# How to Calculate Fabric Cutting Cost in Garments Industry : Simple Way With 2 Example

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## Introduction

This article will show you how to calculate fabric cutting cost in garments industry. The fabric cutting process is the most important component in the readymade apparel industry. The apparel will be ready to wear when all the fabric components are sewed together. So, it is important for all merchandiser in garments industry how to find out fabric cutting cost. Before going to fabric cutting cost calculation, let’s see flow chart of fabric cutting department at a glance.

## Flow Chart of Fabric Cutting Department

In fabric cutting department of an apparel industry, flowing the general of flow chart of fabric cutting.

• Step 1: Relaxing of the fabric.
• Step 2: Marker planning.
• Step 3: Spreading and marker making.
• Step 4: Cutting
• step 5: Bundling and sticking sticker in the pieces.

These are the 5 steps that is followed by an apparel industry in their fabric cutting department.

## Factor Effect on Fabric Cutting Cost Calculation

The merchandiser has to take into consider the various raw materials used in each stage of the manufacturing process as well as the labour involved in the process when calculate fabric cutting cost at fabric cutting department in the garment industry. Furthermore, there are a few other technical parameters listed here that directly influence fabric cutting department costs.

1. Ply direction: The fabric type determines the direction of plies. It has a direct impact on the number of plies and spreads. So, it is important to consider ply direction when calculate fabric cutting cost
2. Marker planning: In order to ensure maximum fabric utilization, the marker planning may suggest few changes in the spreading length wide and number of plies, which directly affect the fabric cutting cost.
3. Type of cutting machine used: The cost factor will vary based on the type of machine, whether it is a straight knife, a band knit machine or a computer controlled cutting machine. In contrast to manual and other machines, computer controlled cutting machines complete the process in a shorter amount of time. However, there is a slight increase in operating costs and labour costs.
4. Number of plies used per spread: By increasing the number of plies per spread, the operating time will be reduced and the process cost will be reduced. So, it is essential to consider when making fabric cutting cost.
5. Fabric types: The number of layers, spreading methods and direction are depend on the thickness, fibers used in fabric. So, fabric types can be influence the fabric cutting cost calculation.

## Exercise: Calculate Fabric Cutting Cost

Example 1: A garments factory received an order with the order quantity of 30,000 garments. The factory works with 5 cutting masters and 2 helpers. The wages the company provides are Rs. 300 per shift for maters and Rs. 150 per shift for helpers. The average day production per shift is 3000 garments and the company works two shifts per day. After cutting process, they have to make 100 cut parts together onto a bundle and every bundle is tagged with one tag which details the description of the part. After bundling, all the pieces in the bundle are stocked with a size sticker. Each garment consists of 5 parts. Calculate fabric cutting cost for the order with 10% profit, if the price of the tag is RS. 0.60 and the sticker is Rs. 10/100 sticker and the company spend Rs. 3,000 for power per month, Rs. 85,000 for other salary per month, Rs. 10,000 for building rent per month.

Solution

Step 1: Number of shifts required to complete the order

• The order quantity= 30000 garments
• Dail production= 3000 garments.
• No. of shifts required to complete the order= order quantity ÷ daily production= 30,000÷3000= 10 shifts
• The company works 2 shifts per day.
• Hence the number of days required to complete the order= total shifts to finish order ÷ shift/day= 10÷2= 5
• No of days to complete the order is 5

Step 2: calculate of labour cost

In the department, 5 coutting master and 2 helpers are involved in the work with the wage of Rs. 300, and Rs. 150 per shift respectively.

• Labour cost of cutting master= Number of cutting master × total working shift × wage per shift= 5×10×300= Rs. 15,000
• Labour cost of helper= 2×10×150= Rs. 3000
• Total labour cost= 15000+3000= Rs. 18,000

Step 3: Calculation of raw material cost

The garment consists of 5 components and the order quantity is 30,000 garments.

• Bundles
• The cut components were made as bundle of 100 piecesEach garment has five parts. Hence for 30,000 garments , number of parts = 5× 30,000= 1,50,000 parts
• So the number of bundles= 1,50,000 ÷ 100= 1,500 bundles
• Stickers
• Totally 1,50,000 components were cut. Hence, 1,50,000 sticker are used.The cost of the sticker = Rs. 10/100 stickerHence, for 100000 components= 1,50,000× ( 10÷100)= Rs. 15,000
• Sticker cost= Rs. 15,000
• Tag
• The price of tag= Rs. 0.60Total number of bundles= 1,500 bundles1 bundle= 1 tag. There for 1,500 bundles= 1,500 tag
• Price of tag= 0.60× 1,500= Rs. 900
• Total material cost= 15,000+ 900= Rs. 15,900

Step 4: Calculation of overhead costs

The company spends following costs as overhead. Assume company works 26 days per month.

