instead of
allocating costs to cost centers (such as manufacturing, marketing, finance),
ABC allocates direct and indirect costs to activities such as processing an
order, attending to a customer complaint, or setting up a machine.
A subset of activity based management (ABM), it enables management to
better understand (a) how and where the firm makes a profit, (b) indicates
where money is being spent and (c) which areas have the greatest potential
for cost reduction. Developed by professors Robert Kaplan and Robin Cooper
of Harvard University in late 1980's.

Advantages of ABC system

ABC system besides providing more accurate basis for calculating product
costs has other benefits too, i.e., it serves as a mechanism for managing
costs. It is in this area of cost management and resource planning ABC has
the greatest potential. Its benefits may be summarized as under:
1. Measurement of performance: This is done by identifying responsibility
or accountability for cost behavior.
2. Price fixation: This is done by identifying the true cost of product or
services.
3. Product Promotion: This is done by analyzing profit contribution and
impact of inter relationship of product or service.
4. Customer profitability: It helps to know which customers yield more
profit. This is done by identifying the cost or profitability of type of
customer.
5. Choosing channel of distribution: This is done by analyzing the cost
and performance of alternative distribution channels.

3. Absorption costing:
 A method of costing a product in which all fixed and variable costs are
apportioned to cost centers where they are accounted for using absorption
rates. This method ensures that all incurred costs are recovered from the
selling price of a good or service. Also called full absorption costing. See also
direct costing, marginal costing.

Hence garment or apparel costing is an important tool for cutting costs,

avoiding wastages, and making optimum utilization of the available raw
material and resources. Using an appropriate method of garment costing can
help in developing a better quality of style for buyers and provide clarity to
the process of manufacturing too.

Garment description- Van Heusen Mens Formal trouser

(a) Label: Label is a tag that gives a description of the performance
an inherent in a fabric for the purpose of aiding the consumer in
selection. A label is a part of garments which indicates the various
instructions about garments. Label is attached with garments by swing.
There are following types of label are available-

Types of Label:
1. Main Label: Contains buyer name or brand name.
2. Size Label: Contains garments size.
3. Care Label: Provides information about washing, ironing, drying
etc.
4. Integrated Label: Contains main label, care label, and size
label in a combination.
 Fig 3: Main label: Contain brand
name or buyer name

Fig 4: Size label: Contained

garments size
Care label: It is attach at the side of garments & contain following three
information-
Composition
Care code or symbol
Country of origin
 Fig 5: Care label/wash label

Trims:

Zipper: A fastening device operating by means of two parallel rows of metal

or plastic teeth on either side of a closure that are interlocked by a sliding
tab is called zipper. These are used in industrial clothing, typical apparel
garments as a closure in pants, skirt & dresses. Basically it is the part of
chain. The physical part of the zipper are shown in the following figure-
 Fig 6: Zipper

Basic Part of Zipper:

1. Zipper Tape: Zipper tape is the woven fabric made by nylon or

polyester or bland fiber. It is treated as critical part of zipper because it
should be DTM. It is attach by swing with garments.
2. Teeth: It is made of brass, aluminum or plastic or nylon. Zipper is
opened & closed by these teeth.
3. Slider: It is used to open & close the zipper teeth.
4. Stopper: It controls the slider run out of the zipper.

Hook and bar or hook and loop: Contain 4 parts

 Fig 7: Hook & Bar

Button: Button is a knob or disc which can be attached to the garments as a

means of fastening or ornamentation. Button is an essential trim which is
attached with garments as functional or decorative purpose. Button can be
made from different types of materials. Mostly use metal & plastic.

The size of button is express as ligne where 1Ligne = 0.635m. At 1st button
diameter is measure through slide calipers & converted in to ligne.
According to the number of hole button can be classified as two types-
Accessories and Packaging:

Carton: Number of ply indicates the quality of a carton. There are

3 ply carton
5 ply carton
7 ply carton
9 ply carton etc.

Fig 8: Cartons for packaging

Poly Bag: There are two types- Individual & Blister.

1. Individual- one garment/bag
2. Blister- more than 1 to 100 garments/bag
 Fig 9: Polybags for packaging
Tags: Price tag

Fig 10: A woman shopping for

Price tag is something that indicates the price being charged for an item.

a. An example of price tag is a sticker saying that a shirt costs

$10.99.
b. Something that is not for sale for any amount of money (like
love) is an example of an item on which you cannot put a price tag.
 Fig 11: Price tags

