Garment Export Costing Sheet: Building an FOB Price per Piece

Export buyers negotiate hard on FOB price, and margins in garment exports are thin. A costing that hides assumptions inside one number cannot be defended in negotiation or checked after the order. The costing sheet builds the FOB price line by line so every assumption is visible and can be updated when fabric prices or exchange rates move.

The build-up

1. Materials: fabric consumption per piece × price per metre (or kg) plus wastage, and every trim — buttons, zips, labels, threads, packing materials.
2. Cut-make (CM): the conversion cost per piece, from your own line costing or the job-work rate.
3. Washing and finishing, where applicable.
4. Packing per piece.
5. Testing: the order's test cost divided by order quantity.
6. Freight to the FOB point: inland transport, port and clearing charges for the order divided by quantity.
7. Rejection allowance: a percentage for pieces that fail inspection or are lost.
8. Factory overhead as a percentage of cost.
9. Finance cost for the cycle — packing credit interest from material purchase to realisation.

From cost to FOB

Commission and profit are usually expressed as a percentage of the FOB price, not of cost. So FOB = total cost ÷ (1 − commission % − profit %). Adding percentages to cost instead understates the price. The sheet then converts FOB to the buyer's currency at the exchange rate you enter, and shows the price per dozen, which many buyers use.

Fabric consumption

Consumption is the biggest variable. Get it from the marker — the cutting layout — not from a rule of thumb. Marker efficiency depends on the size ratio of the order, fabric width and pattern direction, so recheck consumption when the buyer changes the size breakdown. Add a separate wastage percentage for end losses, shrinkage and shade variation.

Exchange rate

Use the rate you can actually achieve: a forward-contract rate if you hedge, or your bank's rate for the expected realisation date. The costing should show the rate used so you can see the exposure if the rupee moves before you book a forward contract.

Export incentives

Incentive schemes such as RoDTEP and duty drawback reduce your net cost, but their rates are notified by the government for each product line and change over time. The sheet contains no rates: enter the current rate for your HS code after checking the latest schedule, and keep it at 0% if you are not sure. It shows the incentive separately so you can decide whether to price it in (some exporters do, to win orders) or treat it as a buffer.

Finance cost and realisation

Export proceeds generally have to be realised within the period set by the RBI's directions on export of goods and services (see our export realisation tracker). The finance cost line should reflect your real cycle: material purchase, production, shipment, and the buyer's payment terms.

After the order

Compare the costing with actuals — fabric used, CM, rejections, freight. The gaps tell you which assumptions to correct for the next quotation. In Bebaak Loom, style costing and order actuals sit side by side; EXIMFlow tracks the shipment, incentives and realisation.

Worked example (illustrative)

A woven shirt uses 1.35 m of fabric at ₹210 per metre with 4% wastage (about ₹295), plus lining, buttons and labels — materials around ₹337 per piece. Adding CM of ₹95, washing ₹18, packing ₹12, testing and freight spread over 5,000 pieces, a 2% rejection allowance, 8% overhead and 1.5% finance cost gives a total cost of about ₹536. With 5% commission and 8% profit as percentages of FOB, the FOB price is ₹536 ÷ 0.87 ≈ ₹616, or about US$7.33 at ₹84 to the dollar — US$88 per dozen. Every one of these numbers is an input you can change, which is the point: when the buyer asks for US$7, you can see which lines would have to move.

Common mistakes

• Adding commission and profit as a percentage of cost.
• Fabric consumption from a rule of thumb, not the marker.
• Using today's spot exchange rate for an order paid in four months.
• Building incentive rates into the price without checking the current schedule.
• No rejection allowance.