• Rs. 3000 for power per month
• Rs. 85,000 for other salary per month
• Rs. 10,000 for building rent per month.
• Total Cost= 3000+85000+10000= Rs. 98,000
• Cost per day= 98000÷ 26= Rs. 3,769.23
• Company works for this order only for 5 days. Hence, the cost of five days can be made as
• Overhead cost= Overhead cost per day × 5= 3,769.23 × 5= Rs. 18,846.15

Step 5: Calculate fabric cutting cost per garments

• Total cost = Labour cost + Material cost + Overheads= 18,000+ 15,900+18,846.15= Rs. 52,746.15
• Total cost with profit= 52,746.15 + ( 52,746.15× 15%)= Rs. 60,658.07
• Cutting cost per garment= Total cost÷ order quantity= 60,658.07÷ 30000= Rs. 2.02
• The cutting cost of the garment is Rs. 2.02

Example 2: A garments factory received an order with the order quantity of 60,000 garments. The factory works with 10 cutting masters and 4 helpers. The wages the company provides are, Rs. 250 per shift for mater and Rs. 150 per shift for helpers. For cutting process, the company used one brand knife machine and 4 straight knife machines throughout the order processing time. But the band knife machine was rented from a supplier for the cost of Rs 2000 per day and the straight knife was company-owned. For that straight knife company spends Rs. 200 per machine after every shift for cleaning and knife changing during the working time. By using these machines, the average day production per shift is 9000 garments and the company works one shift for every day. After cutting process, they have to prepare the cut material for the sewing process. For that, they have to make 50 cut parts together onto a bundle and every bundle is tagged with one tag which details the description of the part. The bundles are stocked with a size sticker after bundling all the pieces. Each garment consists of 12 parts. Calculate fabric cutting cost for the order with 10% profit, if the price of the tag is Rs 0.70 and the sticker is Rs. 12/125 sticker and the company spends Rs. 7000 for power per month, Rs. 70,000 for other salary per month, Rs. 20,000 for building rent per month.

Solution

Solution:

Step 1: Number of shifts required to complete the order

• The order quantity= 60,000 garments
• Dail production= 9000 garments.
• No. of shifts required to complete the order= order quantity ÷ daily production= 60,000÷9000= 6.66 shifts= Almost 7 shifts
• The company works one shifts per day.
• Hence the number of days required to complete the order= 7 days

Step 2: Calculate of labour cost

In the department, 10 cutting master and 4 helpers are involved in the work with the wage of Rs. 250 and Rs. 150 per shift respectively.

• Labour cost of cutting master= Number of cutting master × total working shift × wage per shift= 10×7×250= Rs 17,500
• Labour cost of helper= 4×7×150= Rs. 4,200
• Total labour cost= 17,500+4,200= Rs. 21,700

Step 3: Calculate of raw material cost

The garment consists of 12 components and the order quantity is 60,000 garments.

• Bundles
• The cut components were made as bundle of 50 piecesEach garment has 12 parts. Hence for 60,000 garments , number of parts = 12× 60,000= 7,20,000 parts
• So the number of bundles= 7,20,000 ÷ 50= 14,400 bundles
• Stickers
• Totally 7,20,000 components were cut. Hence, 7,20,000 sticker are used.
• The cost of the sticker = Rs. 12/125 sticker
• Hence, for 7,20,000 components= 7,20,000× ( 12÷125)= Rs. 69,120
• Sticker cost= Rs. 69,120
• Tag
• The price of tag= Rs. 0.70Total number of bundles= 14,400 bundles1 bundle= 1 tag. There for 14,400 bundles= 14,400 tag
• Price of tag= 0.70× 14,400= Rs. 10,080
• Total material cost= 69,120+ 10,080= Rs. 79,200

Step 4: Calculate of other expenses

• The company works 7 days to complete the order.
• Hence, the band knife machine is rented for 7 days. The rental amount for a day is Rs. 2000
• Cost for band knife= 2000× 7= Rs. 14,000
• The number of straight knife machine used 4 and the amount spent per shift per machine is Rs. 250
• Cost for straight knife= 4 ×200×7= Rs. 5,600
• Total machine expense= 14,000+ 5,600= Rs. 19,600

Step 5: Calculation of overhead costs

The company spends following costs as overhead. Assume company works 26 days per month.

• Rs. 7,000 for power per month
• Rs. 70,000 for other salary per month
• Rs. 20,000 for building rent per month.
• Total Cost= 7,000+70,000+20,000= Rs. 97,000
• Cost per day= 97,000÷ 26= Rs. 3,730.77
• Company works for this order only for 7 days. Hence, the cost of 7 days can be made as
• Overhead cost= Overhead cost per day × 7= 3,730.77 × 7= Rs. 26,115.39

Step 6: Calculate fabric cutting cost per garments

• Total cost = Labour cost + Material cost +Machine cost+ Overheads= 21,700+79,200+19,600+26,115.39= Rs. 1,45,615.39
• Total fabric cutting cost with profit= 1,45,615.39 + ( 1,45,615.39× 10%)= Rs. 1,60,276.93
• Cutting cost per garment= Total cost÷ order quantity= 1,60,276.93 ÷ 60,000= Rs. 2.67
• The fabric cutting cost per garment is Rs. 2.67