Calculating CMT in the Garment Industry

Top 5 Methods For Calculating CMT in the Garment Industry

In the clothing business, knowing your costs is very important. CMT means Cut, Make, Trim, and it covers the cost of cutting fabric, sewing clothes, and adding final touches. Getting the CMT cost right helps with pricing and budgeting.

Today, we’ll talk about what CMT is, why it’s important, and 7 easy ways to calculate it. Whether you’re new or experienced, this guide will help you manage costs and improve your clothing business.

What Does CMT Mean?

In the garment industry, “CMT” stands for Cut, Make, and Trim. It refers to the labor cost involved in producing garments. This is a way of making clothes where the manufacturer does three main things:

1. Cut: They cut the fabric into the shapes needed to make the clothes, using patterns given by the client.
2. Make: They sew the cut pieces together to create the garment.
3. Trim: They add the final details, like buttons, zippers, and labels.

Manufacturers also might include other costs like checking the quality, packaging the clothes, and transportation. Adding all these costs together gives the total cost to make the garment in a CMT arrangement. This is also known as CMTP (cut, make, trim and making). 

Example Calculation:

1. Cutting: 1.5 hours
2. Making: 3.0 hours
3. Trimming: 0.5 hours

CMT = Hourly Rate × Total Hours

You can calculate CMT by multiplying the hourly cost by the total hours it takes to make the garment. It’s a simple way to figure out the labor cost!

Top 5 Methods For Calculating CMT in the Garment Industry

Calculating Costing Method Time (CMT) in RMG factory involves assessing the cost of cutting, making, and trimming garments. Here are some methods to calculate CMT:

1. Standard Allowed Minutes (SAM) 

Standard Allowed Minutes (SMV) is an important metric in Bangladesh’s Ready-Made Garment (RMG) industry. It indicates the time a skilled worker requires to complete specific garment tasks. This method is also known as the standard time (SM) method or Standard Minute Value (SMV)

 

To calculate the SAM, the following steps are typically involved:

1. Task Breakdown: Divide the work into smaller steps
2. Time Measurement: Observe workers to record how long each task takes
3. Allowances:  Include extra time for breaks and any machine problems that might occur

SAM or SMV Formula: Basic time + Allowance 

CMT= Hourly Rate×Total SAM in Hours

2. Piece Rate Method

Another top method to calculate CMT is Piece Rate Method. In this method, workers get paid a set amount for each garment they make. This encourages them to work faster and more efficiently. For example, if they earn $5 for each garment and produce 100 garments, the total payment is calculated like this:

 

CMT = Payment per Garment × Number of Garments
CMT = $5 × 100 = $500.

 

This method can motivate workers and helps businesses figure out costs based on how much they actually produce, matching labor costs with the amount of work done.

3. Time and Motion Study

Time and Motion Studies involve watching and analyzing each step in the production process to see how long each task takes. After collecting this information, you can calculate the CMT based on the accurate time estimates. 

For example, if the study shows that cutting takes 2 hours and sewing takes 3 hours, and the labor cost is $10 per hour, you would calculate CMT like this:

 

CMT = (Cutting Time + Sewing Time) × Hourly Rate
CMT = (2 + 3) × $10 = $50.

 

This method gives you precise estimates. This helps with budgeting and improves efficiency in production.

4. Standard Costing Method

The Standard Costing Method uses predefined costs for different production stages to calculate CMT. For example, if cutting costs $30, making costs $50, and trimming costs $20, the CMT would be:

 

CMT = Cutting Cost + Making Cost + Trimming Cost
CMT = $30 + $50 + $20 = $100. 

 

This method helps maintain consistency in costing and allows easy adjustments when costs change in the production process.

5. Budgeted Rate Method

The Budgeted Rate Method involves estimating total labor costs for a production period and dividing it by the expected production hours to set a budgeted CMT rate. For instance, if the total estimated labor cost for a month is $1,000 and the expected production time is 200 hours, the CMT would be:

 

CMT = Total Labor Cost / Total Hours
CMT = $1,000 / 200 = $5. 

 

This method is useful for planning and ensures that costs align with production targets, helping in effective financial management.

Why is CMT Calculation Important?

CMT is calculated in garments to determine the cost of making a piece of clothing. It’s important for several reasons:

1. Cost Management: Knowing the CMT helps brands understand how much it will cost to produce their clothes, which is essential for budgeting.

 

1. Pricing: By calculating CMT, companies can set the right price for their products to ensure they make a profit.

 

1. Production Planning: It helps manufacturers plan how much time and resources they need to make the garments.

 

1. Supplier Relationships: Clear CMT pricing helps build trust between brands and manufacturers by outlining exactly what each party is responsible for.

 

1. Quality Control: Understanding the CMT can help ensure that the manufacturing process meets quality standards at each stage.

 

In summary, CMT calculation is essential for budgeting and pricing in the garment industry. It helps manufacturers estimate production costs accurately, set competitive prices, and maintain profit margins. Understanding CMT also aids in improving efficiency and optimizing production processes.

 

Frequently Asked Questions

How to calculate CMT?

CMT stands for Cut, Make, and Trim. To calculate CMT, add the costs of cutting fabric, making the garment, and adding trims.

 

How do you calculate CPM in garments industry?

CPM means Cost Per Minute. To calculate CPM, divide total labor costs by total minutes worked on making garments.

 

What is the formula for cost of goods sold in merchandising?

Cost of Goods Sold (COGS) = Beginning Inventory + Purchases – Ending Inventory. This shows how much it costs to sell products during a period.

 

How would you calculate the selling price of a garment?

Selling Price = Cost Price + Profit Margin. Add your desired profit to the cost of making the garment to set the selling price.