Costs of Running A Costs of Running A BusinessBusiness

Marketing/Entrepreneurship Marketing/Entrepreneurship

What is a better deal?What is a better deal? A 10oz Candy Bar for $1.00 or a 5oz A 10oz Candy Bar for $1.00 or a 5oz

candy bar for $0.60?candy bar for $0.60? A 10 piece chicken bucket for $8 or a 20 A 10 piece chicken bucket for $8 or a 20

piece chicken bucket for $15?piece chicken bucket for $15? A 12 flower bouquet for $6 or a 20 flower A 12 flower bouquet for $6 or a 20 flower

bouquet for $9?bouquet for $9?

Unit of SaleUnit of Sale

Define the Unit of Sale for the following Define the Unit of Sale for the following businesses:businesses: Pizza ParlorPizza Parlor Barbara ShopBarbara Shop Computer StoreComputer Store StarbucksStarbucks $1 Store$1 Store

CostsCosts

Variable Costs: Change with Sales. Variable Costs: Change with Sales. Occur in 2 sub-categoriesOccur in 2 sub-categories COGS – specific to each unit of saleCOGS – specific to each unit of sale

Cost of materialsCost of materials Cost of LaborCost of Labor

Other variable costsOther variable costs CommissionsCommissions Shipping & HandlingShipping & Handling

Calculating Gross ProfitCalculating Gross Profit

Selling Price – COGS – Other Variable Selling Price – COGS – Other Variable Costs = Gross ProfitCosts = Gross Profit

Try ThisTry This

Find the Gross Profit per Unit. Find the Gross Profit per Unit. Sales Price = $10.00Sales Price = $10.00 COGS = $36 for a Dozen WatchesCOGS = $36 for a Dozen Watches Commission = 20% Commission = 20%

Economics of One UnitEconomics of One UnitFor WatchesFor Watches

Selling Price Selling Price $10.00$10.00 Cost of Goods SoldCost of Goods Sold $3.00$3.00 Other Variable (Commission)Other Variable (Commission) $2.00$2.00

Total Variable Costs Per Unit:Total Variable Costs Per Unit: $5.00$5.00

Gross Profit Per Unit:Gross Profit Per Unit: $5.00 $5.00

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Individually, try the example for the Individually, try the example for the Sandwiches. Sandwiches.

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