Course contents
- 01How the price of a garment is built from fabric to margin, stage by stage
- 02Costing a garment: fabric, trims, making charge, overhead and profit
- 03Margin and markup: the difference, and how each is calculated
- 04Payment terms and cash flow: how and when money moves between buyer and factory
- 05Where profit is made and lost across the value chain: a worked comparison
Costing a garment: fabric, trims, making charge, overhead and profit
This page is for anyone who builds or checks a garment's costing sheet
A costing sheet is the document that shows how a garment's price is built, component by component, and it is the tool a merchandiser uses every time a price is quoted, questioned, or renegotiated. Lesson 7.1 named the five cost components that stack up to a garment's price: fabric, trims, making, overhead and profit. This lesson shows you how to build the sheet itself, and one rule matters more than any other: every component's share of the total price must be calculated by a live formula, never typed in by hand. Without that rule, a costing sheet can look correct today and be silently wrong tomorrow, the moment any one cost changes. This lesson mainly teaches the money flow of an order: how a price is built up and checked, piece by piece.
What you need, and what this lesson does not cover
You need: the five cost components from lesson 7.1 (fabric, trims, making, overhead, profit). You do not need to know how to write a spreadsheet formula before starting; this lesson shows you.
By the end of this lesson you can:
- build a costing sheet with each cost component in its own row and its own typed dollar value;
- add a total row that sums the components with a formula instead of a typed figure;
- add a share-of-price column that divides each component by the total with a live formula;
- check that the five shares of price add up to 100% as a sanity check;
- explain why a typed percentage goes silently wrong the next time a cost component changes.
Not covered here: how margin and markup carry the price from FOB to the shop shelf (lesson 7.3), and how payment terms affect the factory's cash flow (lesson 7.4).
Words you will meet in this lesson
| Term | Meaning |
|---|---|
| Costing sheet | The document that lists a garment's cost components and adds them up to its total price. |
| Cost component | One part of a garment's total price: fabric, trims, making, overhead, or profit. |
| Share of price | What percentage of the total price one cost component makes up. |
| Formula | An instruction in a spreadsheet cell that calculates a value from other cells, instead of a value typed in by hand. |
| Typed number | A value entered directly into a cell as a fixed figure, with no formula behind it. |
| Overhead | The factory's running costs shared across everything it makes: rent, electricity, management. |
| FOB (free on board) | The factory delivers the goods on board the ship at its own port. Freight from there is the buyer's cost. |
| Ex-factory price | The price a domestic buyer pays a factory for goods collected or delivered locally, with no export shipping terms attached. |
A costing sheet's shares of price must be calculated by formula, never typed
Building a costing sheet means entering each cost component's own dollar value, then calculating its share of the total price, never typing that share in by hand. The calculation must be a live formula, so that if any one component changes, every share updates automatically, instead of needing to be re-typed by someone who remembers to do it. A costing sheet with typed shares and a costing sheet with formula-driven shares can look identical on the day they are built. The difference only shows up the first time a cost changes.
0.359375 × 100 = 35.9375%, fabric's share of price (rounds to 35.9%)
The same five components appear in every costing sheet, but the framing changes
| What can differ | The shapes you will meet | Why it matters to you |
|---|---|---|
| How the total is built | Typed-total costing (the wrong way): someone adds fabric, trims, making, overhead and profit on a calculator and types the answer into the total cell. Formula-driven costing (the right way): the total and every share are formulas referencing the component cells. | A typed total looks the same as a formula-driven one until one component changes, and then the typed total silently goes stale while the formula updates itself. |
| Export or domestic pricing | Order A's costing is framed as an FOB export price. Cedar & Co.'s own domestic costing follows the same five-component structure, but without an FOB framing: its "price" is what it pays Delta Garments ex-factory, then it adds its own local delivery cost. | The five components stay the same, but the price you compare against changes: an export FOB price is not the same figure as a domestic ex-factory price plus delivery. |
| The product being costed | The same five-component method applies to Order B, the jeans, even though the exact cost figures differ from Order A's T-shirt. | Learning the method on one product lets you cost any product; the numbers change, the structure does not. |
| Who reads the sheet | A merchandiser builds it to quote a price. A buyer reads it to judge whether a price is fair. A factory owner reads it to see where the margin sits. | The same sheet must answer different questions for different readers, which is only possible if every number in it can be trusted and traced back to a formula. |
Order A's costing sheet: Delta Garments builds up the USD 3.20 FOB price
Delta Garments builds the costing sheet for Order A, Northline Apparel's 15,000-piece basic cotton T-shirt. Five cost components sit in the sheet, each entered as its own dollar value: fabric USD 1.15, trims USD 0.20, making USD 1.10, overhead USD 0.49, profit USD 0.26. A total row sums them with a formula, giving the FOB price of USD 3.20. Beside each component's dollar value sits a share-of-price column, calculated by a formula, never typed.
