A PPT on “Identification of Variable Costs in Textile Fabric Business & How it affect to Costing”

Objective of this Project:-

Introduction to variable cost in Business. Identification of Variable cost factors. Important of variable cost factors. How Variable Cost affect During Costing. Past data Analysis. Other factors to be consider.

Variable Cost:-

Variable Cost is the expense that varies with Production Output. It depends on the Total Production Volume. It is mandatory to run a Business Organisation. In generally it also varies from time to

time or Season to Season. Variable Cost has a great impact during costing of the product.

In Textile Apparel Business during Costing of the finished product, we have to focus on the variable cost to sustain our Current Business.

Calculation of Variable Cost:-

Total Variable Cost =Total Quantity of Output X Variable Costs per Unit of Output

So variable Cost is Directly Proportional to the Organisation total Output/Production. It increases if the production being increased and vice versa

Graphical Representation of Variable Cost Verses Production O/p

Y

Variable Cost

Fixed Cost X

Yarn Cost

Knitting Cost

Processing Cost

Design & Development Cost

Process Utility Cost

Process Loss Cost

Other Factor

List of variable Factors:-

Identification of Variable Cost factors:-

1) Basic Raw material i:e Yarn Price:-

Yarn is the root of fabric production which is varies from time to time.

Yarn price depend on the following factor;

Yarn Count

Yarn type i:e Ring Spun or Vortex or Combed

Yarn Category i:e Normal or Organic or Contamination free or Compact or Pima or Supima.

Type i:e Normal or Compact or

Organic

Category i:e Ring or

Vortex or Combed

Yarn:-

Knitting i:e interloping of two thread.

The variable cost factors in knitting are Needle Cost and its working days

Type of product i:e SJ or RIB or Interlock Fabric Category i:e Open width or Tubular

o m/c efficiency according to product category

2) Knitting Cost:-

Knitting

M/c efficien

cy

Needle

Fabrication

Knitting:-

3) Processing Cost:-

Processing Cost basically include Dyeing, Finishing and Printing Cost.

Dyeing:-

In Dying the following are most variable things;

The most Variable cost in Processing is the Chemical Cost, including dye cost for Dyeing.

Shade Category i:e light or medium or dark. Process route Category i:e White or Piece dyed or melange or Yarn dyed.

Processing

Dyeing

FinishingPrinting

Processing:-

Shade Category

Process Route

Auxiliary Cost

Chemical Cost

Dye Cost

Dyeing:-

Finishing:-

As Comparison to dyeing finishing has less impact on variable costing. These are below;

Basically the no of finish that applied on the fabric affect the costing

Printing:-

Printing has more effect on total variable cost as compared to sum of dyeing and finishing cost.

In printing the below two are responsible for the most variable cost;

Type of printing i:e Discharge or Reactive or Pigment No of Colour i:e 2 or 4 or 8 or 12 or >12

Finishing

Type of

finish

No of finish

Fabric Quality

Finishing:-

Type of Print

No of Colour

Printing:-

4)Design & Development Cost:-

Looking in to the Competitive market, we have to develop new innovative product that is flexible to end user.

D&D Cost basically affected by the type of Season i:e Spring Summer & Autumn Winter.

D&D Cost also affect by the Fibre price or Yarn Price decided by the manufacturer.

Fashion & Culture Material Efficient Environment D&D COST

Design & Development Cost:-

5) Process Utility Cost:-

It is another variable cost factor that affects costing to end product.

It includes;

Steam Electricity Water

Egg Maintenance etc

Water

Steam

Power

Egg Mainatnce

Process Utility Cost:-

6) Process Loss:-

The fabric weight get Loss during Converting the Gray Raw fabric to Finished Fabric Ready for use is called as Process Loss.

Process loss refers to the consumption of fabric or fabric get waste during processing of grey fabric starting from dyeing to packing.

It varies from product to product i:e SJ or RIB or Interlock.

It varies from product route to route i:e Dyeing or Printing or Finishing

Fabric Quality

Process Route

Process Loss

Process Loss:-

7) Country of Business:- This refers to the Country to whom we are sending our product. Here Gov. Tax and other thing to be consider as the Gov. Rules and taxes varies from time to time

Example:-

Suppose we are doing finished fabric business in India with Srilanka .The Finished fabric to be delivers Srilanka, Here Gov. Rule like Duty Draw Back is applicable, Currently which is 5.5% , but it is not fixed may change after change of Gov. or time.

It is another variable factor that changes from Customer to Customer. It refers to the Quantity order by the Buyer in the Official PO.

It may be above than our standard minimum order quantity or below than the MOQ.

Looking in to the length of order quantity we have to quote the price.

8) Order Quantity Length:-

Other factors like;

Packing cost that varies from time to time which depends on the Polythene, Sticker Cost. Administrative Cost like Courier Cost varies from time to time. Logistic/Transport Cost:- It is the basic way of transport goods to buyer. It may be By Road or

By Train or By Air. It is varies from time to time depend on the fuel cost.

9) Other Factors :-

Importance of Variable Cost:-

I) It Can Be Zero, if Production is Zero during Plant Shut Down. II) It increases the total turnover. III) It has a bigger Contribution to the total Cost. IV) It helps to Competes in market by increasing the output. V) Finally it helps to increase the margin of profit also

Average Yarn Price analysis from last 3 Year

Year Avg Yarn INR Price Per Kgs

2011-12 2052012-13 2302013-14 235

2014-15(Till Now) 250

205230 235 250

2011-12 2012-13 2013-14 2014-15(Till Now)

Avg Yarn INR Price Per KgsAvg Yarn INR Price Per Kgs

HOW Variable Cost Affect in Costing of Fabric!!!

Varible Factor Percentage(%)Yarn 60Knitting 2Dyeing 3Finishing 2Printing 12Process Utility 6Process Loss 10D&D 2Transport 2Other including Packing 1

The below is approximate %

60%

2%3%2%

12%

6%10% 2% 2% 1%

Percentage(%)Yarn Knitting Dyeing Finishing PrintingProcess Utility Process Loss D&D Transport Other including Packing

Graphical Representation of data analysis:-

Thank You For Your Valuable T!me.