Product Research- Eco style T-shirts

Product Research- Eco style T-shirts

       Student name:

Student ID:

Name of product: Eco-Style T-Shirts



1. Product Design. 3

2.  Estimation Research and Development and Design Costs. 4

3. Determination of per unit cost of product. 4

4. Cost of Direct Materials purchased and used in production. 6

5. Cost of goods manufactured schedule for 40000 units. 6

6. Schedule of Cost of Goods Sold for 30000 units. 7

7. Determination of Market Price. 7

8.  Cost of downstream Activities. 7

9. Income Statement. 8

References. 9











1. Product Design


                                   “Eco- Style” T-shirts

The product selected by us is T-Shirts made from recyclable products. The brand name that has been chosen by us is “Eco-Style” and the brand name chosen by very well describes the product offered by me and the main aim that I intend to achieve by introducing this product in the market. The reason why I have chosen this product is to promote use of eco-friendly products in the market. Eco friendly products are those products which do not have an adverse effect on the environment both in their manufacturing as well as disposal. Such products help in preservation of environment and reduction of pollution. At present, the concept of sustainability has become really popular not only amongst producers but also amongst consumers (Krumm, 2020). Consumers are choosing to buy those products which are eco friendly and do not have adverse impact on the environment As the concepts of environmental protection and sustainable choices have gained popularity, consumers are shifting towards environment friendly products. The trend of rising environmental conscience of consumers is rising at a high pace (, n.d.). It was proved in a survey performed in the year 2019 that around 35 percent of the respondents chose to but an eco friendly product even if it had a higher price (Edelstein, n.d.). This clearly shows that there is a strong demand for eco friendly products at present and it is going to increase further in the coming years. There is one more reason behind choosing this product. T-shirts is a type of clothing which is worn by people from all parts of the world and it is that apparel which never goes out of fashion. It is the most preferred clothing of people from all age groups and there exists a high demand for this product in the national as well as global markets (Credence Research, 2017).



2.  Estimation Research and Development and Design Costs



Hours required

Hourly pay rate of R&D professional

No. of Research professionals required


Initial studies, development of manufacturing formula, process design, product design


$ 45.00


$ 3,600.00

Development of prototype


$ 45.00


$ 360.00

Testing of prototype


$ 45.00


$ 90.00

Total Research and development cost

$ 4,050.00


(The University of Queensland Australia, n.d.)

The research and development will be carried out in three phases where the first phase would involve the initial feasibility study and development of formula for manufacturing the Eco-Style T-shirts. In this first stage of research and development, the process design would be laid out and the complete product design will be decided. The second stage will be development of prototype of the product and testing of the prototype. The total cost estimated cost of Research and Development and Design Costs is expected to be $4050.

3. Determination of per unit cost of product


Direct Material

Direct Materials



Jute (in meters)


$ 3.60

Old/discarded cloth (meters)


$ 1.00

Cotton yarn (grams)


$ 7.00

Threads for stitching


$ 0.25



$ 0.15

Cost of Printing (per unit)


$ 3.00

Cost of Direct Material per unit


$ 15.00



 (, n.d.),


Direct Labour

Cost of direct labour per unit


Hours per unit

Rate per hour


Cutting Cost per unit



$ 2.00

Stitching Cost per unit



$ 5.00


$ 7.00


Note- It is assumed that the level of skill required for this work is low, hence the requirements for labour can be met by hiring cheap labour which is untrained and owing to the nature of work there would be no training costs involved.

Fixed Overheads

Fixed Overheads

Cost of Washing- per annum

$ 8,000.00

Depreciation on equipment

$ 1,250.00


$ 9,250.00


Approach used for calculation of fixed overhead cost per unit

The absorption costing approach has been used for allocating the cost of fixed overheads and It is assumed that the fixed overheads would be absorbed on the basis of direct labour hours of cutting department.



Estimated Annual production


Annual cutting department labour hours (80000*0.25



Fixed Overhead absorption rate =

Total Fixed Overheads / Annual cutting department labour hours 



= $ 0.46

per labour hour (cutting department)


Total Per unit cost  of each T shirt

Direct Material


Direct labour

$ 7.00

Fixed Overheads

$ 0.12




4. Cost of Direct Materials purchased and used in production

The cost of direct materials purchased to produce 40000 “Eco-Style” T shirts will be equal to $600,000.


