A price on a costing sheet looks like one number. It is not. Every price a factory quotes is five separate amounts, added together in a fixed order: what the fabric cost, what the trims cost, what the labour cost, what the factory's overhead cost, and what the factory kept as profit. A merchandiser who cannot separate these five is stuck trusting the bottom line, and cannot tell a buyer why the price is what it is, or find where a saving is actually possible.
This lesson teaches you the five components, in order, and what each one covers. It uses the same T-shirt order this course already follows, Order A, whose price of USD 3.20 was fixed in Course 1. Here you learn to read that same price as a stack, and to work out what share of the price each component is. The lesson mainly teaches the money flow: how a price is built up, piece by piece, rather than how the goods move or who owns them.
You need: nothing but this page. Course 1's lesson 1.3 already fixed Order A's price at USD 3.20; you do not need to recalculate it here.
By the end of this lesson you can:
Not covered here: how each component is calculated line by line (lesson 7.2), the difference between margin and markup (lesson 7.3), and how payment terms affect cash flow (lesson 7.4).
| Term | Meaning |
|---|---|
| FOB price | The price the factory charges for the garment, delivered on board the ship at its own port. Order A's FOB price is USD 3.20. |
| Fabric cost | The cost of the fabric used in one garment, driven by the fabric price per kilogram and how much fabric one piece consumes. |
| Trims | Everything sewn onto or attached to a garment besides the main fabric: labels, buttons, zips, thread. |
| Making charge | The labour cost of cutting, sewing and finishing one garment. Also called CMT (cut, make and trim) cost when quoted on its own. |
| Overhead | The factory's running costs, shared across every order it makes: rent, electricity, management salaries, machine depreciation. |
| Profit | What the factory keeps after every other cost is paid. The only component that is a deliberate decision, not a pass-through cost. |
| Costing sheet | The document that lists a garment's cost components and adds them to the price the factory quotes. |
| Share of price | One component's cost divided by the total price, usually shown as a percentage. |
A factory does not choose a price and work backward. It adds up five components, always in the same order: fabric, trims, making, overhead, profit. Each one is a separate, checkable, negotiable amount. Fabric and trims are what the factory paid to buy materials. Making and overhead are what it cost the factory to turn those materials into a finished garment. Profit is what the factory decided to keep. Order A's own costing, fixed in lesson 1.3, already shows the five numbers: fabric 1.15, trims 0.20, making 1.10, overhead 0.49, profit 0.26, adding to an FOB price of USD 3.20.
The five components never change. What changes from one style, one order or one factory to the next is how large each component is, and how it is driven. Here are the shapes you will meet most often.
| What can differ | The shapes you will meet | Why it matters to you |
|---|---|---|
| Fabric's share of price | For most simple styles, fabric is the largest single component, often a third or more of the price (Order A: about 36%). For a heavily embellished or trim-heavy style, trims can take a much bigger share. | Fabric price per kilogram and consumption per piece usually move the total price more than any other single input. |
| Making charge, by product complexity | A basic T-shirt has a low making charge because it has few seams. A jacket with linings, pockets and multiple closures has a much higher making charge for the same fabric cost. | Two garments with identical fabric can have very different FOB prices once making charge is added. |
| Overhead, by factory scale and utilisation | A large factory running near full capacity spreads its fixed costs (rent, machinery, management) over more pieces, so overhead per piece is lower. A small or under-booked factory carries a higher overhead per piece. | A factory quoting a higher price is not always less efficient; it may simply have fewer pieces to spread its overhead across. |
| Profit margin, by order type and relationship | A new, small or risky order often carries a higher profit margin to compensate the factory for the extra risk. A large, repeat order from a trusted buyer, like Order A, often carries a lower, steadier margin. | Profit is the one component a factory sets deliberately; it is the natural place a buyer and factory negotiate, not the place to expect a "true cost". |
| Domestic versus export pricing | An export order (like Order A, sold FOB to Northline Apparel) prices fabric, trims, making and overhead the same way as a domestic order, but usually adds no local sales tax to the factory's own price; a domestic order sold to a local brand like Cedar & Co. may include different terms in the same five-part stack. | The five components stay the same across export and domestic business; only the terms wrapped around the price change. |
Product families outside apparel keep the same five-component logic. A towel or a bedsheet still stacks fabric, trims (thread, labels, tags), making, overhead and profit; only fabric consumption and making complexity look different from a T-shirt.
The case we followThis course follows Order A: 15,000 basic cotton T-shirts that Delta Garments makes for Northline Apparel. Lesson 1.3 already fixed how Order A's FOB price of USD 3.20 breaks down. This lesson re-presents the same five numbers specifically as a stack, so you can see what share of the total price each one is.
| Component | Order A amount (USD per piece) | What it covers in Order A |
|---|---|---|
| Fabric | 1.15 | Knitted cotton jersey fabric bought from Colorline Dyeing |
| Trims | 0.20 | Labels, thread and other small items bought from Trimco |
| Making | 1.10 | Delta Garments' cutting, sewing and finishing labour |
| Overhead | 0.49 | Delta Garments' rent, electricity and management, shared across all its orders |
| Profit | 0.26 | What Delta Garments keeps after the other four costs |
| Total FOB price | 3.20 | What Northline Apparel pays Delta Garments per piece |
To find fabric's share of Order A's price, divide the fabric cost by the total FOB price and multiply by 100.
