Costing and wastewater decisions in a tie-dye enterprise
A youth group makes 200 tie-dye cotton T-shirts per month. Each shirt uses MK 4,500 of fabric, MK 800 of dye and chemicals, MK 1,200 of direct labour and MK 300 of packaging. Monthly fixed costs are MK 150,000 rent, MK 60,000 transport, MK 40,000 electricity and MK 25,000 depreciation. The selling price is MK 12,000 per shirt. The group has no wastewater treatment: after dyeing, about 40 litres of spent dye bath per shirt is tipped into a storm drain that runs past a borehole used by nearby households. The dye bath is alkaline and contains unfixed dye. The group wants to grow, but a local official has warned that the drain discharges to a wetland. The group keeper asks for a costing and a plan that keeps the price competitive.
1. Calculate the unit cost, contribution per shirt and monthly break-even output. Judge whether the selling price is defensible, showing your reasoning.
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Variable cost per shirt = MK 4,500 fabric + MK 800 dye and chemicals + MK 1,200 labour + MK 300 packaging = MK 6,800. Monthly fixed cost = MK 150,000 rent + MK 60,000 transport + MK 40,000 electricity + MK 25,000 depreciation = MK 275,000. At 200 shirts, total cost = (200 × MK 6,800) + MK 275,000 = MK 1,360,000 + MK 275,000 = MK 1,635,000, so unit cost = MK 1,635,000 ÷ 200 = MK 8,175. Contribution per shirt = MK 12,000 − MK 6,800 = MK 5,200. Break-even = MK 275,000 ÷ MK 5,200 = 52.9, so 53 shirts per month. Monthly profit at 200 shirts = (200 × MK 5,200) − MK 275,000 = MK 765,000.
The price is defensible on cost grounds: it covers full unit cost and gives a contribution margin of about 43%. However, the unit cost does not include wastewater treatment or an owner's salary. If treatment adds MK 100,000 per month to fixed costs, break-even rises to 73 shirts and profit falls to MK 665,000, still positive at 200 shirts. The group should not cut the price to win volume without first adding these costs; it should instead protect the price and reduce waste.
2. Assess the environmental and health risk of the current disposal method and propose low-cost changes that the group can make immediately.
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The current practice is a serious risk. About 200 × 40 litres = 8,000 litres of alkaline dye bath per month enters a storm drain that reaches a wetland and a borehole used by households. The bath contains unfixed dye, salt and alkali; it can raise soil pH, damage aquatic life, stain water and create a legal liability. Storm drains are not designed for process water, so the group cannot assume dilution will make it safe.
Immediate low-cost changes: collect spent dye bath in labelled 200-litre drums instead of tipping it away; let solids settle; neutralise the clear liquid with dilute acetic acid or vinegar to pH 6–9, testing with pH paper; reuse the final rinse water for the next dark shade; and arrange disposal through a permitted sewer or licensed carrier, not the storm drain. Reduce the load at source by using dye recipes with higher exhaustion, avoiding metal-complex dyes, and measuring chemicals rather than estimating. Provide gloves, eye protection and training, and keep children and animals away from the dye area. Record volumes, pH before and after treatment, and disposal dates. These steps do not require a treatment plant, but they do require discipline and a written procedure.
3. Explain how the group should record the costing, environmental checks and corrective actions in a practical project portfolio so that an assessor can see the decision trail.
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The portfolio should show a chain of evidence, not just a final product. Include a cost card listing every variable and fixed cost, with receipts or supplier quotations, and a break-even calculation that shows the formula and the result. Add a simple monthly cash-flow or profit statement for 200 shirts and a sensitivity note showing what happens if the price falls or treatment costs are added. For the environmental side, include a dye recipe log with dye mass, water volume, pH at start and end, and a waste log with drum number, volume, pH after neutralisation and disposal date. Photographs of the settling drums and pH test strips are useful evidence.
Add a short risk assessment identifying the storm drain, borehole and PPE hazards, and a corrective-action table with dates and signatures. The assessor should be able to see the problem, the decision, the action and the result. Finish with a reflection that explains why the group chose treatment and reuse over simply reducing output, and what it would do next if sales rose to 300 shirts. This turns a costing exercise into evidence of entrepreneurship, safety and environmental responsibility.