Garments CM (Cost of Manufacturing) Calculation

In the garment industry, it is essential to calculate the cost of manufacturing to ensure profitability. The Cost of Manufacture (CM) is the manufacturing cost of one dozen garments. To determine the CM for a particular order, various factors such as factory expenses, total running machines, machine quantity, daily productivity, and currency exchange rates need to be considered. In this blog, we will discuss how to calculate the CM of a garment order and factors that affect it.

In apparel trade, CM means Cost of Manufacture. It actually refers to Manufacturing Cost of 1 Dozen (12 pcs garments). To calculate Manufacturing Cost of 1 dozen garments for a specific order we’ve to know the factors below:

1. Monthly expense of factory,

2. Total running machines,

3. Machine quantity to execute the layout of mentioned order,

4. Daily (8 hour per day) productivity of the order,

5. Dollar conversion rate (if monthly expense is different from US$)

Suppose,

Monthly Factory Expense = 50,00,000 BDT (Bangladeshi Taka)

Working days of the month=26 days

Daily Factory Expense: 50,00,000 ÷ 26 = 1,92,307.69 BDT

(Formula: monthly factory expense ÷ working days in the month)

Total running machine quantity in factory =150

Daily Expense of 1 Machine: 192307.69 ÷ 150 = 1282.05 BDT

(Formula: daily factory expense ÷ total running machine)

Machine quantity of layout for mentioned order = 27

Daily cost for the layout: 1282.05 × 27 = 34,615 BDT

(Formula: daily expenditure of 1 machine × Machine qty of the layout)

Suppose,

Hourly production of the layout = 125 pcs

Normal daily working hours = 8 hours

So, Daily Production of the layout: 125 × 8 =1000 pcs

(Formula: hourly production of the layout × normal daily working hour)

Manufacturing cost of 1pcs: 34615 ÷ 1000 = 34.62 BDT

(Formula: daily cost of the layout ÷ daily production of the layout)

So, CM (Manufacturing Cost of 12 pcs garments): 34.62 × 12 = 415.44 BDT

(Formula: manufacturing cost of 1pc × 12)

Dollar conversion rate: 1 US Dollar = 78.26 BDT (Bangladeshi Taka).

So, CM (Manufacturing Cost of 12 pcs garments) in US Dollar: 415.44 ÷ 78.26 = 5.30 US$

20% profit will be added with CM: 5.30 × 20% = 1.06 US$

So, Final CM = 5.30 + 1.06 = 6.36 US$.

Knowing the manufacturing cost of an order is crucial in the garment industry. By calculating the CM, manufacturers can estimate the total production cost and set competitive prices. The factors that affect the CM, including factory expenses, total running machines, machine quantity, daily productivity, and currency exchange rates, must be taken into account. By following the steps outlined in this blog, manufacturers can calculate the CM for their orders and ensure profitability.