Pricing a Cushion-Cover Batch and Fixing a Dye Room
A textile-design graduate has a ₹1.2 lakh order for 240 hand-printed cotton cushion covers, to be delivered in four weekly batches of 60. The buyer offers ₹150 per piece. The graduate's cost sheet shows: fabric ₹120/m, with 2 covers per metre before wastage; printing paste and chemicals ₹15 per cover; printing labour ₹10 per cover; stitching ₹15 per cover; packaging ₹5 per cover; rent ₹4,000 per month; electricity ₹1,200 per month; equipment depreciation ₹500 per month; and 5% of printed covers are rejected. The fabric wastage is 8%. The unit operates from one room with a small window; vat dyeing is done in a bucket using caustic soda and sodium hydrosulphite, and workers eat lunch at the same table. The buyer's audit team will visit before the second batch.
1. Prepare a per-batch and per-piece cost sheet and decide whether ₹150 is viable. Show the break-even quantity.
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Batch cost for 60 good covers. To allow 5% rejection, print 60 ÷ 0.95 = 63.16 covers. Fabric: 63.16 ÷ 2 = 31.58 m; add 8% wastage = 34.1 m; at ₹120 = ₹4,092. Paste and chemicals: 63.16 × ₹15 = ₹947. Printing labour: 63.16 × ₹10 = ₹632. Stitching: 60 × ₹15 = ₹900. Packaging: 60 × ₹5 = ₹300. Variable total = ₹6,871, or ₹114.5 per good cover. Fixed per month = rent ₹4,000 + electricity ₹1,200 + depreciation ₹500 = ₹5,700; four batches give 240 good covers, so fixed per piece = ₹23.75. Total = ₹138.3. At ₹150, contribution = ₹35.5 and profit = ₹11.7 per piece (7.8%). Break-even = ₹5,700 ÷ ₹35.5 = 161 pieces per month, below the 240 capacity. Viable only if rejection and wastage stay controlled; owner's salary is not included.
2. The buyer asks for a 10% reduction to ₹135. Identify at least four cost or design levers and quantify the effect of two.
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₹135 is not viable at current costs. Contribution falls to ₹20.5; break-even = ₹5,700 ÷ ₹20.5 = 278 pieces, above the 240 capacity.
Levers. (1) Cut fabric wastage from 8% to 4%: 34.1 → 32.8 m, saving ₹156 per batch = ₹2.6 per piece. (2) Negotiate fabric at ₹110/m: saves ₹341 per batch = ₹5.7 per piece. (3) Cut rejection from 5% to 2%: fewer printed covers and less fabric, about ₹3 per piece. (4) Simplify the print or reduce colours to cut paste and labour. Together the first three save about ₹11 per piece, bringing cost to about ₹127; at ₹135 the margin is about ₹8, still thin. Counter at ₹142–145 or ask the buyer to accept a simpler design; do not accept ₹135 without a verified cost reduction.
3. List the safety and legal problems in the dye room and propose a low-cost compliance plan before the audit. Include how compliance affects the cost.
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Problems. Caustic soda and sodium hydrosulphite are corrosive or reducing chemicals stored and used in an unventilated room; there is no PPE, no eyewash, no labelling or MSDS, eating at the work table, no spill kit, and probable electrical and floor drainage hazards.
Low-cost plan. Store chemicals in a locked, labelled cupboard on a raised tray, separating acids from hydrosulphite; provide goggles, gloves, apron and mask; install an exhaust fan and keep the window open; provide an eyewash bottle and hand-wash point; ban food and drink; train workers on spills and first aid; keep MSDS and a spill kit.
Cost. About ₹12,000–15,000 one-time. Spread over 12 batches (2,880 pieces) this is ₹4–5 per piece, not ₹50; over the first 240 pieces it is ₹50–60, so the first order must absorb it or the price must rise. Compliance is non-negotiable; a rejected audit risks the whole order.