So you have an exciting product that you want to make. You have some materials in mind and you’ve even talked to suppliers on what it would cost to get it made. But you’re still wondering:
“How much will my product cost?”
Well you’ve come to the right place. Today I’m walking you through ALL the little costs that go into your product and how to track and calculate them.
First, I recommend you SIGN UP to get access to my FREE Resource Library so you can download my Cost Sheet Template.
Did you sign up? You should get an email with the password and link. Once you’re in the library, click on the download icon on the Cost Sheet Template and you should be ready to go!
Got it? Great! Let’s go!
OK, fair warning – this is DETAILED! I want to make sure you know ALL of the ins and outs of your product cost.
If you have a real world example to work through while you read this, even better. Pull out your sample and grab a pen and paper. You’ll probably discover, there are costs you’re missing and you need to get. Make a list!
This cost sheet will support you in tracking all the little pieces that add up to your FOB (Freight On Board) cost. Whoa! Wait a minute!
Glad you asked. Your FOB cost is the total cost for your factory to make your product. It is the first piece of your product cost. It does NOT include shipping that product from your manufacturer to your warehouse or any duties you need to pay to import your product.
FOB Cost + Shipping Cost + Duty Cost = LDP Cost
For more on what an LDP cost is, check out my post on How to Calculate Gross Margin.
Today we will be diving deep into calculating your FOB cost.
Fabric
Fabric is probably the biggest driver in your product cost. Unless you are making the most basic products, you are probably using more than one fabric in each style.
Some examples are:
- Main Body Fabric
- Lining
- Contrast Waistband
- Cuffs
- Pocket Bags
- Facings
In the Cost Sheet there is enough space for you to enter 13 different fabrics. You could add more if you have them but hopefully you don’t.
Each Row of Fabrics has the following fields:
Fabric
This is where you enter where the fabric is being used in the style (body, lining etc).
Item #
This is where you add in the fabric specific item number that you get from your fabric supplier. The fabric header from your supplier, will usually have this called out clearly at the top. It will be a unique number that only this EXACT fabric has. This keeps you, your fabric supplier and your factory on the same page. Here is an example of a fabric header if you’re not sure what I’m talking about.
Description
This is where you write a description of the fabric that makes sense to you. Your item number probably won’t. But CAUTION! Keep your item description consistent. As you get bigger, you want to refer to your fabrics in the same way with every supplier. You will probably also get versions of things that are similar. So document a consistent and UNIQUE name for each fabric.
Some examples are:
- 300g Brushed Cotton Fleece
- 200g Brushed Cotton/Poly Fleece
Usage
This is how much you are using of the fabric within a particular product. Make sure that you are entering it in the same unit of measure as you are being quoted the price in. So, if your fabric price is quoted in yards, enter your usage in yards. In the cost sheet, just enter the number value in this field.
Unit of Measure
This is where you enter the unit of measure for example yard or meter. This is for your reference and does not affect the calculation in the cost sheet. Ideally all your fabrics will have the same UOM to support other functions in the cost sheet.
To convert meters to yards – multiply by 1.09
To convert yards to meters – multiply by 0.914
Cost
This is where you enter the cost quoted by your fabric supplier. It does not need to include duty or the shipping cost of the fabric at this point. Keep in mind that if you are working in Canada (like me) you are able to get your GST back at the end of year. You have to register your business and sign up but it is all pretty straight forward. This means you do not need to include the GST price in your fabric price since you will be getting it back.
Extended Cost
This is where the magic happens. Do not enter anything in this field. The cost sheet will automatically generate the total cost by multiplying the usage and cost.
Continue filling in a row for each of your different fabrics. You DO NOT need to fill in a row for each pattern piece. For example, if you are making a pair of baby pants, just enter one line for the whole main body fabric. You do not need a new row for the front leg, back leg etc.
Fabric Totals
In Row 28 the total fabric usage and total fabric cost are calculated.
In order for the total Fabric Usage to be valuable, the Unit Of Measure for each line item should be the same. This is important because this total feeds into the fabric duty and fabric shipping cost lower down in the cost sheet.
If you look at Cell 128, you will see you now have a total fabric cost for your product. Yay!
