STUDENT NAME: _________________________________ YEAR & MAJOR: _________________
PROFESSOR:
Case Study – Costing & Pricing
SHANTA JUTTI (Shanta Fancy Footwear for Ladies)
Adapted from Udyogini’s Micro-Enterprise Training
FINAL EXAMINATION
Shanta Devi of Chasku village, located about 40 km from Jaipur, Rajasthan, belongs to a
joint-family engaged in making Jutti - fancy footwear for ladies. Male members of the
family are involved primarily in shaping, cutting and stitching, whereas female members
are responsible for cleaning, washing and processing of leather and doing colourful
embroidery on shoe uppers. Shanta’s father–in-law, being eldest in the joint family, kept
account of the income & expenditure. He used to pay each member Rs. 500/- as wages.
About a year ago, her father-in-law died and the joint-family got separated. Shanta Devi
and her husband decided to take up Jutti-making as their main occupation. They had
learnt this traditional skill from their parents. Shanta was very good in designing and doing
colorful embroidery on shoe upper.
After starting their own business, to begin with, they started making only 10 pairs of Jutti
per month. For that they used leather worth Rs. 500/-, fancy thread for embroidery
of Rs 100/-, oil for leather of Rs 50/-. They also experienced that for procuring raw
materials like leather, threads etc they had to go to the town. Each trip to would cost
Rs 20/-. These were variable costs and depended on the number of Jutti made. They
hired tools for Rs 100/- per month. For selling Jutti they hired a small room on rent of
Rs 600/- per month. These were fixed costs and Shanta had to pay this whatever the
quantity of Jutti she sold.
Jutti produced by Shanta used to be very attractive and sold quickly on an average
price of Rs 126/-. The local people started demanding and referring her Jutti as “Shanta
Jutti”. But her last six months experience showed her that she was not in a position to
save beyond 20/- per pair, which she kept as their meagre wages. In her own way she
calculated the cost on raw material for one pair of Jutti was not more than Rs 65/- (Rs
50/- for leather + Rs 10/- for thread + Rs 5/- for oil), which she thought was much less
than the sale price (Rs 126/-) per pair.
Attracted by the demand and reputation of Shanta Jutti, a market-linkage focused NGO
(Non-Governmental Organization) contacted Shanta and discussed in detail about Jutti
making. The representative of the NGO suggested that she should do proper costing and
price the pair of Jutti accordingly. In order to get regular and real profit she should know
the minimum price and minimum volume of production of her product.
Questions & Discussion Points on Costing :
a) Had Shanta calculated her cost correctly? What has she not included?
b) Are fixed costs not be added to the total cost?
c) Would she be making profit if she made only 10 pairs of Jutti?
d) Can you calculate how many pairs of Jutti she would need to make to not be in a loss ?
Case Study – Costing & Pricing .. contd
SHANTA JUTTI (Shanta Fancy Footwear for Ladies)
Adapted from Udyogini’s Micro-Enterprise Training
The representative from the NGO further suggested that there was a trader in Jaipur city
who, impressed by the quality & demand for embroidered Shanta Jutti, was ready to buy
at least 20 pairs of specially designed & embroidered Shanta Jutti every month. The city
trader would probably agree to advance upto 50% of the total price, provided she ensured
monthly supply.
Shanta had always been enterprising and she got a certificate on Recognition of Prior
Learning of the Pradhan Mantri Kaushal Vikas Yojana (PMKVY), a very good scheme of
the Govt. of India. This helped her get a Mudra loan from State Bank of Bikaner & Jaipur
with an EMI of Rs. 2,500/-.
She soon decided to continue to make 10 Shanta Jutti which was her basic product and
price it for Rs. 126/- for the local market. She would also make 20 pairs of specially
designed & embroidered ‘Shanta Jutti’ every month and price it for Rs. 200/- per pair
for the city trader.
When she once went to deliver some Jutti to the city trader, she saw many foreign tourists
who normally visit Jaipur. They were willing to pay Five US Dollars (around Rs. 350/-) for
designer Jutti which had a brand name. Immediately Shanta went to meet her friend Divya
who ran a shop selling ‘lehnga-choli’ which had her name as ‘Divya Creations’. As a
branded label, Shanta now sold 25 ‘Shanta Jutti’ to Divya for Rs. 300/- as her friend’s
shop catered to foreign tourists. Her friend also introduced her to NIESBUD’s EDP
Progamme on CD.
NIESBUD’s self-study EDP Progamme which gave her a certificate in 15 days was very
useful. Shanta realized the importance of calculating her cost more carefully and pricing
her product for different markets using marketing concepts like branding and online
marketing. Customers all over the world could afford to pay more for novelty products like
embroidered ‘Shanta Jutti’. This would easily cover her costs and earn her good profits.
Questions & Discussion Points on Pricing & Profit:
1.
2.
3.
4.
In how many different markets did Shanta sell her Jutti?
How did Shanta manage to have differentiated pricing?
How much was her profit when she sold branded ‘Shanta Jutti’ to her friend Divya?
Can you calculate how much profit she made from selling all 55 pairs of Jutti in a
month?
Rubrics for the essay.
DESCRIPTION
Content provided are correct and
appropriate
Sufficient elaboration of key
ideas and examples are provided.
The essay is clear and organized
Grammar and usage are correct
TOTAL
SCORE
4
3
2
1
10
SCORE OBTAINED