Elements of 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. 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. Direct Materials Direct materials include: All raw materials, materials specifically purchased, parts or components purchased or produced, and primary packing materials. 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. Overhead Overhead is the aggregate cost of indirect materials, indirect materials. 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.



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.


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.


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

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.

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

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.




 
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