Costing

Pricing Formula

Cost of goods + markup=wholesale selling price

Cost of goods=RM cost+ Direct Labour+ O/H+ Profit
CMT
LDP
Mark-up (gross margin)=marketing and selling costs+
PD costs+ distribution costs+ general and admin
expenses
Wholesale selling pricing=price the manufacturer
charges retailer for each garment
Wholesale net selling price-8/10 net 30

Pricing Formula
Gross margin (mark-up)=net sales-total cost of goods
sold
GMROI=GM/avg.inventory investment
AGM= (GM-Inv carrying cost)+ Distribution costs
Maintained (margin) markup=final markup
Required Departmental markup
Sell-through(% of units sold through normal distribution
channels before markdown)
Net Income
Fixed expenses/costs
Variable expenses/costs
Semi-Variable expenses/costs

Pricing Strategies
Rigid Calculation
(Fixed Costs and Variable costs)
Subjective Pricing-Pricing that market can bear
Factors considered in subjective pricing Current SP of similar competitive styles
Uniqueness of style compared to competitors
products
Current value of brand and its influence on the
consumer
Pull through marketing-advertising or packaging
Relative effect of price on potential sales volume
Current market trends

Pricing Strategies
While doing subjective pricing retailers
merchandiser must have
In depth knowledge about market
Garment pricing

Pricing Variables
Volume
Costing

Costing Principles
Cost of goods-associated concepts-LDP, CMT
Cost of Goods-Direct material, direct labour and
manufacturing overheads
Direct Material-associated concepts- size scale
or ratio, material utilization, MOQ
Direct Labour- associated concepts-SAM,
PF&D, piece rate
Manufacturing overheads-Fixed and variable

G&A expenses
Marketing and selling expenses-secure garment
orders and deliver garments to customers e.gadvertising,, warehousing, shipping etc.
Merchandising, Design, PD expenses
Distribution Expenses
Administrative Expenses

Costing Strategies
Direct Costing
Absorption Costing/Whole cost methodallocates fixed manufacturing overhead to each
unit of production along with variable
manufacturing costs.
Activity based costing
Blended Costing

Costing Levels

Quick Costing
Costing for Sale
Production Costing
Accounting costing

Costing parameters for

manufacturers

Product pricing
Purchase of raw materials
Production volume
Wages
Production capacity
Purchase of capital equipment
Difficulties of new product
New techniques to be developed
Training for new machinery
Operators learning time
Line efficiency
Operator efficiency
Average and marginal costs
Labour costs for standard and non standard operations

Pricing Objectives and Strategies

Objectives
Costs
Customers
Company
Competition
External Economic Factors-inflation, economic cycle,
changes in local conditions
Internal Economic Factors-????

Pricing Methods

Cost based pricing methods are influenced by

Manufactures recommended prices
Trade prices guides
Competitors prices
Gross profit margin required.

Methods to decide on cost-based pricing

Standard markup pricing

Target pricing
Demand oriented pricing
Stabilization pricing

Pricing Methods
Marketing-based pricing methods
Market skimming
Market penetration
Psychological pricing
Price lining
Competition oriented pricing

Customer Purchase and Price

Credit Cards
Store cards
Group cards
Affinity cards
Discount cards
Cardholder discount
Payment option/deferred payment option
Rebate cards
Internet shopping
Tele-shopping

References1) Chapter 5-Range Planning, Book-Fashion Buying by Helen

Gowrek
2)Chapter 7-Costing & Pricing Strategies,
Book-Apparel Merchandising-The line starts here by Roseneau and
Wilson
3) Fashion Marketing-Bohdanowicz & Clamp-Chapter 8