GIVEN DATA

Sq Feet Plant Utilization 6000

Production 4800

Office 1200

Units per month Coveralls Boxers T-Shirts Production/Month 20% 50% 30% 10000

Knitter Cutter Sewer/Packager

Capacity (mts)/Shift 4000 4500

Wage/Hr 20 15 15

Fabric Used (mts)/Unit Units Produced / Shift Hours Taken / Unit

1.5 35 0.229

1.7 35 0.229

1.11 140 0.057

1.12 96 0.083

3 21 0.381

COST ANALYSIS
Washable Trousers Direct Expenses Fabric Zipper Elastic/Velcro Dye Labor Sewer Knitter Cutter Packager Total Direct Costs/Unit 3.43 0 0.04 3.43 $ 12.00 3.43 0 0.05 3.43 $ 12.28 0.86 0.04 0.03 0.86 $ 4.12 1.25 0 0.03 1.25 $ 3.68 5.71 0 0.08 5.71 $ 19.86 4.65 0.45 0 0 4.93 0.45 0 0 1.07 0 0 1.26 1.06 0 0.09 0 8.1 0 0.25 0

Cargo

Tshirt

Boxer

Coveralls

In Direct Expenses Total Factory Office/Other Factory Rent 56400 45120 11280 Heat+ Utilities 15600 12480 3120 Internet 1800 0 1800 Salary 60000 0 60000 Maintenance 2000 2000 0 Misc 18600 0 18600 Total Costs Annual 154,400.00 59,600.00 94,800.00

TOTAL WORKING HOURS

TotaL hours for Tshirts Boxers and Coveralls

15840

Total hrs required with 22342.86 introduction of trousers

Total hrs required with 22697.14 introduction of cargos

ALLOCATION OF FIXED COST

Trousers Factory overheads Other overheads Full Cost 0.61 0.97 13.58

Cargo 0.60 1.15 14.03

T-shirts 0.22 0.34 4.67

Boxers 0.31 0.498 4.50

Coveralls 1.43 2.279 23.57

Bid Price at full cost. Base price Bid price at base price

17.63 12 17.14

18.22 13.07 16.97

6.07 4.12 5.32

5.84 3.68 4.77

30.61 19.86 25.79

( Margin-23% of the Bid Price)

BIDDING ANALYSIS
The bid price for Kreative Kasuals depends upon their organization targets. Therefore the Bid price would vary in different situation. Following are the options available to Kreative Kasuals to bid for Trousers and Cargo:

1. BID AT MARGIN- Ideally they should Bid at this price as it not just break-even but also give them a margin of 23% on Bid price. As it includes Direct cost, Factory Overhead, Other Overhead costs and also margin. 2. BID AT THE FULL COST - If they want to go away with the margin then they should bid at the price where their total revenue is equal to their total cost. As it includes Direct cost, Factory Overhead and Other Overhead costs 3. BID AT DIRECT COST- the company is already incurring indirect cost on the existing product line hence to be ambitious in acquiring the tender they may bid at a price where they will be able to recover only the direct cost.

Suggestion considering the Macro Economic Indicators:

The Canadian textile manufacturing industry has seen an annual growth decline of 9.9%. Also the textile exports have dropped by 17.7% in 2008, thus with such difficult times where competition for government tenders increases, hence Kreative Kasuals should bid for its tender at a price which is competitive enough. In other words, they should price at the minimum which they can afford. According to our analysis, the company should bid at DIRECT COST as already stated the company is incurring the rest of the costs, even if they dont manufacture cargo and washable trousers. Therefore, in such competitive environment they shouldnt allocate their other overheads on washable trousers and cargo.