Textile costing

Textile Technology (B.E./B.Tech) · Quality and industry · free study notes for exams, placements and interviews

In short

Textile costing is the systematic build-up of the cost of a fibre, yarn, fabric or garment from its cost elements - material, labour and overheads - so that a selling price, a quotation or a make-or-buy decision can be defended with numbers. It matters because textiles is a low-margin, high-volume business where raw material alone is 55-70% of yarn cost and a paisa per metre decides whether an export order is won. It is examined in university papers on "Textile Mill Management / Costing and Economics", in GATE-TF style numericals on production and waste, and in placement rounds at spinning mills, composite mills, processing houses and export houses (Arvind, Vardhman, Trident, Welspun, KPR, Shahi, Raymond, Alok). On the job it is the daily language of merchandisers, production planners, costing officers and cost accountants.

Explained

Cost elements and the cost sheet

Direct material - cotton/PSF/viscose for a mill; yarn for a weaver; fabric and trims for a garment unit.
Direct labour - wages of workers directly converting the material (ring-frame tenters, weavers, sewing operators).
Direct expenses (chargeable) - job-work charges, specific dyes for one order, royalty on a design.
Overheads - factory (power, stores, repairs, depreciation, supervision), administrative, selling and distribution.
Build-up: Prime cost = direct material + direct labour + direct expenses → Factory/works cost = prime cost + factory overheads + opening WIP − closing WIP → Cost of production = works cost + administrative overheads → Cost of sales = cost of production + selling & distribution overheads (adjusted for finished-goods stock) → Sales = cost of sales + profit.
Behaviour classification: fixed (depreciation, interest, salaries), variable (fibre, dyes, power on machines), semi-variable (maintenance, supervision). Needed for break-even and for pricing marginal orders.
Controllable vs uncontrollable, and sunk vs opportunity cost - cotton price is uncontrollable at mill level; waste% and utilisation are controllable, which is where costing effort pays.

Costing methods and systems used in textiles

Process costing - the standard method for spinning, weaving and processing: cost is accumulated department-wise (blowroom, carding, drawing, combing, speed frame, ring frame, winding) and divided by output; normal loss is absorbed by good output, abnormal loss is written off.
Operation / multiple costing - a composite mill costs each operation and adds them (spinning + weaving + processing).
Job and batch costing - garment export orders, dye lots, made-ups; cost is tracked per style/order number.
Unit (output) costing - cost per kg of yarn, per metre or per kg of fabric, per piece of garment.
Absorption costing - all fixed overheads are loaded on output via a rate (per machine hour, per spindle shift, per kg); used for statutory cost records and inventory valuation.
Marginal (variable) costing - only variable cost is charged to the product; contribution drives short-run decisions on export orders and idle looms.
Standard costing with variance analysis - a pre-set standard cost per kg/metre, compared monthly with actuals; variances split into price/rate and usage/efficiency.
Activity-based costing - allocates shade changes, lot changes and sampling to small, fancy orders that absorption costing under-prices; increasingly used in processing houses with many small lots.
Target costing - buyer fixes FOB; the factory works backwards to allowable fabric, trim and CM cost. Normal practice in apparel exports.
Cost Accounting Standards (CAS 1-24) of ICMAI define how material cost, employee cost, utilities, depreciation and capacity are to be measured; cost records are kept in form CRA-1 and cost audit reported in CRA-3.

Spinning (yarn) costing

Two blocks: raw material cost (net of waste realisation) and conversion cost.
Cotton in India trades per candy = 355.62 kg; Indian bale = 170 kg. Always convert to ₹/kg before costing. Mixing cost is the weighted average of the varieties in the lay-down.
Waste (blowroom droppings, card flat strips and sliver waste, comber noil 14-18% for combed counts, roving and ring-frame hard waste, winding waste) plus invisible loss (1-2%, no realisation). Combed counts therefore carry far higher material cost than carded.
Yarn realisation % = yarn out / cotton fed × 100 - the single most watched mill number (about 88% carded, 72-76% combed). One percentage point of realisation moves cost per kg by roughly ₹2.
Soft/usable waste is sold back (comber noil to open-end mills, droppings to the waste trade), so net material cost = gross cotton cost − waste realisation.
Conversion cost per kg = power + labour + stores & spares + repairs & maintenance + packing + depreciation + interest + administration. Power is measured as UKG (units per kg), roughly 2.6-3.0 kWh/kg for 30s carded and 3.5-4.5 kWh/kg for 60s combed; SITRA/ATIRA publish benchmark norms.
Count effect: production per spindle falls almost in proportion to count, so conversion cost per kg roughly doubles when count doubles. Coarse counts are material-dominated, fine counts conversion-dominated.
Costing must use achieved production, not nameplate: efficiency (utilisation × machine efficiency), doffing time, lot changes and power cuts all raise cost per kg.

