Costing and Textile Economics
What this domain tests
Costing calculates the true cost of making a textile item; textile economics explains prices, supply and value addition. The exam tests costing sheets, mark-up and simple break-even.
Core rules
- Unit cost = direct materials + direct labour + overheads (power, rent, machine depreciation, packaging) + wastage. Include thread, interfacing, buttons and trims, not just main fabric.
- Selling price = unit cost + profit. Mark-up is usually calculated on cost; margin is profit as a percentage of selling price. Do not mix them.
- Break-even quantity = fixed costs ÷ (selling price per unit − variable cost per unit).
- Textile economics: supply and demand affect fibre prices; economies of scale lower unit cost; value addition through design, branding and finishing raises price; quality and reliability support repeat sales.
Worked example
A tote bag uses 0.6 m fabric at P40/m, thread and trims P8, labour P30, overheads P12. Material = P24; total unit cost = P24 + P8 + P30 + P12 = P74. Add 25% mark-up on cost: P74 × 1.25 = P92.50. If instead a 25% margin is required, price = P74 ÷ 0.75 = P98.67. The reasoning shows mark-up and margin give different prices.
Traps
Do not omit overheads or wastage; do not confuse mark-up with margin; do not treat profit as cost. Check units (per metre, per item). A low price may not cover fixed costs.