Garment Costing: Complete Guide for Fashion Brands
Master the art of garment costing. Learn how to calculate true product costs, protect your margins, and price profitably—before you commit to production.
What is Garment Costing?
Garment costing is the process of calculating the total cost to produce a single unit of clothing. It includes everything from fabric and trims to labor, shipping, and duties—giving you the true "landed cost" before you set your retail price.
Get it wrong, and you're either leaving money on the table or pricing yourself out of the market. Get it right, and you can make confident decisions about what to produce, where to source, and how to price.
Your biggest line item
Varies by region
Often underestimated
Cost to retail
Garment Cost Breakdown
Every garment cost is made up of these components. The percentages vary by product type and sourcing strategy, but this is the typical breakdown:
| Component | % of Cost | What's Included |
|---|---|---|
| Fabric | 40-60% | Main body fabric, lining, interfacing |
| Trims | 10-15% | Buttons, zippers, labels, threads, elastic |
| CMT (Cut, Make, Trim) | 15-25% | Labor costs for manufacturing |
| Packaging | 2-5% | Hangtags, polybags, tissue, cartons |
| Testing & QC | 1-3% | Lab testing, quality control, inspection |
| Freight | 3-8% | Shipping from factory to warehouse |
| Duty & Import | 5-25% | Customs duties based on HS code and origin |
| Agent/Commission | 3-7% | Sourcing agent or buying office fees |
Pro tip: Your fabric cost drives everything. A 10% reduction in fabric cost or consumption has more impact than negotiating CMT rates.
Costing Formulas & Calculations
Here's how to calculate each cost component. Build these into a spreadsheet or PLM system.
Direct Materials
Trims & Hardware
Manufacturing
CMT vs FOB Pricing
Two pricing models dominate garment manufacturing. Understanding the difference is critical for accurate costing.
| Aspect | CMT (Cut, Make, Trim) | FOB (Free on Board) |
|---|---|---|
| What's Included | Labor only (cutting, making, trimming) | Labor + all materials + packaging + local freight |
| You Source | All materials and trims yourself | Nothing - factory provides everything |
| Control Level | High - you choose every supplier | Lower - factory selects materials |
| Typical Use | Established brands, specific material needs | New brands, simpler products, faster timelines |
| Cost Transparency | Very high - you see all component costs | Lower - bundled pricing |
| Risk | Material sourcing delays are your problem | Factory handles sourcing risks |
When to Use Each
- Use CMT when you have specific fabric requirements, need cost transparency, or have established material suppliers
- Use FOB when you're new to manufacturing, have simpler products, or need faster turnaround
- Hybrid approach: Many brands use FOB for basics and CMT for hero styles with specialty materials
Target Costing vs Actual Costing
Target Costing (Before Development)
Start with your target retail price and work backward to determine the maximum you can spend on production.
Example: $100 retail ÷ 3.5 markup = $28.57 max landed cost
Actual Costing (During Development)
Build up the actual cost from real quotes and consumption data. Compare against your target to ensure viability.
- Get fabric quotes with actual consumption from pattern maker
- Request CMT quotes with sample for accuracy
- Calculate freight based on weight and shipping method
- Determine duty rate from HS code classification
The 10% rule: If actual cost exceeds target by more than 10%, reassess design, materials, or target price before proceeding.
Costing Mistakes That Kill Margins
These mistakes are common—and expensive. Build checks into your costing process to catch them early.
Forgetting Freight
Impact: 5-10% cost surprise
Fix: Always include shipping from factory to your warehouse
Ignoring Duty
Impact: 5-25% margin killer
Fix: Calculate HS code duty rates before committing to pricing
No Fabric Wastage
Impact: 10-15% material underestimate
Fix: Add 5-10% wastage factor to fabric consumption
Missing Minimums
Impact: Higher unit costs or stuck inventory
Fix: Factor MOQ surcharges or excess stock costs
Static Pricing
Impact: Margin erosion over time
Fix: Build in currency and material price fluctuation buffers
Markup vs Margin Confusion
Impact: Pricing errors, lost profit
Fix: Know the difference: 50% markup ≠ 50% margin
How PLM Automates Costing
Manual costing in spreadsheets works—until you're managing 50+ styles with multiple colorways and suppliers. Here's what changes with PLM:
- Auto-calculated costs: BOM changes automatically update total cost
- Material libraries: Reuse pricing data across styles without re-entering
- Supplier quotes: Compare quotes side-by-side within the system
- Target vs actual: Real-time comparison as you develop
- Currency conversion: Automatic conversion for international sourcing
- Cost reports: See margin analysis across entire collections
Take Control of Your Costing
Kobo PLM includes automatic costing from your BOM data. See true landed costs in real-time as you develop—no more spreadsheet surprises.