Weaving, knitting and processing costing

Grey fabric cost per metre = (warp yarn cost + weft yarn cost + weaving waste) + warping/sizing charges + weaving conversion cost.
Yarn requirement comes from the fabric specification: count, EPI/PPI (or wales/courses), width, crimp and selvedge/wastage allowances. Size pick-up (8-12% on warp) adds weight that is later desized - it is a cost, not saleable weight.
Weaving conversion is quoted per metre or per pick-metre (₹ per 1,000 picks per metre). Loom cost comes from a machine hour rate; airjet looms have high power and capital cost but 600-800 ppm, rapier looms lower speed and power.
Knitting costing is per kg: yarn cost + knitting charges (₹/kg, by machine gauge and diameter) + 2-4% knitting waste; GSM and width are controlled by loop length and stitch density.
Processing (wet) costing per kg or per metre: dyes and chemicals (dose × fabric weight, decided by shade depth and MLR), water, steam (kg steam/kg fabric), power, effluent treatment, labour, rejection/reprocess allowance. Dark shades and reactive-dyed cotton cost multiples of pale shades; right-first-time % is a cost driver.
Machine hour rate = (fixed + variable cost of the machine centre per period) / productive machine hours in that period - the standard way to absorb overheads in weaving, knitting and processing.
Depreciation for cost records follows useful life under Schedule II of the Companies Act, 2013; income-tax depreciation uses the WDV block rates under the Income-tax Act, 2025 (which replaced the 1961 Act from 1 April 2026 and renumbered all sections) - the two differ, so cost sheets and tax computations never match.

Garment and export costing

Fabric consumption per garment from the marker/CAD average + cutting and end-bit wastage (3-8%) + sampling allowance; the biggest cost and the biggest error source.
Trims and accessories - thread (consumption from seam length × SPI × stitch-type factor), buttons, zips, interlining, labels, polybag, carton; costed per piece from a trim card.
CM (cut-make) cost = SAM × cost per minute. SAM (standard allowed minutes) comes from time study/GSD; cost per minute comes from total factory cost ÷ earned minutes at achieved line efficiency (45-60% is common in India).
CMT = cut, make, trim (buyer supplies fabric); FOB = free on board (factory supplies everything, delivered on board the vessel at the named port of shipment); CFR adds ocean freight and CIF adds freight plus marine insurance; LDP/DDP add duty and inland delivery at destination. Quote the Incoterm or the number is meaningless.
Add rejection/seconds allowance, testing charges, inspection, merchandising overhead, bank and documentation charges, interest on working capital, then profit (8-15%).
Export incentives are costed as income, not cost: RoSCTL for apparel and made-ups, RoDTEP for other textiles, and duty drawback - rates are notified and revised, so always use the current notified rate.
Currency: FOB is quoted in USD/EUR, so the ₹/USD rate used and its hedge cost belong in the cost sheet.

Decision tools and statutory framework

Contribution = sales − variable cost. Accept a low-price export order if it gives positive contribution and capacity is idle; never if it must displace a higher-contribution order.
Break-even, margin of safety, P/V ratio - used to judge whether a mill survives a cotton price spike or a lean season.
Key-factor (limiting-factor) analysis - rank products by contribution per spindle shift, per loom hour or per kg of dyeing capacity, not per piece.
GST: since 22 September 2025 the slabs are 5%, 18% and 40%. Fibre, yarn and fabric are at 5%, and textile job work at 5%; readymade garments are at 5% up to the notified price threshold (raised in the 2025 rationalisation, reported as ₹2,500 per piece) and 18% above it - the 40% slab is a demerit-goods rate and does not apply to textiles. Verify the current notification before quoting, and remember GST is a pass-through: only blocked credit is a cost.
Labour cost under the four Labour Codes, in force from 21 November 2025 (replacing the Factories, Minimum Wages, Industrial Disputes and BOCW Acts): the single definition of "wages" caps excluded allowances at 50% of total remuneration, which raises the PF, gratuity and bonus base - a real increase in costed labour for mills and garment units.
Cost records and cost audit: textiles is in the non-regulated sector list of the Companies (Cost Records and Audit) Rules, 2014 - broadly, cost records are required above ₹35 crore turnover and cost audit above ₹100 crore overall with ₹35 crore of the covered product. Thresholds have been amended over time; confirm the current rule before relying on it.
Policy support that changes the cost base: PLI for MMF fabric, MMF apparel and technical textiles; PM MITRA mega parks; the earlier TUFS/ATUFS interest and capital subsidy schemes (closed to new cases) still shown in older cost sheets.