TRIMS & PACKAGING
This is where all of the other components that go into your product cost will land. This includes logos, labels, buttons, zippers, fusing, thread, hang tags, packaging boxes- you name it.
Each Row of Trims and Packaging has the following fields:
Trim and Packaging Type
This is where you add a generic description of what the trim or packaging is. I have entered some defaults so that you have a list of things to consider. You can add or remove as you see fit.
Item #
Same as your fabric, this is where you will add the unique item number for your trim or packaging. This is either something you can get from your supplier or make up on your own if you are buying retail.
The most important thing is that this be a unique code (can be letters and numbers) and that it is tracked somewhere. I recommend having a master document that holds all your fabric, trim and packaging information.
If this sounds like something you would like help with, leave a comment on this post and I can work on getting one added to the FREE Resource Library.
Description
This is where you enter a description that makes sense to you, since the Item # may not.
Some examples of Trim and Packaging Descriptions are:
- 18L 4 Hole Clear Plastic Button
- ½” Raised Heat Set Logo
- ¼” Velvet Ribbon (Since you might have a lot of these, your Item # will become important here.)
Usage
Same as fabric, this is how much you are using of each trim or packaging item within your specific product. Since there are many different ways to measure trims and packaging, pay special attention to your unit of measure when entering your usage.
Unit of Measure
For trims and packaging this varies a lot more than with fabric. Because of this, there is no final calculation of your total Trim and Packaging Usage like there is for your total fabric usage. It just wouldn’t make sense.
Some examples of Trim and Packaging Units of Measure (UOM):
- Piece (For zippers.)
- Yards (For ribbons, elastics, drawstrings.)
- Per Thousand (For labels and poly bags. If you want you can convert them to a per piece price.
- Gross (For buttons.)
- This is a weird one that I want you to know about. Usually when you are getting buttons from a supplier, they are sold in a something called a gross. A gross is 144 pieces. There is also a great gross which is 1728 pieces (a dozen Gross). Weird, I know.
In the cost sheet you can manage this by entering your Unit of Measure as a Gross and then entering your quantity as a fraction of that Gross:
OR – you can do the math to change your price from Gross to a Piece ($4.32/144 = $0.03 per Piece) and enter you UOM and usage as a piece.
Both options get you to the same place. Use what makes the most sense to you.
Cost
This is where you enter the cost that is quoted by your trim or packaging supplier. Because of the variance in types of trims and packaging which would create drastically different shipping and duty costs, this cost SHOULD include your duty and shipping to get it to your manufacturer.
Here is an example of how you would calculate the cost for a yard of ribbon with the following details.
- Vendor quotes you $20 per roll of ribbon
- There are 50 yards of ribbon per roll
- In order to save on shipping you bring in a box of 20 rolls which cost you $20 to ship
- There is no duty on importing man made fiber ribbons to Canada. Yay!
- Canada Boarder Services Online – for Canadian Duty Rates
- US International Trade Commission – for US Duty Rates
Here is a snap shot of the ribbon example since you’re having a hard time finding it in there.
OK, so now you have all the data. Let’s calculate an accurate cost per yard. There are a bunch of ways to do this but I’m going to give you one example. The nerd in me loves this stuff. Woot!
Calculating the shipping cost per roll
$20 (per box) / 20 (rolls per box) = $1 per roll
Calculating the total cost for a roll of ribbon
$20 Ribbon Cost (per roll) + $1 Shipping Cost (per roll) + $0 Ribbon Duty (per roll) = $21
Total cost per yard of ribbon
$21 Per Roll / 50 (Yards per roll) = $0.42 per yard
We did it!! Now you can enter the price of $0.42 per yard in the cost field.
Extended Cost
Same as fabric, this is where the magic happens. Do not enter anything in this field. It will automatically calculate by multiplying the usage by the cost. This is the total cost for that item within your product.
Total Trims Cost
Once you have entered all of your different rows of trim and packaging the Total Trims cost for your product will calculate in Cell I46.
Artwork
So after all those complicated trim calculations, you’ll be happy to know artwork is pretty straight forward. This is where to add something like a screen print or embroidery charge.
Artwork
In this column you would enter the type of art (Screen Print, Embroidery, Applique).
