How to Calculate Apparel Packing Cost in Apparel Industry?

Packing or packaging is a part of the apparel finishing processes. The packing process is done according to the buyer’s requirements. In the past, I have shared two important articles about packing or packaging, where one is types of packing & apparel packaging method, and the other one is apparel packing materials & packing cost calculation formula. Now, this article presents the actual packaging cost, How to Calculate Apparel Packing Cost in the Apparel Industry.

The packing process is one of the most significant processes in the apparel manufacturing industry. This process is done by the finishing department. There are different types of packing methods that are done according to the buyer’s instructions. Packing or packaging is an important part of the products which has to convey a lot of information to the people. Packing means wrapping, compressing, filling, or creating goods for the purpose of protecting apparel and also for convenient handling.

Apparel Packing or Packaging Materials in the Finishing Department:

There are some apparel packing materials used in packaging. Those are pointed out in the following:

1. Paper and Cardboard,
2. Plastic material,
3. Creep paper,
4. Tissue paper,
5. Carton box,
6. Insert card,
7. Small barcode sticker,
8. Size sticker,
9. Tag bullet,
10. Hologram sticker,
11. Gum tape,
12. Plastic strap,
13. Strap machine.

How to Calculate Apparel Packing Cost in the Apparel Industry?

Here is the step-by-step process for the Packing Cost calculation in the Apparel Industry:

Apparel Packing Cost Calculation Formula:

To calculate the apparel packing cost, the following formula must be maintained.

Packing cost per apparel,

         (D.M + D.L + D.E + O.H)

= ………………………………………….

    Total apparel packing production

Here,

D.L means direct labor cost,

D.M means direct material cost,

D.E means direct expense cost,

O.H means overhead cost.
Key Elements of Apparel Packing Cost:

The cost elements involved in the apparel packing process are as follows:

1. Direct material cost – Poly bags, tags, labels, hangers, hangtags, pouches, barcode stickers, insert card, hologram stickers, carton box, inner box, packing strap, tag bullets, gum tape, color stickers, size stickers, price stickers, etc.
2. Direct labor cost – Packing labor.
3. Direct expense cost – Cost of re-packing, hiring charge of carton-strap packing machine.
4. Overhead cost – Salary, power, transport, etc.

Major Factors to Calculate Apparel Packing Cost:

There are so many factors that directly affected on apparel packing cost. Those are listed below:

1. Style of apparel,
2. Types of assortment.
3. Number of packing or packaging materials.
4. Types of apparel packing – Single, combo, bulk packing.

Apparel Packing Cost Calculation Method in the RMG Sector:

Calculate the packing cost per apparel from the given chart.

SL No.	Parameters	Quantity and Cost
01	Order quantity	10000pcs
02	Packing person	10
03	Wages per packing person	Rs. 150 per shift
04	Production per shift	2000 pcs apparel
05	1 day	2 shifts (1shift= 8hrs)
06	1 carton box	50 pouch
07	1 pouch	4pcs apparel
08	1 pouch	1 insert card
09	1 pouch	1 tag
10	1 pouch	1 small barcode sticker
11	1 pouch	1 size sticker
12	1 pouch	1 bullet tag
13	1 carton box	1 big barcode sticker
14	1 apparel	1 hologram sticker
15	20 carton box	1 gum tape
16	1 carton box	4 meters plastic strap
17	1 carton box	Rs. 40
18	1 pouch	Rs. 5
19	1 insert card	Rs. 1.50
20	1 tag	Rs. 0.80
21	1 small barcode sticker	Rs. 0.50
22	1 size sticker	Rs. 0.10
23	1 tag bullet	Rs. 50 per 1000 bullets
24	1 big barcode sticker	Rs. 1.00
25	1 hologram sticker	Rs. 1.00
26	1 gum tape	Rs. 35.00
27	Plastic strap	Rs. 3 per meter
28	Strap machine rent	Rs. 500
29	Power	Rs. 5000 per month
30	Salary	Rs. 50000 per month
31	Rent	Rs. 10000 per month
32	Other expense	Rs. 15000 per month
33	Profit	15%

Solution:
The following formula has to be applied in apparel packing cost calculation:

Packing cost per apparel,

Direct labor + Direct material + Direct expense + Overhead
= ………………………………………….………………….………          ……… (1)
Total apparel packing production

Total Production Calculation:

Total production = 10000pcs apparel

Total Production Time Calculation:

Total production time,
= (Total production/production per shift)
= (10000/2000)
= 5 shifts

Direct Material Cost Calculation:

Carton box = (10000pcs/200pcs) = (50× Rs. 40) = Rs. 2000
Pouches = (10000pcs/4pcs) = (2500× Rs. 5) = Rs. 12500
Insert card = (2500 pouch ×1) = (2500× Rs. 1.50) = Rs. 3750
Tag = (2500 pouch ×1) = (2500× Rs. 0.80) = Rs. 2000
Small barcode = (2500 pouch ×1) = (2500× Rs. 0.50) = Rs. 1250
Size sticker = (2500 pouch ×1) = (2500× Rs. 0.10) = Rs. 250
Tag bullet = (2500 pouch ×1) = {2500× (Rs. 50/1000} = Rs. 125
Big barcode = (50 cartons ×1) = (50× Rs. 1) = Rs. 50
Hologram = (10000pcs ×1) = (10000× Rs. 1.00) = Rs. 10000
Gum tape = (50 carton/20) = (2.5 × Rs. 35) = Rs. 75
Plastic strap = (50 carton × 4 meters) = (200× Rs. 3) = Rs. 600

So,
Total direct material cost stands at
= Rs. (2000+12500+3750+2000+1250+250+125+50+10000+75+600)
= Rs. 32600

Direct Labor Cost Calculation:

Labor wages,
= (Number of labors × No. of shifts × wage per shift)
= (10×5× Rs. 150)
= Rs. 7500

Direct Expense Cost Calculation:

Strapping machine rent = Rs. 500

Overhead Cost Calculation:

In power cost calculation,
= (Cost × 5 shifts) / (30days × 2 shifts in a day) = {(5000 × 5)/60} = Rs. 417

In salary cost calculation,
= (Cost × 5 shifts) / (30days × 2 shifts in a day) = {(50000 × 5)/60} = Rs. 4167

In rent cost calculation,
= (Cost × 5 shifts) / (30days × 2 shifts in a day) = {(10000 × 5)/60} = Rs. 834

In other expenses cost calculation,
= (Cost × 5 shifts) / (30days × 2 shifts in a day) = {(17000 × 5)/60} = Rs. 1251

So,
Total overhead cost stands at,
= Rs. 417 + Rs. 4167 + Rs. 834 + Rs. 1251
= Rs. 6669

From the equation-01, we get,

Apparel packing cost per pc,

(Rs. 32600 + Rs. 7500 + Rs. 500 + Rs. 6669)
= ………………………………………………………..
10000

= Rs. 4.70

After adding 15% profit,

Apparel packing or packaging rate stands at
= {4.70/ (1-15%)}
= Rs. 5.50

*Here we have calculated in Rs., but you can do it in USD or any other currency.