Textile Economics and Entrepreneurship
What the domain tests
Textile Economics and Entrepreneurship tests costing, pricing, break-even, value addition and small-business planning in textiles and clothing. Expect calculations and decisions about whether a product or order is viable.
Costs and contribution
Fixed costs do not change with output: rent, equipment, licences. Variable costs rise with each unit: fabric, thread, buttons, labour paid per piece. Contribution per unit = selling price − variable cost. Break-even units = fixed costs ÷ contribution per unit. Mark-up is based on cost; margin is based on selling price.
Worked example
A producer makes 50 school bags. Fixed costs are K15,000; variable cost is K1,200 per bag; selling price is K1,800. Contribution = K1,800 − K1,200 = K600. Break-even = K15,000 ÷ K600 = 25 bags. At 50 bags, profit = (50 × K600) − K15,000 = K15,000. Reasoning: below 25 bags the business makes a loss; each bag above 25 adds K600 towards profit. If fabric prices rise by K100 per bag, contribution falls to K500 and break-even rises to 30 bags.
Enterprise decisions
Market research identifies what customers will buy; records show actual costs; pricing must cover costs and remain competitive. Value addition through design, branding or better finish can justify a higher price. Cash flow matters even when a product is profitable on paper.
Traps
Do not confuse mark-up with margin; do not ignore fixed costs; do not price below cost to win an order; do not treat sales revenue as profit; do not forget waste and rejected items in costing; do not mix personal and business money.