| Cost component | Order A (USD per piece) | Share of price (formula) |
|---|---|---|
| Fabric | 1.15 | 35.9% |
| Trims | 0.20 | 6.25% |
| Making | 1.10 | 34.375% |
| Overhead | 0.49 | 15.3125% |
| Profit | 0.26 | 8.125% |
| Total (FOB price) | 3.20 | 100% |
Every one of Order A's five shares comes from the same formula, dividing the component by the total
Trims is 0.0625 of the total; 0.0625 × 100 = 6.25% (trims' share)
Making is 0.34375 of the total; 0.34375 × 100 = 34.375% (making's share)
Overhead is 0.153125 of the total; 0.153125 × 100 = 15.3125% (overhead's share)
Profit is 0.08125 of the total; 0.08125 × 100 = 8.125% (profit's share)
The five shares add up to 100%, which is the sanity check that tells you the formulas are wired correctly.
Adding all five shares at full precision (35.9375, 6.25, 34.375, 15.3125 and 8.125) gives exactly 100%, confirming the formulas are wired correctly. The commonly quoted rounded figures (35.9%, 6.25%, 34.375%, 15.3125% and 8.125%) sum to 99.9625% only because fabric's own share was rounded down for readability.
The methodBuild a costing sheet in five steps
- List every cost component in its own row: fabric, trims, making, overhead, profit.
- Enter each component's dollar value directly into its own cell, never a running total.
- Add a total row that sums the components with a formula, not a typed figure.
- Add a share-of-price column that divides each component by the total with a formula.
- Confirm the five shares sum to 100% as a sanity check that the formulas are correct.
A common mistake is typing a percentage share by hand after calculating it once on a calculator
A common mistake is typing a percentage share into a costing sheet after working it out once on a separate calculator, since the number is correct at the moment it is typed. The moment any cost component changes, for example a fabric price rise or a new overhead rate, the typed percentage is now silently wrong until someone remembers to redo the calculation and retype it. A formula-driven cell never goes stale this way, because it recalculates itself every time the sheet opens or a component changes.
A costing sheet lists a garment's five cost parts: fabric, trims, making, overhead, profit. Each one gets its own dollar value, typed in by hand. The total is added up by a formula, never typed. Each part's share of the total price is also worked out by a formula, never typed. This matters because if a formula does the work, then changing one dollar value updates everything else by itself. If a person types the share instead, that share stays exactly as typed even after the dollar values change, and nobody may notice it is now wrong.
- A costing sheet has five cost components: fabric, trims, making, overhead, profit.
- The total row is a formula that sums the components, never a typed figure.
- The share-of-price column is a formula that divides each component by the total, never typed.
- The five shares of price always sum to 100%; if they do not, a formula is wired wrong.
- A typed percentage is correct only until the next cost change, then it is silently wrong.
- The same five-component method applies to an export FOB price and a domestic ex-factory price alike.
Mona types "36%" into the fabric share cell instead of entering a formula
Mona builds Order A's costing sheet at Delta Garments. Pressed for time, she has already worked out fabric's share of the price on a separate calculator, so she types "36%" directly into the fabric share cell instead of entering a formula.
