Table of Contents
Introduction viii
1 Small and medium-sized (SMEs) clothing businesses 1
Introduction 1
Leadership in SMEs 1
Business strategy 2
Processes, products and services 4
Exercises 5
2 Risk management 10
Introduction 10
Business risk management 11
Financial risk management 13
Developing a risk management plan 14
Specific risks affecting the fashion industry 15
The industry response 17
Key performance indicators 19
Exercises 23
3 Global awareness and new markets 27
Introduction 27
The global supply chain 27
Barriers-and facilitators in market-entry strategies 28
Contemporary issues 29
Purchase order 30
Lead times 34
Critical path 35
Exercises 38
4 Product cost when sourcing 39
Introduction 39
Global sourcing 39
Range planning 40
Factories 41
Shipping terms 41
Exercises 43
5 The nature of clothing manufacture and the need for costing 47
Introduction 47
What is clothing manufacture? 47
Two important questions 48
Definition of cost 49
The need for costing 49
From manufacturing to sourcing 51
Exercises 52
6 The elements of cost 54
Introduction 54
Classification of cost 54
Direct costs 55
Indirect costs-the overheads 61
Exercises 64
7 Costing over periods of time 69
Introduction 69
Period cost reports 69
Capital equipment costs 70
Depreciation - the straight-line method 71
Period cost report 72
Stocks and inventory 75
Value of the work-in-progress 77
Period end adjustments 78
Exercises 82
8 Product cost-job costing 85
Introduction 85
What is job costing? 85
Treatment of the direct costs 86
Treatment of the overheads 88
Absorption of production overheads 88
Cost centres 91
Absorption of non-production overheads 92
Example of a job cost 93
Over-/underabsorption of overheads 94
Process costing 96
Exercises 97
9 Marginal costing 102
Introduction 102
Variable costs 102
Fixed costs 103
Semi-variable costs 104
Contribution 104
Treatment of the semi-variable costs 107
Case study 109
Exercises 111
10 Break-even analysis 114
Introduction 114
Establishing the break-even point 114
Break-even tabulation 115
Break-even chart 117
Margin of safety 118
Profit/volume chart 119
Break-even point by calculation 120
Break-even illustration 121
Exercises 123
11 Budgeting and standard costing 125
Introduction 125
Budgeting 125
The cash budget 126
Sales lag 129
Flexible budgets 130
Zero-based budgeting (ZBB) 131
Standard costing 132
Variance analysis 132
Direct material 134
Causes of direct materials variances 136
Direct labour 137
Causes of direct labour variances 140
Overhead in standard costing 141
Advantages and disadvantages of standard costing 142
Exercises 143
12 The changing nature of cost 150
Introduction 150
From traditional to advanced manufacturing technology 151
Just-in-time 152
Component manufacture and assembly 152
Summary of changes in costs with the move into advanced technology 153
Cost behaviour change 155
Service industries 156
Activity-based costing 156
Exercises 157
13 Activity-based costing 158
Introduction 158
Activity-based costing 158
Advantages and disadvantages of ABC 164
Activity-based budgeting 165
Exercises 166
14 Capital investment decisions 170
Introduction 170
The capital cost 171
Accounting rate of return (ARR) 171
Net cash inflows 172
Payback period 174
Discounted cash flow (DCF) 175
Discounted payback period 177
Conclusions 181
Exercises 181
Bibliography 188
Answers to exercises 190
Acknowledgement 226
Index 227
