Dirt and Worms COGS Activity Since we have been practicing calculating COGS let’s do one more to make sure you really understand how to do it. The only difference this time…you get to make the product…and eat it! We will be selling Dirt and Worms. Has anyone not heard of Dirt and Worms? It is a delicious mix of chocolate pudding and crumbled Oreos (that is the dirt) with little gummy worm surprises! Let’s assume that we are selling Dirt and Worms for market day and we need to determine our COGS. What is the first thing we should do? Answers will vary.

Dirt and Worms Cost of Goods Sold Define One Unit: Item Total Quantity Cost Quantity per Unit Unit Cost Pudding (cups) 8 servings $3.50 $ Oreos Approximately 48 cookies Approximately 36 cookies $2.98 Worms Approximately 28 worms $2.48 Cups 50 cups $2.63 Spoons 100 spoons $5.24 Total Cost of Goods Sold per Unit *Before you begin you MUST update the “Total Quantity” and “Cost” of each item based on what you actually purchased for the activity. One unit of sale for our market day business will be one cup of Dirt and Worms. (You can hold up a cup to demonstrate.) What do we need to make this one cup of Dirt and Worms? (Again, you can hold up the ingredients.) At this point you can give each student supplies. (Ask them to not eat it until you are done with the math!) Work through filling in the table. (Use the Dirt and Worms Activity Guide to assist you with this process.) *From here you can talk to your students about how to determine price based on COGS. You will also want to discuss your customers’ ability and willingness to pay that price.

Dirt and Worms Pricing & Profit Pricing & Profit is used to determine whether a business model can be profitable. You can follow up the Dirt and Worms COGS Activity with a discussion of Pricing & Profit. Then have your students apply their Pricing & Profit knowledge to the Dirt and Worms Activity.

Price and Profit : Fill in the table below using the per unit COGS to determine if this product can be a profitable product. Selling Price per unit A) $ Cost of Goods Sold per Unit Pudding $ Oreos Worms Cups Spoons B) $ Gross Profit per Unit = (A-B) C) $ Using the COGS from the earlier slide you can complete and Pricing & Profit analysis for Dirt and Worms. Pricing & Profit is used to determine if a product can be profitable. In order to determine this you must first calculate COGs and then determine a selling price. Using the selling price and COGS you then calculate the Gross Profit per Unit. Selling Price per Unit: You (as a class or small group) determine the selling price for one unit. What do you think your costumer is willing and able to pay for one unit of Dirt and Worms? Total COGS per Unit: Total each items’ COGS per Unit. These numbers can be found on the Dirt and Worms COGS Worksheet. Gross Profit per Unit: The difference between revenue per unit (price customer is paying) and COGS per unit. Gross Profit per Unit is the amount of profit you would make per unit of Dirt and Worms sold. Is this enough to consider Dirt and Worms a profitable product? Why or why not? You can further your cost discussion by asking “What if we added the cost of labor into our calculations?”