Here is the row as Mona leaves it:
Does this shortcut cause any immediate problem? Decide before opening the answer.
Show decision
Not immediately. Two facts decide this together.
First, today's number is correct. Fabric is USD 1.15 of a USD 3.20 total, a share of about 35.9%, which rounds to the 36% Mona typed. Nothing on the sheet is wrong today.
Second, the risk sits in the future, not the present. The moment the fabric price changes, for example if a cheaper cotton source lowers fabric to USD 1.05, the typed 36% is now silently wrong until Mona remembers to recalculate and retype it. A formula-driven cell would have updated itself automatically, showing 33.9% (1.05 of a new USD 3.10 total) the moment the fabric cell changed.
Neither fact alone tells the full story. Looking only at today's number would say the shortcut is harmless. Looking only at future risk without checking today's number would miss that the sheet is not wrong yet. The real risk is not today's number; it is every future update this sheet will ever need.
A stale, hand-typed share can misdirect where a factory looks to cut cost
Framed qualitatively, a stale, hand-typed percentage that nobody catches can lead to a wrong assumption about which cost component actually drives the price most, the point lesson 7.1 already made about fabric's outsized share. If a typed fabric share of 36% is left in place after fabric's real share has moved to 33.9%, someone reading the sheet may keep treating fabric as more dominant than it now is, and misdirect negotiation effort toward fabric when overhead or making has meanwhile become the bigger lever. This is a cost this lesson avoids entirely by insisting on formulas, not typed numbers, for every share of price.
Fabric's typed share, left stale at 36%, no longer matches the sheet once its true share has moved to about 33.9%, a gap of roughly 2 percentage points of misleading information for anyone still reading the old typed figure.
Costing sheet: build Order A's row, then your own order's row
The Costing sheet has five columns: cost component, Order A's amount, Order A's share of price, your order's amount (a yellow input cell), and your share of price. Order A's rows are filled in already, totalling 3.20. Its share-of-price column and total row are live formulas, never typed numbers: each share divides the row's amount by the total, and the total sums the components above it. For your own order, type each component's dollar value into the yellow column only, leaving every share cell and the total row untouched. If your five shares do not sum to 100%, a formula has been overwritten with a typed number, and that cell needs fixing first.
[Download the Costing sheet](../../templates/T01-C07-costing-sheet.xlsx)
1. Why must a costing sheet's share-of-price column be a formula rather than a typed number?
2. What do Order A's five cost-component shares of price add up to?
3. A 3,000-piece order has a total price of USD 9.80 per piece, and its trims cost USD 0.35 per piece. What is trims' share of price?
| EN | AR | FR | TR | Meaning |
|---|---|---|---|---|
| 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. |
| Cost component | عنصر التكلفة | Élément de coût | Maliyet bileşeni | One part of a garment's total price: fabric, trims, making, overhead, or profit. |
| 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. |
| Formula | صيغة حسابية | Formule | Formül | An instruction in a spreadsheet cell that calculates a value from other cells, instead of a value typed in by hand. |
| Typed number | رقم مكتوب يدويًا | Nombre saisi manuellement | Elle girilen sayı | A value entered directly into a cell as a fixed figure, with no formula behind it. |
| Overhead | التكاليف العامة | Frais généraux | Genel giderler | The factory's running costs shared across everything it makes: rent, electricity, management. |
| FOB (free on board) | تسليم على ظهر السفينة في ميناء المصنع | FOB (franco à bord) | FOB (gemide teslim) | The factory delivers the goods on board the ship at its own port. Freight from there is the buyer's cost. |
| Ex-factory price | سعر خروج المصنع | Prix départ usine | Fabrika çıkış fiyatı | What the buyer pays the factory for the finished goods, at the factory's own gate, before any delivery cost is added. |
Lesson 7.3: Margin and markup
You can now build a costing sheet whose shares of price update themselves. The next lesson uses that same sheet to work out margin and markup as the garment moves from the factory's FOB price to the wholesale price and the shop price. Back to the course map