Key points

Prime cost - direct material + direct labour + direct expenses; overheads are added after it.
Cost of production vs cost of sales - selling and distribution overheads sit outside cost of production.
Process costing - the textile default; cost per kg or per metre, department by department.
Yarn realisation - good yarn ÷ cotton fed × 100; the master efficiency figure of a spinning mill.
Invisible loss - moisture and fly loss with zero sale value; it increases cost and cannot be recovered.
Waste realisation - sale value of comber noil, droppings and hard waste, deducted from gross material cost.
Candy = 355.62 kg; Indian bale = 170 kg - convert before costing cotton.
UKG - units (kWh) of power per kg of yarn; rises sharply with count and with TPI.
Conversion cost - everything except net material; per kg it roughly doubles when count doubles.
GSM from specification - GSM ≈ 23.25 × [EPI(1+cw)/Ne_warp + PPI(1+cf)/Ne_weft]; crimp and size add weight.
Machine hour rate - annual machine-centre cost ÷ productive hours; absorbs overheads in weaving and processing.
SAM and cost per minute - the two numbers that fix garment CM cost.
Incoterms - CMT < FOB < CFR/CIF < DDP; a price without its Incoterm is not a quotation.
Contribution - sales minus variable cost; the only valid test for a marginal order on idle capacity.
Break-even units = fixed cost ÷ contribution per unit; margin of safety = (actual − BEP)/actual.
Variance analysis - price/rate variance uses actual quantity; usage/efficiency variance uses standard price.
GST is a pass-through - 5% on fibre, yarn, fabric and textile job work since 22 September 2025; only blocked ITC is a cost.
Wages definition under the Labour Codes (from 21 November 2025) caps excluded allowances at 50%, raising PF/gratuity/bonus loading.

Formulas and examples

Cotton cost (₹/kg) = price per candy ÷ 355.62 [1 candy = 355.62 kg; 1 Indian bale = 170 kg]
Raw cotton per kg yarn = 1 / (1 − total waste fraction); Yarn realisation % = yarn out ÷ cotton fed × 100
Net material cost per kg yarn = (mixing cost ÷ (1 − waste)) − (saleable waste kg × waste rate ₹/kg)
Ring-frame output (kg/spindle/8 h shift) = n × η / (138.9 × TPI × Ne)
n = spindle speed rpm, η = efficiency (fraction), TPI = twists per inch, Ne = English count (hanks of 840 yd per lb)
Count conversions: tex = 590.5/Ne; denier = 5315/Ne; Nm = 1.693 × Ne
Loom output (m/h) = ppm × 60 × η / (PPI × 39.37) [ppm = picks per minute; 39.37 inch = 1 m]
Fabric GSM = 23.25 × [EPI × (1+c_w)/Ne_warp + PPI × (1+c_f)/Ne_weft] [c = crimp fraction]
Fabric weight per metre (kg) = GSM × width (m) / 1000; Yarn cost per metre = that weight × yarn ₹/kg × (1 + weaving waste)
Machine hour rate = (depreciation + interest + power + labour + repairs + allocated overheads per year) ÷ productive machine hours per year
Cost per minute = total factory cost per month ÷ (operators × working minutes × line efficiency)
CM cost = SAM × cost per minute; FOB = (fabric + trims + CM) × (1 + rejection%) + overheads + profit
Contribution = sales − variable cost; BEP (units) = fixed cost ÷ contribution per unit; P/V ratio = contribution ÷ sales
Material price variance = (SP − AP) × AQ; Material usage variance = (SQ − AQ) × SP [S = standard, A = actual]

Example 1 - cost sheet for 1 kg of 40s carded ring yarn Cotton at ₹62,000/candy → 62,000 ÷ 355.62 = ₹174.34/kg. Total waste 12% (of which 2% invisible), saleable waste sells at ₹55/kg.