Cost of components of Trouser

Particulars Unit Unit Cost Total
(meter or meter2) (quanti per (INR)
ty) unit
(INR)
1. Main Fabric 1.4*1.47 122 per 252
(81% m2
Terylene;
19% Rayon)
2. Lining Fabric
i. Normal Lining
(Cotton- 2.05 99 203
Polyester
Blend)
ii. Pattern Lining 0.03*1 82 2.46
(100%
Polyester)
iii. Seam Lining 0.0588 79 4.645
 (100%
Polyester)
Total 210.10
5
3. Trims
i. Buttons 4 7 28
15 mm
5/8 Inch
24 Ligne
ii. Hook & Bar 1 7 7
iii. Main Label 1 1.8 1.8
iv. Size Label 1 1.0 1.0
v. Care Label 1 0.5 0.5
vi. Zipper 1 9.5 9.5
Total 47.8
4. Thread
Consumption
(100%
Polyester) [(1.14*4)+(0.92*4)]* 1.11
i. 3-thread 14
overlock = 115.36
(1 cm = 58 per
14 cm roll
thread) 0.4
ii. Chain [(1.14*2)+(0.92*2)]*
Stitch 4
(1 cm = 4 = 40.48
cm 1.66
thread)
iii. Lock [2.5(38*2+46*2+72*
Stitch 2
(1 cm = +100+20+40+18)/1
 2.5 cm 00]
thread) +40.48+115.36
= 171.79
Total 3.17
5. Fusing
Material (20*6)+(4.5*20)=210 4.9/m 10.29
i. Fly (Micro Fibre) /100
ii. Waist Band = 2.1
(Macro Fibre) 93*3.8 = 353.4/100 10/m
= 3.534 Width = 35.54
0.75m

Total 45.83
6. Packaging
i. Plastic Bag 1 5 5
ii. Carton
a. Inner 1 9 9
b. Oute 1 80 6.6
r (12
trousers
1 ) 0.5
iii. Tags 0.5
Total 21.1

Cost of Labour
Particulars Estimated Level of Cost/min or Cost/piece
SAM Skill unit
1. Inspection 0.28 Skilled 3.5 1
2. Spreading 0.2 Skilled 3.5 0.7
& Marking
3. CMT 0.1 Skilled 3.5 0.35
4. Sewing 22.3 Skilled 3.5 78.05
5. Finishing 0.5 Skilled 3.5 1.75
Total 82.2
Overheads Apportionment per piece
Particulars Basis of Unit Cost/unit Tota
Apportionme l
nt
Factory Overheads
1. Indirect Material
i. Consumable Number 10 0.5 5
ii. Oil
grease/lubrica Millilitres 2 0.5 1
nts
2. Indirect Labour 50 3000/12480 12
i. Wages No. of min
ii. Managers Employees
Salary
3. Indirect Expenses
i. Factory Rent 200*20 50000 1.25
and taxes Floor Space 0
(m2) 100000*5%
ii. Depreciation / 5
iii. Lighting Cost of 5% 1000
Machine 100 100000 0.25
12480
Light Points
Total 24.5

Absorption Costing
Particulars Amount Total
(INR) (INR)
1. Direct Material
i. Fabric 252.00
ii. Lining Fabric 210.11
iii. Trims 47.8
 iv. Thread
Consumption 171.79
v. Fusing Material 45.63
A. Material
Consumed 727.33
2. Direct Labour
Inspection 1.00
Spreading & Marking 0.70
Cutting
Sewing 0.35
Finishing 78.05
1.75 82.2
3. Direct Expenses
i. Packaging 21.1 21.1
Costs
B. Prime Cost
(1 + 2 +3) 830.63
4. Factory Overheads 24.5
C. Works Costs 855.13
5. Office and
Administrative 12
Overheads
C. Office and
Administrative
Costs 867.13
(A + B + C)
4. Selling and
Distribution 15
Overheads
D. Total cost of
Sales 882.13
(A + B + C)
E. Profit (140%) 1234.982
F. Sales
 (D + E) 2117.112

Marginal Costing
Particulars Amount Total
(INR) (INR)
A. Sales 2117.112
B. Variable Cost
Direct Material
i. Fabric 252.00
ii. Lining Fabric 210.11
iii. Trims 47.8
iv. Thread
Consumption 171.79
v. Fusing Material 45.63 727.33
Direct Labour
Inspection 1.00
Spreading & Marking 0.70
Cutting
Sewing 0.35
Finishing 78.05
1.75 82.2
Direct Expenses
ii. Packaging 21.1 21.1
Costs
Selling and Distribution
Expenses 15
C. Contribution 1271.382
(A - B)
D. Fixed Costs
 Factory 24.5
Overheads
E. Profit 1246.882
 Activity based costing
Activity Cost driver Cost driver Resource used by
base rate(Rs.) one unit
Factory floor Foot2 - 1.25
space
Electricity Kilowatt - 0.25
Water Gallons - 0.10
Quality control Units inspected 8000/8000p 1
cs.
Packaging - Number of 9 9
inner products
Packaging - Boxes 80 (12 6.6
outer trouser)

Activity Cost Total Rate per

transaction transaction(Rs)
Machine setup 5,000/month 417 12
Quality 10 1
inspection
Machine hour 33.47
worked
Material 0.5
recipients
Total 47
General Ledger

Payroll taxes 1,000*64=640 DIRECT COST=PAYROLL

00 TAX+FRINGE
BENEFITS+UNEMPLOYMENT
INSURANCE=288000
Machine 500*64=32000 PURCHASE ODER
maintenance COST=MACHINEMAINTAINANCE+E
QUIP.
DEPRICIATION+ELECTRICITY=1600
00
Purchasing Dept. 4,000*64=256 PURCHASING DEPT
labor 000 SUPPLY+LABOUR COST=272000
Fringe benefits 2,000*64=128
000
Purchasing Dept. 250*64=16000
Supplies
Equipment 750*64=48000
depreciation
Electricity 1,250*64=800
00
Unemployment 1,500*64=960
insurance 00
TOTAL 720000/12480=57.7