Cost of Direct Materials purchased

No of units to be purchased

Cost of direct materials per unit



$ 15.00

$ 600,000.00


Cost of Direct Materials used in production


Value of opening inventory

$ 5,000.00


Cost of direct materials purchased

$ 6,00,000.00


Value of closing inventory

$ -5,000.00



$ 6,00,000.00


5. Cost of goods manufactured schedule for 40000 units


Schedule of Cost of Goods Manufactured

Inventory - Direct Material

(in $)

Beginning of Inventory - Raw Materials


COGS - Purchase - Raw Materials


Total Raw Materials


Ending Inventory - Raw Materials


Total Direct Materials


Direct Labor


COGS - Direct Labor Cost


Total Direct Labor


Factory Overhead


COGS - Other Fixed overheads


Total Factory Overhead


Total Manufacturing Cost


Inventory - Work in Progress


Beginning of Inventory - WIP


Total Work in Progress


Ending Inventory - WIP


Cost of Goods Manufactured



6. Schedule of Cost of Goods Sold for 30000 units

Schedule of Cost of Goods Sold

Cost of Goods Manufactured

$ 6,63,450.00

Add: Administration Overheads

$ 0.00

Cost of Production

$ 6,63,450.00

Add: Opening Inventory - Finished Goods

$ 40,000.00

Less: Closing Inventory-Finished Goods

$ -40,000.00

Cost of Goods Sold

$ 6,63,450.00


7. Determination of Market Price

The market price of Eco-Style T-shirt has been decided by using the cost plus method wherein a 20% mark-up on total per unit cost of each T-shirt would be added to total per unit cost to arrive at the suitable price at which the T Shirt will be sold in the market.

Price of each Eco-Style T shirt= 22.12*1.2 = $ 26.5

8.  Cost of downstream Activities

The T-shirts will primarily be marketed through online shopping portals where in business would be required to pay to the commission of 1% of Sale price of product to these E-commerce platforms. Apart from this, the product would be promoted through certain cost-friendly methods of advertisement such as digital marketing which would cost around $9600 (800*12) per annum and through use of social media platforms such as facebook, twitter, linked in etc (, n.d.)I intend to use certain other effective methods for marketing such as content marketing which is one of the most popular methods of marketing nowadays and involves no major cost. I would use my creativity to write good content for my product and business so as to make significant positive publicity of my product. As the Eco-style T shirt is a product which is related to an environmental cause, I would get in touch with certain people who are willing to act as influencers. This would enable me to market and advertise my product in the best manner without incurring significant marketing costs associated with traditional methods of advertising which are not really effective and are expensive too (Small Business Sense, n.d.). There will not be any storage costs as I would be using the store room at my house for storing the T shirts produced by the business.

9. Income Statement

Income Statement for month of March (based on absorption costing)





Sales Revenue

$ 13,25,000.00

Less: Cost of Goods Sold

$ -11,06,000.00

Gross Profit

$ 2,19,000.00

Less: Operating Expenses


Commission on Sales

$ -13,250.00

Advertising cost (digital marketing)

$ -9,600.00

Administrative expenses

$ -3,000.00

Operating Income

$ 1,93,150.00

Less: Income tax expense @30%

$ -57,945.00

Net Income

$ 1,35,205.00




















References (n.d.). Do Consumers  Prefer Eco-Friendly Companies. Retrieved from

Credence Research. (2017). Evolution in T-shirt industry Worldwide will Enhance Market Growth.  Retrieved from

Edelstein A. (n.d.). More consumers are opening their wallets for eco-friendly products. Retrieved from

Krumm L. (2020). Sustainable Consumer Behavior: Go Big or Go Home? Retrieved from (n.d.). Knitting Wool and Yarn. Retrieved from

Small Business Sense. (n.d.). 20 Low Cost Marketing and Advertising Ideas for Frugal Entrepreneurs. Retrieved from

The University of Queensland Australia (n.d). Professional staff and professional research staff salaries. Retrieved from (n.d.). Welcome To The Kingdom. Retrieved from

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