Actual Cost per Garment
1. Actual cost -1: Formula of the actual labor cost of a garment-
Actual cost = Total Salary to be paid/Total Units Produced.
For a line, Calculate Total salary (W) to be paid on the day including direct manpower. Find total units produced (U) in shift time (output of the line).
2. Actual cost -2: Second formula is Total salary to be paid /(Total minutes produced/SAM)
Though the first method is used by most of the factories, it is not true actual cost. Because, only output quantity is considered in this cost calculation, where a lot of works is produced on the line as WIP. There are two main reasons why engineers prefer the first method.
- It is very difficult to find how many units have been produced by individuals in a line and calculate total minutes produced in a day.
- To the factory management, it does not matter how much work is laid (partially stitched) in the line. How many units are completed is considered as production.
Cost per SAM
The formula used to calculate the cost per SAM is Garment SAM x Cost factor. Where cost factor is per minute labor cost to the factory at factory average efficiency. Or simply instead of cost factor you can multiply Garment SAM by average labor salary per minute (which represent cost factor calculated at 100% efficiency). Whatever method you use must be clear to everyone (persons who see the report) within the factory. Cost per SAM is fixed for a style.
Example: Factory Efficiency 50%, Daily wages INR 200.00 Shift time 480 minutes. See the comparison in the following table where style A and style B’s Cost per SAM and actual cost have been shown. Use above formula to calculate figures.
|
Style
|
SAM
|
Manpower
|
Planned Production
|
Actual Production
|
Cost factor
|
Cost/SAM
|
Actual Cost
|
|
A
|
15
|
20
|
320
|
150
|
0.833
|
12.5
|
26.67
|
|
B
|
12
|
20
|
400
|
250
|
0.833
|
10
|
16.00
|
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