Tote Bag Order: Costing, a Late Fabric Delivery and a Low Offer
Reena, a former NSQF trainee, has a chance to supply 150 cotton tote bags to a Guwahati bookstore for its anniversary. She has quoted after estimating: 90 m of 112 cm cotton at ₹150/m; 45 m of lining at ₹80/m; thread, labels, and interlining ₹1,500; electricity and machine maintenance ₹900; two tailors for 18 days at ₹500/day each; and workshop rent ₹2,000 for the period. She has not included her own supervision time, packaging, or transport. The bookstore offers ₹280 per bag and wants delivery in 20 days. On day 4, the fabric supplier says the printed cotton will arrive 4 days late. Reena’s two tailors can finish 10 bags per day once fabric is available, but one tailor has to leave for a family function for two days. Reena has ₹8,000 savings and the bookstore will pay 30% advance only after seeing a sample.
1. Calculate Reena’s total cost and cost per bag, and evaluate the ₹280 offer.
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Fabric: 90 × ₹150 = ₹13,500. Lining: 45 × ₹80 = ₹3,600. Thread, labels and interlining = ₹1,500. Electricity and maintenance = ₹900. Labour: 2 × ₹500 × 18 = ₹18,000. Rent = ₹2,000. Total = ₹39,500. Cost per bag = ₹39,500 ÷ 150 = ₹263.33. At ₹280, the contribution is ₹16.67 per bag, or ₹2,500 in total, about 6.3% of cost. That is too thin because supervision, packaging, transport, sample-making, wastage and payment delays are missing. A single rejected lot or a late delivery penalty could wipe out the profit. Reena should not accept ₹280 without either reducing costs or negotiating a higher price, probably in the ₹320–₹350 range depending on the missing costs.
2. Assess the delivery risk and propose a production and communication plan.
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The fabric now arrives around day 8, leaving 12 days. With two tailors at 10 bags per day, normal capacity is 120 bags, not 150. One tailor is absent for two days, so those days produce about 5 bags each, reducing capacity by 10 bags to about 110. Reena is short by about 40 bags. She should immediately tell the bookstore the revised dates and offer options: a third tailor for 8 days, overtime, or delivery in two batches. She should also ask for the sample to be approved quickly so the 30% advance is released, because her ₹8,000 savings may not cover materials and wages. A realistic plan is to deliver 110 bags on time and the remaining 40 within a week, with the client’s written agreement. Silence until the deadline would be worse than an early, specific update.
3. What costing items are missing, and how should Reena present the quote?
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Missing items include Reena’s supervision time, packaging, transport to the bookstore, sample cost, machine needles and maintenance consumables, wastage of 5–10%, and a contingency for rejects or late fabric. If applicable, GST and payment processing costs should also be shown. Reena should present a transparent breakdown rather than one lump sum: materials, labour, overheads, finishing and packing, transport, and her margin. She should state payment terms, sample approval conditions, and delivery dates. For the ₹280 offer, she can show that the direct cost is already ₹263.33 before supervision and transport, so the offer leaves almost no room for error. A clear quote with a higher price and a smaller minimum order, or a lower specification, is more professional than accepting a loss-making order.