Report

Cost of A Cup of ‘Quality’ Coffee Ted Mitchell Sources of Cost Information • General Information in the student manual • Coffee Calculator in game • Materials Report in the game Weekly Report on Marketing Performance Week #1 Revenue, R = P x Q $3.50 x 1069 cups $3,741.50 Cost of Goods sold, V x Q $0.32 x 1069 $342.08 Gross Profit, G = (P-V) x Q $3.18 x 1069 $3,399.42 Servers $1,741.50 Adv & promotion $2,800.00 Marketing’s Contribution to Weekly Profit Calculating the the direct cost for making a (aka variable cost per cup, V) $4,541.50 ($1,142.08) cup of coffee Calculation for Variable Cost per cup • Quality of the Coffee – $5 per pound for good – $6 per pound for best – $7 per pound for organic • 62.5 shots of espresso per pound – 1 shot of espresso for 12 oz cup – 2 shots of espresso for 16 oz cup – 3 shots of espresso for 20 oz cup • All Cups are about $0.07 to $0.09 each • Do NOT include any fixed costs or depreciation Direct Cost per Medium Cup Quality Good Best Organic Costs per cup 0.09 0.09 0.09 Cost per lb $5 $6 $7 Shots per lb 62.5 62.5 62.5 Cost per shot $lb/62.5 shots per lb 0.08 0.096 0.112 Shots needed 2 2 2 Cost of espresso 0.16 0.192 0.224 Total cost per cup 0.25 0.282 0.314 Total cups 2,436 2,436 2,436 Cost of Goods Sold $609 $687 $765 The total Cost of Goods Sold, COGS • Is also called the total variable cost for period • The actual size of the COGS depends on the number of cups of coffee sold • The amount of the COGS varies directly with the number of cups sold and the revenue earned • The direct cost of making an individual cup of coffee can be constant over the decision period • The direct cost of making an individual cup of coffee is defined as the variable cost per unit sold Total Variable Cost Total Cost of Goods Sold Increases As Production Increases. Dollars Total Cost of Goods Sold Total Variable Cost Quantity of Coffee Sold Weekly Report on Marketing Performance Week #1 Revenue, R = P x Q $3.50 x 1069 cups $3,741.50 Cost of Goods sold, V x Q $0.32 x 1069 $342.08 Gross Profit, G = (P-V) x Q $3.18 x 1069 $3,399.42 Servers $1,741.50 Adv & promotion $2,800.00 Marketing’s Contribution to Weekly Profit Calculating the the direct cost for $4,541.50 ($1,142.08) making a cup of coffee (aka variable cost per cup, V) Weekly Report on Marketing Performance Week #1 Revenue, R = P x Q $3.50 x 1069 cups $3,741.50 Cost of Goods sold, V x Q Plus wasted coffee $0.32 x 1069 $342.08 Gross Profit, G = (P-V) x Q $3.18 x 1069 $3,399.42 Servers $1,741.50 Adv & promotion $2,800.00 Marketing’s Contribution to Weekly Profit Calculating the the direct $4,541.50 ($1,142.08) cost for making a cup of coffee (aka variable cost per cup, V) Most students take the COGS and divide it by the # of cups sold COGS shows up on the Dashboard of Biz-Café Any Questions? • On Estimating the Cost of Goods Sold (aka the total variable cost)? • On estimating the direct cost of making a cup of coffee (aka the variable cost per cup sold)?