Cotton required = 1 ÷ 0.88 = 1.1364 kg → gross material = 1.1364 × 174.34 = ₹198.11
Invisible loss = 0.02 × 1.1364 = 0.0227 kg; saleable waste = 0.1364 − 0.0227 = 0.1136 kg → realisation = 0.1136 × 55 = ₹6.25
Net material cost = 198.11 − 6.25 = ₹191.86
Conversion: power 3.2 kWh × ₹7.50 = ₹24.00; labour ₹22; stores & packing ₹12; repairs ₹6; depreciation ₹14; interest ₹9; administration ₹8 → ₹95.00
Cost of production = 191.86 + 95.00 = ₹286.86; selling & distribution ₹9 → cost of sales = ₹295.86
Profit at 10% on cost = ₹29.59 → ex-mill price = ₹325.45/kg; with 5% GST, invoice = ₹341.72/kg
Material share of cost of sales = 191.86 ÷ 295.86 = 64.8%

Example 2 - production and the count effect 40s, 16,000 rpm, TPI 24, efficiency 95%: output = (16,000 × 0.95) ÷ (138.9 × 24 × 40) = 15,200 ÷ 133,344 = 0.114 kg/spindle/shift (114 g). A 25,000-spindle mill on 3 shifts = 0.114 × 25,000 × 3 = 8,550 kg/day ≈ 8.55 t. At 30 running days, 256.5 t/month. If the same mill spins 80s, output per spindle roughly halves, so the ₹95/kg conversion cost in Example 1 would rise to about ₹190/kg - which is why fine-count mills live on conversion efficiency, not cotton price.

Example 3 - 40×40/120×80 plain shirting, 120 cm width

Warp = 23.25 × 120/40 = 69.75 g/m², × 1.07 (7% crimp) = 74.63; weft = 23.25 × 80/40 = 46.50, × 1.05 = 48.83 → GSM = 123.5
Weight per metre = 123.5 × 1.20 ÷ 1000 = 0.1482 kg/m; yarn at ₹300/kg → ₹44.46, plus 2% weaving waste = ₹45.35/m
Loom output = 600 × 60 × 0.85 ÷ (80 × 39.37) = 30,600 ÷ 3,149.6 = 9.72 m/h
Machine hour rate: depreciation ₹2,50,000 + interest ₹1,12,500 + power (4 kW × 8,000 h × ₹7.50) ₹2,40,000 + repairs/stores ₹60,000 + labour ₹50,000 = ₹7,12,500 ÷ 8,000 h = ₹89.06/h → weaving cost = 89.06 ÷ 9.72 = ₹9.16/m
Warping + sizing ₹4.00/m → grey cost = 45.35 + 4.00 + 9.16 = ₹58.51/m; processing ₹14.00 → finished fabric = ₹72.51/m

Example 4 - cost per minute and shirt FOB 500 operators × 26 days × 480 min = 62,40,000 available minutes; at 55% efficiency = 34,32,000 earned minutes. Factory cost ₹1.20 crore/month → ₹3.50 per minute. A shirt: marker average 1.55 m + 7% wastage = 1.6585 m × ₹72.51 = ₹120.24 fabric; trims ₹25.00; SAM 22 min × ₹3.50 = ₹77.00 CM. Sub-total ₹222.24 × 1.02 (2% rejection) = ₹226.68; profit 12% = ₹27.20 → FOB ₹253.88, about USD 2.88 at ₹88/USD (rate must be the hedged or booked rate). RoSCTL/drawback is credited separately as income.

Example 5 - break-even and variance Processing house: fixed cost ₹40,00,000/month, selling price ₹28/m, variable cost ₹18/m → contribution ₹10/m.

BEP = 40,00,000 ÷ 10 = 4,00,000 m/month; P/V ratio = 10/28 = 35.7%; BEP in value = 40,00,000 ÷ 0.357 = ₹1.12 crore
At 5,50,000 m: contribution ₹55,00,000 − ₹40,00,000 = ₹15,00,000 profit; margin of safety = 1,50,000 m = 27.3%
Variance (Example 1 standard): standard 1.1364 kg at ₹175 = ₹198.87; actual 1.18 kg at ₹172 = ₹202.96. Price variance = (175 − 172) × 1.18 = +₹3.54 favourable; usage variance = (1.1364 − 1.18) × 175 = −₹7.63 adverse; total −₹4.09 adverse (198.87 − 202.96) - cheaper cotton bought, but more of it consumed.

