Project report

Costing of sports T-shirt

Group Members:
Anam Aqil (4492)
Natasha Shaheen
Syed Babar Shah (4174)
Syed Ali Jaffery (3969)
Umair Siddiqui
C.I.D: 10757

Submitted to: Sir ArslanHashmi

Date: 15th April 2011

ACKNOWLEDGMENT

Costing of Sports T-shirt Page 1

First of all we are really thankful to Almighty Allah & praying for the betterment of rest of
our life.

To achieve this report successfully we interacted with concerned professionals of the

garment industry. They contributed and guided us to make the task possible.

We are very grateful to our respected teacher Sir ArslanHashmi who transferred the
knowledge and gave the immense support through the course by text and by her knowledge
to make us know about the costing procedures that need to be followed in the professional
life.

Last but not least thanks to our parents and our friends.

Signatories:

------------------------------ ------------------------------ ------------------------------

Anam Aqil Natasha Shaheen Syed Babar Shah

------------------------------ ------------------------------
Ali Jaffery Umair Siddquidfsd

Table of Content:

Introduction ---------------------------------------------------------
4
Costing of Sports T-shirt Page 2
Data--------------------------------------------------------------------
5
COGM------------------------------------------------------------------
6
Period cost ----------------------------------------------------------
7
Cost per unit --------------------------------------------------------
8
Break even analysis ----------------------------------------------
10
Total cost ------------------------------------------------------------
11
Total sales ----------------------------------------------------------
12
Break even through graph -------------------------------------
13
Conclusion ----------------------------------------------------------
14

Costing of Sports T-shirt Page 3

 Introduction:

In order to do the costing of a sports t-shirt we had to visit a well known

garment company, located in site area known as Eastern Garments. They
are the manufacturers of casual and sports t-shirts. They take orders from
the well known brands such as

• Outfitter

• Signature

• Cross road

These are the main buyers of t-shirts.

When contacted to Mr. Salam Uddin (production manager) to give us some

information about the project, he excused and said it is against the
company policy to pass costing data outside the company.

Basically Eastern Garments have many production units at different

locations. The data we were provided with applies to a single production
unit (production facility).

After requesting Mr. Salam Uddin he told us the procedure of

manufacturing and the total cost with the whole process. We worked on the
data and calculated the following:

• Total Manufacturing Cost

• Period cost

• Prime Cost

• Conversion Cost
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 • Cost per unit

• Total cost

• Contribution margin income statement

• Break even analysis

Data Provided By The Company

Rupees

➢ Raw material 250,000

➢ Labor (direct 70% , indirect 30%) 175,000

➢ Depreciation. 8% 20,000

➢ Utilities (electricity, gas) 68,750

➢ Rent (40% on factory& 60% on office) 100,000

➢ Advertising expenses 30,000

➢ Transportation cost (per 1000 units) 12,500

➢ Interest paid on loan 11,000

➢ Selling price 450

Note:

This data is valid only for the production of 2500 unit of t-shirts

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Product cost:
Product costs include all costs involved in acquiring or making a
product. In case of manufactured goods, these costs consist of
direct materials, direct labor, and manufacturing overhead.
As far as the product cost of the Eastern Garments is concerned,
it is calculated below:

Rupees

Raw Materials 250,000

Direct Labor 1, 22,500

Manufacturing Overheads:

Indirect labor 52,500

Depreciation 8% 20,000

Utilities 68,750

Rent on factory 40,000 1, 81,250

------------

Total Manufactured Cost (Product Cost) 5, 53,750

------------

Total Manufacturing Cost for Eastern Garments is 5, 53,750.

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Period cost:
Period costs are all the costs that are not product costs. For e.g. rental costs
of administrative offices. Period costs are expensed on the income statement
in the period in which they are
incurred using the rules of accrual accounting. All selling and administrative
costs are considered to be period costs.
Period cost of Eastern Garments is as follows:

Period cost
Rupees
Advertising expense 30,000

Rent on office 60,000

Transportation 12,500

Interest 11,000
Period cost = 1,13,500

Period cost of Eastern Garments is = Rs. 1, 13,500

Prime Cost:

Prime Cost includes all direct manufacturing costs.

Prime Cost= Direct Material Cost + Direct Labor Cost

Prime Cost =250000+ 122500

Prime Cost = Rs. 372500

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Conversion Cost:

Conversion Cost is the sum of direct labor cost and manufacturing

overheads because these cost are incurred to convert materials into
finished goods.

Conversion Cost = Direct Labor Cost + Manufacturing Overhead

Conversion Cost = 122500 + 181250

Conversion Cost = Rs. 303750

Cost per unit:

Formula: Cost per unit = total cost / no. of units produced

In order to find out the cost per unit, first we will find out the total cost.

Total cost = Variable cost + Fixed Cost

 Fixed cost :

Fixed Cost
Rupees
Advertising 30,000
expense
Direct labor 1,22,500
Utilities 68,750
Rent office 100,000
Depreciati 20000
on
Lubricants for 15,000
machine
Transportation 12,500
Total fixed 3,68,750
cost

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Variable cost:

Variabl
e cost
Rupe
es

Indirect 52,500
labor

Raw 25000
materia 0
l

Total 30250
variabl 0
e cost

Total cost = Variable Cost + Fixed Cost

Total cost =302500 + 368750

Total cost =671250

Cost per unit = total cost / no. of units produced

Cost per unit =671250 / 2500

Cost per unit =Rs. 268.5

Profit:

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The cost of one t-shirt is 268.5 rupees and they sell it for 450 rupees means they have
profit of Rs.181.5 on every t-shirt.

Break even analysis:

➢ Contribution income statement
Total Per unit
(Rupees)

Sales (2500x450) 1125000 450

Variable 302500 121
expense(121x2500)

Contribution 822500 329

margin

Fixed 368750
Expense

Net income 453750

Break even = Fixed expense / unit CM

Break even = 368750 / 329

Break even =1121 units

Break even in Rs. = Fixed expense / CM ratio

Break even = 368750 / 0.731

Breakeven = Rs. 504445

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Break even analysis by graphs:
 Total cost :
No. Of units cost per unit Total cost
0 268.5 0
100 268.5 26850
200 268.5 53700
300 268.5 80550
400 268.5 107400
500 268.5 134250
600 268.5 161100
700 268.5 187950
800 268.5 214800
900 268.5 241650
1000 268.5 268500
1500 268.5 402750
2000 268.5 537000
2500 268.5 671250

Total sales:

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 No. Of units sold Selling Price (Rs.) Sales (Rs.)
0 450 0
100 450 45000
200 450 90000
300 450 135000
400 450 180000
500 450 225000
600 450 270000
700 450 315000
800 450 360000
900 450 405000
1000 450 450000
1500 450 675000
2000 450 900000
2500 450 112500

Break even point by graph:

Breakeven point = 1121 units

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After selling the 1121 units of the t-shirts they will be able to
recover their cost.

Conclusion:
After completing the calculations we can summaries the results as:

Rupees

• Cost of good manufactured 553750

• Period cost 113500

• Cost per unit 268.5

• Total cost 671250

• Contribution margin 822500

• Breakeven point 1121units

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