That is about 36% of the price. No other component comes close: making is the next largest at about a third, and trims is the smallest at about 6%.
Overhead (USD 0.49) looks bigger than trims (USD 0.20) on Order A's costing sheet, so it is tempting to target overhead first when looking for a saving. But overhead is usually fixed factory-wide, shared across every order the factory runs, and hard for a single order to change. A trims supplier switch, by contrast, can sometimes be negotiated order by order. Share of price tells you the size of a cost. It does not tell you how movable that cost actually is, and treating the two as the same thing sends a merchandiser after the wrong saving.
A garment's price is not one number. It is five costs added together, always in the same order: fabric, trims, making, overhead, profit. Each one can be checked and questioned on its own. On Order A, fabric is about a third of the price, the biggest single share, because fabric price and how much fabric one piece uses both matter a lot. To find any cost's share, divide it by the total price and multiply by 100. A cost being large does not mean it is easy to negotiate down; some large costs, like overhead, are shared across every order and hard to move, while a smaller cost tied to one order can sometimes be changed.
A new merchandiser at Delta Garments is shown Order A's costing sheet for the first time. Looking down the column of numbers, they notice overhead at USD 0.49 is the second-largest figure, bigger than making at first glance would suggest and much bigger than trims at USD 0.20. They suggest to their manager that overhead is where the factory should look first for a saving on this order.
Here is the costing sheet they are looking at:
Does the biggest-looking number on a costing sheet automatically mean the biggest realistic saving opportunity? Decide before you open the answer.
Not necessarily. Overhead is usually the least realistic of the larger costs to cut on a single order. Two facts decide this together.
First, what overhead actually is. Overhead is Delta Garments' rent, electricity and management cost, shared across everything the factory makes, not something bought fresh for Order A. Cutting overhead on this one order would mean changing how the whole factory runs, which one order's merchandiser cannot do alone.
Second, what a smaller-looking cost can be. Trims, at USD 0.20, is much smaller than overhead in dollar terms, but it is specific to this order: it was bought from one supplier (Trimco) for this order's labels and thread. A trims supplier switch, or a small change to the trim specification, can sometimes be negotiated order by order, in a way overhead cannot.
Share of price tells a merchandiser the size of a cost. It does not tell them how movable that cost is. The new merchandiser's instinct to look at the biggest number first is reasonable, but the better question is which cost is actually within this order's control.
Using the worked share from block 05: fabric alone is roughly 36% of Order A's price (USD 1.15 of USD 3.20). Trims, at USD 0.20, is about 6% of the same price.
Because fabric is such a large share, even a small percentage change in fabric price per kilogram moves the total FOB price by more than an equivalent percentage change in a smaller component like trims. A merchandiser who wants to protect Order A's margin should watch fabric price movements first, since that single input has roughly six times the weight of trims in the final price.
Open the Costing sheet workbook linked below. Its one sheet, "Costing", lists Order A's five components, its amount for each, and a share-of-price column calculated by formula, not typed in: fabric 1.15 of 3.20, trims 0.20, making 1.10, overhead 0.49, profit 0.26. Read that column first; fabric's share should read close to 36%, matching block 05.
Then fill in the yellow "Your order" column with your own five numbers. Its "your share of price" column is also a formula, so it recalculates the moment you type a number in.
[Download: Costing sheet](templates/T01-C07-costing-sheet.xlsx)
1. What are the five cost components that stack up to Order A's FOB price, in the order they stack?
2. What is fabric's approximate share of Order A's USD 3.20 FOB price?
3. A different order has a total FOB price of USD 5.00, with trims costing USD 0.40. What is trims' share of that order's price?
| EN | AR | FR | TR | Meaning |
|---|---|---|---|---|
| FOB price | سعر التسليم على ظهر السفينة | Prix FOB | FOB fiyatı | The price the factory charges for the garment, delivered on board the ship at its own port. |
| Fabric cost | تكلفة القماش | Coût du tissu | Kumaş maliyeti | The cost of the fabric used in one garment, driven by fabric price per kilogram and consumption per piece. |
| Trims | الإكسسوارات | Fournitures (accessoires) | Aksesuar (yardımcı malzeme) | Everything sewn onto or attached to a garment besides the main fabric: labels, buttons, zips, thread. |
| Making charge | تكلفة التصنيع | Coût de façon | İşçilik (fason) maliyeti | The labour cost of cutting, sewing and finishing one garment. |
| Overhead | التكاليف العامة | Frais généraux | Genel giderler | The factory's running costs, shared across every order it makes: rent, electricity, management. |
| Profit | الربح | Profit | Kâr | The money left over after all costs are paid, out of a selling price. |
| Costing sheet | كشف التكلفة | Fiche de coûts | Maliyet tablosu | The document that lists a garment's cost components and adds them to the price the factory quotes. |
| Share of price | نسبة السعر | Part du prix | Fiyat payı | One cost component's dollar value divided by the total price, usually shown as a percentage. |
You now know the five components that stack up to a price and roughly how big each one is. The next lesson goes inside each component and shows how a merchandiser actually calculates it, line by line, before the costing sheet is ever shown to a buyer. Back to the course map