Item #
This is where you would enter your suppliers code for the artwork. You could find this on your strike off or invoice. It should be a unique code for your piece of art so that they can manage their operations smoothly. If this is something that you are doing yourself you should still generate a code and track it on your master materials list.
Description
This is a description that makes sense to you. Try to make it specific so that when you refer to it you supplier is clear on which one you mean. Or when you look back on your records it’s clear.
Usage
This is where you will enter how many there are on each product. Probably safe to say there is only one.
Unit of Measure
For artwork this will probably be a piece or each (which mean the same thing).
Cost
This is where you would enter the price for your artwork. If your factory is adding the artwork as part of the overall production this should be simple cost. You can just enter exactly what they say the price is.
If you are managing the printing yourself, after the factory has sewn your product, you should also factor in shipping costs.
To reduce the time and cost of shipping you should apply your artwork in close proximity to your factory or your warehouse.
Here’s an example of how to calculate the artwork cost when you’re screen printing your own t shirts:
Cost per shirt to ship
$40 (Shipping for 100 shirts from factory to screen printer) / 100 (number of shirts) = $0.40 per shirt
$2 (Screen print quote from screen printer) + $0.40 (Shipping Cost) = $2.40
Extended Cost
This will calculate the total cost for each row based on the cost and usage you have entered. Same as fabric and trim
Total Artwork Cost
The total cost for all of the artwork on your product will be calculated in Cell I50.
LABOUR
This is the EASIEST section! Your supplier will give you a total Cut, Make, Trim (CMT) cost for your product. This will include the cost to cut, sew and add any trims or finishing’s on your product (put the hang tag on, put in in a poly bag). Enter this CMT cost in Cell H52.
FABRIC DUTY & SHIPPING
The cost sheet has a section for approximate fabric duty and fabric shipping cost. It is not 100% accurate because each fabric can have different duty rates and shipping costs but it is a good way to add in a little bit of cost so you don’t end up with huge shipping and duty bills on the back end and realize you never factored this into your product cost.
Duty
Check out the duty rate for your fabric on the CANADIAN and US customs websites. Enter the rate for the fabric with the highest usage into Cell D58. This should give you a good estimate. The total Fabric Duty for the product will then calculate in Cell I58.
Freight
This is the estimated cost to ship your fabric from your fabric supplier to your factory. In Cell D59 enter your cost per Unit of Measure (UOM) to ship the fabric. What?!?! How do you get that? This is just like we did it for the ribbon example above but I will give you a fabric example below.
Here’s an example of how to calculate the freight cost per UOM:
Each Roll of Fabric has 100 Yards & It costs $50 to ship a roll of fabric
$50 (cost to ship a roll) / 100 (yards per roll) = $0.50 (cost per yard to ship)
Now enter $0.50 in Cell D59!
I want to reiterate that this is an example! The fabric shipping cost can vary HUGELY depending on:
- How the fabric is packaged (on a roll, in a box, on a palette).
- Whether it is shipped via air or on a boat (you’re probably not going on a boat unless you’re big enough to start filling up containers).
- What shipping provider you use (USPS, Canada Post, Fedex etc).
- How far the fabric is going.
Total Freight and Duty
This will then calculate the total FABRIC freight and duty in Cell I61.
I really want to hit home how HUGE the fabric freight and duty is.
This is something that designers starting out do not consider.
Shipping and duty can double or even triple the cost of your fabric. This can turn your business into a money pit so pay attention to this and calculate these costs early.
OK- Drum roll please!!!!! We made it to the last piece.
In Cell I62, your FINAL FOB cost is calculated.
I have added a note for the currency (Canadian but you can edit this) to make sure that you don’t forget to think about this. You want all your costs entered in a consistent currency that you agree on with each of your suppliers.
So now that you have your the your product cost (FOB cost), you can add in your product shipping cost and duty for your Landed Duty Paid (LDP) Cost! This will support you in getting to your Gross Margin which is a standard and informative measure to see if you business is going to be profitable.
Jump on over to my post on How To Calculate Gross Margin to take your detailed product cost to the next step and understand what you need to charge in order to make this product profitable. Because that’s why we’re here right?
To build successful, profitable, apparel businesses!
If you found this post helpful, I would love it if you shared it with a friend or pinned it so you can come back to it again later.
Also, if you have any questions about the above, just leave me a comment.
Happy costing!