Sukkur Institute of Business Administration

Airport Road Sukkur, Sindh, Pakistan

MBAIIICS15

INDUS CRAFTS

- PRODUCT MIX DELIMMA Part A

INTRODUCTION
It was February 2015 when Mr. Zahid Hussain sat at his office in Shikarpur thinking about the
different proposals he came across in past few days. As the owner of a small business he was
concerned about the dwindling profitability of his business. From the past 2 years, the demand of
Sindhi cultural products has remained stagnant. As the role of advertising played an important
role in the promotion and sales of cultural products so he decided to change the focus of
advertising of two of its products i.e. Ralli and Ajrak. He also wanted to see the impact of
changing the prices on the demand of Ralli and Ajrak.
While Zahid was busy in making different scenarios he received a call from one of his regular
customer who ordered him to deliver 400 units of Sindhi cap and Ajrak each within the whole
year of 2015 as he has to organize 4 cultural events within country and overseas. Zahid wondered
about the capacity constraints of taking such a large order.
As he was thinking about that uneven order, one of his good friend i.e. Jahangir Ali called and
requested him for a special order. Mr. Jahangir operated a social enterprise and requested Induscrafts to deliver the order of 500units of Ralli and Sindhi cap each for different cultural
exhibition to be held during the year at the concessional prices i.e. Rs.3500 for Ralli and Rs.
2500 for Cap.
Having a little knowledge about costing and accounting, Zahid called his assistant Mr. Amir
Rahim. By the time he arrived, Zahid had already developed couple of scenarios he then handed
over it to Amir. Amir had to consider all scenarios to provide a suitable solution by keeping in

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mind the unevenorder given by the regular customer as well as the special order given by his
friend Jahangir.
1. What is the sales mix breakeven for Indus-crafts? If Zahid set a target profit of 2 million
for this year then at what level of sales this target would be achieved?
2. What would be the impact of dropping Sindhi cap from its product line while keeping the
volume and selling price of the other two products as same? Consider this option before
uneven and special order.
3. If he decided to decrease the price of Ralli to Rs.4000 and thereby demand would
increase by 175 units then how it would impact the overall profitability?
4. What would be the impact of changing the focus of advertising from Sindhi cap to Ralli
quilt if doing so would increase the demand of ralli by 125 units and decrease the demand
of cap by 50 units?
5. What would be the impact if he choose option 3 and 4 simultaneously thereby increasing
the overall demand of ralli by 275 units and decreasing the demand of cap by 50 units?
6. Should Zahid take the order given by regular customer? If yes then how would it impact
the companys profitability? If no then what would be the impact of this deal on its future
relationship with this customer?
7. Zahid also wanted to know if he considers special order and its impact on the long term
profitability of the company.
8. Should he take both uneven orderand special order? What would be the best product mix
he choose so as the companys profitability would increase as well as the relationship
with both customers would be maintained?

COMPANY BACKGROUND
Indus Crafts was founded at Shikarpur in year 2010. Mr. Zahid Hussain Abro established this
non-governmental organization with a mission to empower the social and economic conditions
and wellbeing of the local handicraftsmen of Sindh by providing them fair value of their hard
work. It provided a platform to poor artisans and put its efforts to revive the dying Sindhi cultural
industry.
Its major product line included the Ralli quilt, Ajrak shawl and Sindhi cap with average prices
being Rs.5000, Rs. 3000 and Rs. 3500 respectively. Ralli being the most profitable product
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contributes 66 percent in annual sales followed by Ajrak which stand at 22 percent of annual
sales whereas the Sindhi cap contributes 13 percent in sales at 70 percent of normal capacity. In a
typical year average sales at 70 percent capacity could reach at Rs. 14.6 million where November
and December being the peak season due to Sindhi Topi and Ajrak Day festive. The full
production capacity of Indus-crafts was 5000 units per annum in which Ralliss capacity was
2250 units, Ajraks capacity was 1750 units and Caps capacity was 1000 units. Indus-crafts had
its workshop at Hala for making Ajrak where skilled men worked. For the production of Sindhi
cap and Ralli it had established a manufacturing and training centre where rural women come
from closer areas to make these two products i.e. Sindhi Topi and Ralli quilt. These women were
adept at making both of the products so the yearly production capacity could be changed at any
time however the demand of cap over past 2 years has remained at about 70% of its production
capacity. Exhibit 1 refer to the income statement of year 2014 and exhibit 2A and 2B refer to the
actual costs in units and in total.
Indus-crafts served two types of local as well as international customers; the individual buyers
and organization/company buyers. Its international market included UAE, Australia, Sweden and
UK. It operated on volunteer basis with CEO only being the permanent employee. The company
has digital presence on its own website, a dedicated Facebook page and Twitter and Tumblr
accounts.1
HISTORY OF SINDHI CRAFTS
The traditional Sindhi culture was around 5000 years old and mainly influenced by the arts of
invaders and dwellers. Sindh has been known for its famous floral and geometric designs on
clay, wood, stone, metal and fabric. The artefacts of Sindh include pottery, Ajrak, metal vessels,
gold and silver embroidery, ralli quilt, lacquered work, glass bangles and Sindhi cap. Above all,
it was famous for its textile products which chiefly include Ralli quilt, Ajrak and Sindhi cap. The
skill of making fabric from cotton was the speciality of this province and has been traded
throughout the world. The backbone of this historic tradition were the women of Indus region but
now the men were equally involved in making these art. However, the ralli quilt and Sindhi cap
has still remained the domain of women.

