The Floor Cover Limited

The Floor Cover Limited, New Delhi, completed a market survey in Kenya and U.A.R. The Survey revealed that majority of the consumers, especially from commercial and office establishments, including airlines and transport companies, were highly dissatisfied with the conventional floor-cover of mixed yarn of cotton and wool. The major complaints were in terms of shorter life or durability, as well as lack of stain-proof quality of the product. Majority of the importers / dealers expressed a preference for a new substitute which, besides being more durable, should also be stain-proof and, of course, has to be competitive in terms of price.

After considering the customer requirements, the product-design department of the Floor Cover Limited finalized a new type of floor-cover, called Plasto Cover made of vinyl coated fiberglass cemented to a sponge rubber backing material. A number of tests revealed that this new idea could be the real answer to consumers required very little efforts to clean and maintain. The sponge rubber backing imparted a cushion effect to the foot as much as the conventional cotton wool floor cover. Colour choice of a large variety will be an added attraction for the new product which is also expected to be five times more durable than the conventional one.

The production Department computed the following costs:-

For Producing 100 square yards of floor-covers,

100 square yards of floor-covers,

100 square yards of Fibreglass @ Rs. 50 per square yard.

Adhesive Rs. 60,

Direct Labour Rs. 270,

Overheads are estimated as follows:-

Supervision @ Rs. 4500 per month

Inspection @Rs. 540 per month

Miscellaneous @ Rs. 330 per month

Factory rent @ Rs. 2400 per month

Other expenses @ Rs. 240 per month

Material cutting machine purchased at Rs. 1800 with a service life of 10 years.

Three building tables costing Rs. 5400 with a service Life of five years.

Selling and Administration expenses are estimated to be Rs. 15000 per month, including monthly advertising expenditure of Rs. 9000.

Total production capacity will be 2400 square yards of Floor-covers per month.

Pre-testing of the product has already been successfully conducted in Kenya as well as in U.A.R. Technical test reports convinced the importers/Consumers that the new type of Floor-cover will have a life of 5 years, after which alone it would need replacement. The life of the conventional type of floor-cover of Cotton wool is of one year only.

Export Department of the company has made the most conservative estimate of export sales of 600 square yards per month. The export price of conventional type of floor-cover has been Rs. 38 per square yard, excluding packing and forwarding expenses of Rs. 2 per square yard.

Installation costs are not included in the sale price but these are estimated to be @ Rs. 4 per square yard for the conventional type floor-cover as against Rs. 8 per square yard for the new type.

Packing & Forwarding expenses have been estimated to be Rs. 10 per square yard for the new type as against Rs. 2 per square yard for the conventional one.

Please confirm what the new floor price to be set