Cloth Bags, a Bulk Order and Thirty Days
Divya, a Class 11 student in Erode, stitches cloth bags from the scrap fabric of two tailors in her street. The tailors give her the scrap free. Her materials - thread, lining cloth, labels and needles - cost ₹8 per bag, and she pays her younger cousin ₹2 per bag for cutting. She works about 20 hours a month and can make 40 bags, but sells only 30 at ₹60 each to neighbours. Her town has banned thin plastic carry bags, and a shopkeeper has now offered to buy 100 bags at ₹45 each, delivered in 30 days, with payment 30 days after delivery. Divya has ₹1,000 in savings. Her half-yearly examinations fall in the middle of that month, and she cannot use the school sewing machine during the holidays.
1. Calculate Divya's profit per bag and total monthly profit on her present sales, and the profit per bag on the shopkeeper's offer. On profit per bag alone, which is better? Show the working.
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Cost per bag = materials ₹8 + cutting ₹2 = ₹10.
Present sales: selling price ₹60 − ₹10 = ₹50 profit per bag. She sells 30 bags → 30 × ₹50 = ₹1,500 per month. Note that she makes 40, so 10 unsold bags hold ₹100 of material idle - a small but real cash lock-up.
Bulk order: price ₹45 − ₹10 = ₹35 profit per bag. Total on the order = 100 × ₹35 = ₹3,500.
Per bag alone, the neighbour price is better by ₹15. But per-bag profit is the wrong measure for this decision: the question is how much total contribution she earns and when the cash arrives. The order earns ₹3,500 against ₹1,500 - more than double - but it also demands 2.5 times her normal output and pays nothing until 60 days after she starts. So the offer is not automatically worse, and it is not automatically better either; the next question is whether she can actually deliver it. A student who answers only "₹60 is better" has measured the wrong thing.
2. Should Divya accept the order as offered? Assess capacity, working capital and risk, and write the counter-offer you would advise, with numbers.
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Capacity: 40 bags in 20 hours = 2 bags per hour. 100 bags need 50 hours in 30 days - 2.5 times her normal work, in an examination month, without the school machine. Alone, this is not realistic.
Working capital: 100 × ₹10 = ₹1,000 in materials, which is exactly her entire savings, tied up for 60 days (30 days to make, 30 days credit). One rejected batch or one late payment and she has no buffer.
Risk: single buyer, quality rejection with no written standard, exam performance, cousin's availability, no written agreement.
Recommendation - do not accept as offered; counter-offer:
- 60 bags at ₹52 each (still ₹12 below her neighbour price) = ₹3,120 revenue, ₹2,520 profit.
- ₹600 advance now for materials; balance on delivery, not 30 days later.
- Delivery in 40 days, after the examinations.
- Written note of size, stitching and finish, and a second order of 40 bags if the first passes.
Reasoning: she keeps most of her margin, tests whether the shopkeeper is reliable, protects her savings and her exams, and gains a repeat customer rather than one risky transaction.
3. Name two entrepreneurial competencies Divya is showing and one she still needs. Then estimate one measurable environmental benefit of the order, stating your assumption.
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Competencies shown:
- Opportunity recognition - she connected the plastic-bag ban and free tailor's scrap to a product with real demand; nobody handed her the idea.
- Resourcefulness and cost awareness - free raw material, a paid cousin for cutting, and a known ₹10 unit cost, which is more financial discipline than many adult sellers show.
Competency needed: negotiation and working-capital planning. She is about to accept terms that absorb her whole savings and delay payment by 60 days; she needs to be able to ask for an advance and a shorter credit period without fearing the loss of the order.
Environmental benefit (estimate with assumption): 100 cloth bags. Assume each bag is used once a week for a year and replaces 2 thin plastic carry bags per shopping trip. Avoided bags = 100 × 2 × 52 = 10,400 plastic bags per year. If each plastic bag weighs about 5 g, that is roughly 52 kg of plastic avoided, plus the tailor's scrap, which would otherwise be burnt or dumped, is diverted instead.
The assumption must be stated because the figure changes with usage frequency; the reasoning (reusable bag × uses per year × bags replaced per use) is what earns the mark, not the exact number.