Cost block	Spinning (₹/kg yarn)	Weaving (₹/m grey)	Garment (₹/shirt FOB)
Material	191.86 (59%)	45.35 (78%)	145.24 fabric + trims (57%)
Conversion/CM	95.00 (29%)	13.16 (22%)	77.00 (30%)
Selling, rejection, profit	38.59	included downstream	31.64
Total	325.45	58.51	253.88

Where it is used

Spinning mills (Vardhman, Nahar, KPR, Sangam) - daily cost per kg, UKG and realisation reports; price fixation against NCDEX/CCI cotton movements.
Composite and weaving units (Arvind, Raymond, Mafatlal, Bhilwara/Surat powerloom clusters) - per-pick weaving rates, loom hour rates, job-work quotations.
Processing houses and dye-houses - recipe cost per kg, reprocess cost, ETP cost per m³ loaded on every lot.
Apparel and home-textile exporters (Shahi, Gokaldas, Welspun, Trident) - buyer cost sheets, target costing against FOB, SAM-based CM and costing in merchandising software.
Job roles - costing officer/CMA in mills, merchandiser and sourcing executive in export houses, industrial engineer (SAM, efficiency, cost per minute), production planner, and cost auditors signing CRA-3.
Technical and institutional use - SITRA/ATIRA/NITRA benchmarking studies, TEXPROCIL and AEPC cost-competitiveness submissions, bank project appraisals and PLI/PM MITRA project reports.

Interview questions

Q: Why is raw material such a large share of yarn cost, and what does that imply? A: Cotton is 55-70% of cost, so a 1% change in waste or realisation moves cost per kg more than most conversion savings; mixing control and realisation are the first levers.
Q: What is yarn realisation and how do you improve it? A: Good yarn as a percentage of cotton fed; improved by optimum blowroom/card settings, controlling comber noil, reducing hard waste and recycling soft waste - without losing yarn quality.
Q: Difference between waste and invisible loss in costing? A: Waste is physically collected and has a sale value that is deducted from material cost; invisible loss (moisture, fly) cannot be collected or sold, so it is pure cost.
Q: Why does conversion cost per kg rise with yarn count? A: Output per spindle is inversely proportional to count (and to TPI), so the same machine, power and labour cost is spread over far fewer kilograms.
Q: How do you cost a fabric from only its specification? A: Compute warp and weft GSM from EPI/PPI and counts with crimp, convert to kg per metre using width, price the yarn, add waste, sizing, weaving conversion from the machine hour rate, then processing.
Q: What is a machine hour rate and why use it in weaving? A: Annual machine-centre cost (depreciation, interest, power, labour, repairs, overheads) divided by productive hours; looms differ in speed and power, so per-hour absorption is fairer than a flat per-metre rate.
Q: What is the difference between CMT and FOB? A: In CMT the buyer supplies fabric and the factory charges only cutting, making and trims; in FOB the factory buys everything and the price covers goods delivered on board at the Indian port.
Q: How is cost per minute calculated in a garment factory? A: Total monthly factory cost divided by earned minutes, i.e. operators × working minutes × line efficiency; CM cost is then SAM × cost per minute.
Q: A buyer offers a price below your full cost and your looms are idle - do you accept? A: Yes if it covers variable cost and leaves positive contribution and no better order is displaced; no if it becomes the reference price for the account or blocks capacity.
Q: Is GST a cost in a textile cost sheet? A: No, it is a pass-through recovered through input tax credit; only blocked or unutilised credit, compliance cost and the working capital locked in refunds are real costs.
Q: Which variance tells you the purchase department did well but the mill did badly? A: A favourable material price variance with an adverse usage variance - cheaper cotton was bought but more of it was consumed per kg of yarn.
Q: Why do absorption and marginal costing give different profits in a month? A: Absorption costing carries fixed overheads into closing stock, so profit changes with inventory movement; marginal costing charges all fixed cost to the period.

Common mistakes

Dividing by (1 − waste) wrongly - multiplying yarn weight by 1.12 instead of dividing by 0.88 understates material cost.
Deducting waste realisation on the whole waste including invisible loss, which has no sale value.
Costing cotton at ₹/candy or ₹/bale without converting to ₹/kg (355.62 kg and 170 kg respectively).
Using nameplate speed and 100% efficiency in production formulas, then wondering why actual cost per kg is higher.
Forgetting crimp, size pick-up, selvedge and cutting wastage, so fabric consumption and GSM come out low.
Quoting a price without the Incoterm, or forgetting freight, insurance, bank charges and the exchange rate in an export quotation.
Treating GST or export incentives as cost elements, and mixing cost-record depreciation (Companies Act Schedule II) with income-tax depreciation under the Income-tax Act, 2025.