1Personal interview with Zahid Abro.

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Sindhi culture has adopted the tradition of covering the head with a cap or turban from Balochi
culture. By the time it has become an integral part of Sindhi dress code. During ancient times the
head covered with a cap was regarded as a sign of soberness and status symbol. The traditional
Sindhi cap was shaped as a cylindrical hat with a front cut to expose forehead. The cap was then
embroidered with intricate geometrical patterns and mirror sewing. The different varieties
throughout the time included silk embellishments on cap worn under a turban which has been
outdated, caps decorated with collyrium drawings which has a very short life as once washed the
collyrium design rinsed away with water, and the modern caps embroidered normally with a
golden/silver thread. Tharparkar, Sanghar, Umerkot, Larkana and Nawabshah and some other
districts were famous for cap making. Sindhi cap making has remained the forte of village
women.
Derived from the local word Ralanna (to mingle), ralli quilts were specifically made in Sindh,
Balochistan, Cholistan Desert, Gujrat and Rajhastan. These quilts were particularly made by the
village women who made their living by selling these quilts. Ralli quilts were used as bed sheets,
floor covering, gifts giving, table runners, cushions, pillows and padding for workers or animals.
Derived from the Arabic word Azrak (blue), Ajrak has its history in 1500 BC when a statue of
King-Priest was extracted from Mohenjo-Daro which had swathed a shawl over his shoulder
adorned with a trefoil pattern sprinkled with small circles filled with red colour. 2 Ajrak shawl has
remained the symbol of respect and nobility all over the time. The art of making these block
printed shawls has been lingered in Sindh, Kutch, Gujrat, Barmer and Rajhastan. This shawl
could be worn by either gender.3

PRODUCTION & OPERATIONS

Ralli Quilt

2jamali4u. 2015. Sindhi Ajrak : An Ancient Art Form.. [ONLINE] Available at:
http://jamali4u.net/sindh/sindh/pages/Ajrak15.php. [Accessed 16 November 2016].
3House of Pakistan. 2013. THE STORY OF 'AJRAK': HISTORY AND MAKING. [ONLINE]
Available at: http://www.houseofpakistan.com/the-story-of-ajrak-history-andmaking/. [Accessed 16 November 2016].

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A typical ralli quilt of a size of 5/7 feet needed 180 labour hours to be prepared. The quilt has
been divided into 3 layers with the top layer to be made by individual woman. This layer has
beautiful art and complex geometrical shapes designed on it. These designs have remained in the
memory of these women. Normally old/used cotton fabric has been used in making the middle
and lower layer. A thick coloured thread has been used to join the three layers with long stitches
of 1/8 inch distance but this distance may vary based on the thickness of the quilt. . Rallis were
made mainly from scraps of cotton fabric which have unlimited useful life if used carefully.
Black, white, red, yellow, green, blue and orange are common colours used in the preparation of
patterns. Patchwork, Applique and Embroidered were the most common types of ralli quilts. 4
(Exhibit 3)
Sindhi Cap
Sindhi cap consist of two parts the upper round head cover and the cylindrical side with an open
forehead. In order to make a cap, firstly fabric pieces have to be cut for both parts in different
sizes and then sewed on a machine. After that, the required embroidery or glasswork has to be
done on both parts to give them a specific design. Lastly, both of the parts have to be joined to
complete a typical cap. (Exhibit 3)
Ajrak Shawl
Ajrak normally comes in 2.5 to 3 meter long imprinted cotton fabric. Red, blue, white and black
colours has been used in making of Ajrak. There were major four types of Ajrak namely Teli
(Oily), Sabuni (Soda ash), Do Rangi (Bi coloured) and Kori. Unlike ralli and cap, Ajrak
manufacturing has remained the domain of men. The typical Ajrak consist of a complex process
divided in different stages which last for around 30 days. Firstly, the required fabric sheet has to
be dipped in Eruca Sativa oil for two weeks. Once dried then the printing process, named
Kiryana, began in which design has to be drew from the paste of lime, acacia gum and rice paste.
Then the next stage Kharrh paste (mixture of natural herbs and raw materials; rice paste, alum,
molasses, fullers earth and gum) has to be applied on black, white and the parts to be dyed red.
Then the fabric has to be cleared from extra tanning through thrashing and camel dung. In order
4Indus Crafts. 2010. Rilli / Ralli Quilt. [ONLINE] Available at: http://www.induscrafts.com/rilli-art.html. [Accessed 16 November 2016].

