Learning Goal: Understand the cost components of garment production and how efficiency improvements impact profitability.

Complete Lesson Content:

Production cost includes direct labour (cutting, sewing, finishing), indirect labour (supervisors, maintenance), direct materials, factory overhead (rent, electricity, depreciation). A key metric is Cost per Minute (CPM) or Cost per Standard Minute. Reducing non‑productive time, improving efficiency, and reducing defects directly lower cost. Efficiency improvements drop the unit labour cost, allowing the factory to offer competitive prices or increase margin.

Definitions:

  • CM (Cost of Making) – the labour cost to produce a garment, including overhead.
  • CPM – Cost per Minute; total monthly factory cost divided by total available standard minutes.

Step‑by‑step Explanation:

  1. Calculate total monthly factory expenses: wages, rent, utilities, consumables.
  2. Calculate total available standard minutes (operators × working minutes × efficiency factor).
  3. CPM = Total Expenses / Total Available Standard Minutes.
  4. For a garment, making cost = Garment SMV × CPM.
  5. If SMV = 20 min, CPM = $0.05, making cost = $1.00. Add material cost for total product cost.

Best Practices: Track CPM monthly; a rising trend signals inefficiency or cost increases.

Common Mistakes: Forgetting to include indirect costs in CPM; setting a price based only on direct labour.

Real Industry Example: A factory reduced its CPM by 5% through energy‑saving initiatives and reduced overtime, making it more competitive.

Mini Case Study: A line’s efficiency dropped to 60%, raising unit labour cost by 20%. The production manager implemented line balancing and operator training, bringing efficiency to 80% and restoring margins.

Practical Activity: Calculate the making cost of a shirt with SMV 22 min in a factory with monthly expenses $80,000, 150 operators, 26 working days, 8 hrs/day, and current efficiency 75%.

Assignment: Using Excel, build a simple costing model that shows how changes in efficiency (from 60% to 90%) affect the unit labour cost for a given garment SMV. Write a short interpretation.

Lesson Summary: Efficiency and cost are directly linked; improving production efficiency is a direct lever on profit.

Key Takeaways:

  • CPM = Total cost / available standard minutes.
  • Higher efficiency lowers unit cost.
  • Monitor costs continuously.
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