Costings

February 8, 2025 - February 8, 2025
Get an industry insight to costing…
Product
Determining the product costing is a process that tracks and studies the various components involved, which make up the final product.
For example, packaging, storage costs, machine costs, materials and suppliers, etc, will need to be considered to evaluate and produce a product cost. Basically the final sum should include all costs associated with the production of a specific product or service.
Labour
This expense involves the costing of employing individual workers. Wages are paid to workers on either a daily, weekly, or monthly basis which are paid by the employer to the employee. These payments can include national insurance, pensions and any other necessary contributions paid on behalf of the employee. Other costs could include sick pay or maternity and paternity costs, etc. It is important to calculate wages effectively in order to maintain profits.
Fabric
It is essential to check the cost of the production fabric with the supplier once a material has been selected. Also check whether the cost is based on yards or rolls, etc.
A fabric pricing chart can also be requested from the supplier that includes the fabric style number, name, and weight as well as cost breakdown.
Fabric is sold in three ways:
- Gray Goods / Greige
This is the most inexpensive fabric that has not been treated with any chemicals. However if you wish to dye your fabric, you will then be responsible for finding the methods or alternative supplier to treat and dye the fabric.
- PFD (prepared-for-dye)
This fabric has been treated but not yet dyed.
- Dyed Goods
The most expensive option, but you are also paying for the dying process and are able to designate which colours needed. The type of fabric chosen will determine the cost, but you can however negotiate with supplier to ensure a lower cost and better deal.
Overheads
Overheads refer to an ongoing administrative expense of running and operating a business. They are indirect costs that are not linked directly to the goods or services provided and sold. As an example overheads may include insurance, advertising, legal fees, rent, repairs, supplies, telephone bills, travel and utilities. It is a group of operating expenses necessary to continue a functioning company.
Break Even Analysis
The finding of a break even analysis can be displayed in the form of a graph to show the results more clearly. The analysis is an examination of the changes in fixed and variable costs, highlighting the profit results. An example of a break even analysis graph has been included below:
Price v Quality
‘Price v Quality’ refers to the conflicting issues of achieving high quality whilst keeping production costs low. A product costing too much could discourage customers, but you also need to ensure that the quality is not sacrificed to keep prices lower; it is about finding an appropriate balance between the two in order to develop a cost effective and high quality product.