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to attain the desired red color the fabric has to be dyed with alizarin on high temperature. Then
the fabric has to be dried to sharpen the required colors and again printed with kharrh mixture
followed by final indigo dye. Lastly, Ajrak has to be washed and tightly folded for sale. 5 (Exhibit
3)

CURRENT SCENARIO
The Sindhi cultural products market was losing its charm because of the changing trends of
consumer market. People now demand more sophistication and modernization. As a result, they
were drifting apart from their rich cultural heritage. Because of this, majority of cultural products
had suffered especially Sindhi cap as its usage has remained limited only to occasions like Eid
festive or Topi Ajrak Day (a day celebrated on each 6th December to revive the rich Sindhi
Culture).
Zahid was operating a small company with 3 products he had to consider about the future
sustainability of the business. With all the scenarios he made, he need to pick the one which
provide him enough profitability and long term sustainability. He pondered over the uneven
order given by one of his regular customer but all he worried was about the limited capacity. He
had an option of outsourcing Sindhi caps from Sukkur Central Jail Crafts Unit at a price of Rs
2500 including all the delivery expenses. But if he avail this option, he need to consider other
issues especially the quality and customization of cap.
Zahid was also in favour of taking the special order given by his friend. Jahangir was operating a
small social enterprise whose sole purpose was to revive the rich Sindhi heritage by conducting
different exhibitions throughout the country. The popularity of these exhibitions has increased
overtime and now Jahangir was also moving his business to overseas. Being a trustworthy friend,

5Indus-crafts. 2016. Ajrak Making. [ONLINE] Available at: http://www.induscrafts.com/making-of-ajrak.html. [Accessed 5 January 2017].

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Zahid was not worried about the asymmetry in terms of prices rather he considered it as an
opportunity to make long term relationship with Jahangir.
Zahid paused his thoughts as he could not go with any of the option without a proper costing and
profitability analysis so he waited for Amir to complete his work and left his office.

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Exhibit 16
INDUS-CRAFTS COMPANY
Income Statement 2014

Rs
Sales

14612500

Less:
Variable Costs

EXHIBIT 2A

Direct Material

2598750

Direct Labour

5048750

Supplies

800625

INDUS CRAFTS

Indirect Labour

466375

COMPANY

PRODUCT WISE
IN RS.

Energy

675500

ACTUAL COST

Total Variable Cost

9590000

Contribution Margin

5022500

Less:

Sindhi
Ralli

Ajrak
Total

Fixed Costs
Indirect Labour

466375

Selling Price

Supervision

690375

3000

Energy

675500

Units
1050
3500

Depreciation

579250

Head Office Support

497875

Other Costs

310625

S&GA

730625

Production

Sales
1837500
9625000
Direct Material

Total Fixed Cost

Operating Income
367500

3950625

Cap

3500
5000
525
1925

3150000
14612500

787500

1071875
1443750
2598750

Direct Labour

735000

945000

3368750

5048750

Total

1102500

1732500

4812500

7647500

6Authors source
7Authors source

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FOH COSTS
Supplies

128625

94500

577500

800625 (VC)

Indirect Labour

36750

126000

770000

932750 (50% VC)

Supervision

18375

94500

577500

690375 (FC)

Energy

73500

315000

962500

1351000(50% VC)

Depreciation

36750

157500

385000

579250 (FC)

Head Office Support

18375

94500

385000

497875 (FC)

Other Costs

55125

63000

192500

310625 (FC)

S&GA Expenses

182656

255719

292250

730625 (FC)

Subtotal

550156

1200719

4142250

5893125

Total

1652656

2933219

8954750

13540625

Profits

184844

216781

670250

1071875

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EXHIBIT 2B8
INDUS CRAFTS COMPANY
PRODUCT WISE UNIT ACTUAL COST IN RS.

Sindhi Cap

Ajrak

Ralli

Selling Price

3500

3000

5000

Production Units

525

1050

1925

Sales

1837500

3150000

9625000

Direct Material

700

750

750

Direct Labour

1400

900

1750

Total

2100

1650

2500

Supplies

245

90

300

Indirect Labour

35

60

200

Energy

70

150

250

Subtotal

350

300

750

Total

2450

1925

3250

VARIABLE FOH COSTS

Contribution Margin

1050

1075

1750

8Authors source

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Exhibit 39

9Companys Source

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