Cost of A Cup of ‘Quality’ Coffee Ted Mitchell. Sources of Cost Information General Information in the student manual Coffee Calculator in game Materials.

Slides:

Advertisements

Similar presentations

McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.

Advertisements

Remember the Markup on Price. Mp aka Gross Profit Margin aka Return on a Dollar of Sales aka P-V Ratio Ted Mitchell.

Why WE need to know the difference between a variable cost and a fixed cost Ted Mitchell.

Constructing A Meta-Marketing Machine For Pricing Ted Mitchell.

Three Elements of the Marketing Process as a Two-Factor Machine Ted Mitchell.

Using Impact Analysis to Calculate Arc Elasticity of Price Ted Mitchell.

#3 The Tabular Format for Presentation Ted Mitchell.

The 4 P’s of Marketing Management in Biz-Cafe

Biz-Café Weekly Performance Statement With Pastry

Decomposing Two Factor Models Cups per Hour Ted Mitchell.

Use of Accrual vs Cash Systems of Accounting Ted Mitchell.

Elasticity of the Return on Advertising and ROME Ted Mitchell.

Fixed Costs in the Weekly Decision Period Biz Cafe

Copyright © 2006, The McGraw-Hill Companies, Inc.McGraw-Hill/Irwin Chapter Six Cost-Volume-Profit Relationships.

Both Accrual and Cash Systems Used in Accounting are Inadequate for a Weekly Report on Marketing Performance Ted Mitchell.

What should a plan include? Ted Mitchell. Choose a Target Market Recognize what they are buying 1) High end, place to relax, meet, ruminate, study, 2)

Making Your first Decision With Sample of Biz-Café Decisions for The First Week Ted Mitchell.

Weekly Marketing Inputs for the Biz-Cafe Machine Ted Mitchell.

Cost Based Advertising

Cost Behavior and Cost-Volume-Profit Analysis

Intro to Decomposition: Creating a Three Factor Model (Cups/Server) (Servers/Hour) (Hours) Ted Mitchell.

Intro to Decomposition: Creating a Three-Factor Model (Cups/Server) (Servers/Hour) (Hours) Ted Mitchell.

First of Two Types of Percent: Relative Percentage Conversion or Efficiency Rates, %i Ted Mitchell.

Review and Examples of Percentages and Percentage Changes Ted Mitchell.

Cost-Volume-Profit Relationships. Learning Objective 1 Explain how changes in activity affect contribution margin and net operating income.

Typology of Conversion Rates Ted Mitchell. A conversion rate is the ratio of the Output to the Input Conversion rate, r = (Output, O)/(Input, I) Inputs.

Marketing Return as an Identity Decomposing MROS into ROME, EOR, and Markup or How to allocate additional budget? Ted Mitchell.

Markup as the Conversion Factor in a Two Factor Marketing Machine Ted Mitchell.

Is Cost Based Pricing Fair? Ted Mitchell What are the three basic orientations to setting a selling price for your product? 1) Cost-Based 2) Competitor-Based.

Biz-Café Calculating the Cost of making a Cup of Coffee

Exam Question on Advertising Elasticity. Advertising Profit Z 0 Return on Advertising Expense is always falling Z = ROAE x Advertising Z = (Z/A) x A.

Reviewing the Definitional Issues of ROMI Ted Mitchell.

Explaining the Different Costs, and Profits on The Dashboard of The Marketing Machine Ted Mitchell.

Forecasting The Size of A Change A Sample Question Ted Mitchell.

The Confusion Between A Direct Relationship and A Linear Relationship Ted Mitchell.

Copyright © 2012 McGraw-Hill Ryerson Limited 7-1 PowerPoint Author: Robert G. Ducharme, MAcc, CA University of Waterloo, School of Accounting and Finance.

Cost Based Pricing strategies. Importance of Costs in pricing Costs information indicates whether the product can be made and sold profitably in any price.

Do most companies like Netflix try to understand how the costs of the company behave? 1.Yes 2.No.

Cost-Volume-Profit Relationships Chapter 6. © The McGraw-Hill Companies, Inc., 2002 Irwin/McGraw-Hill 2 The Basics of Cost-Volume-Profit (CVP) Analysis.

McGraw-Hill /Irwin Copyright © 2008 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 6 Cost-Volume-Profit Relationships.

BREAK EVEN ANALYSIS Any business wants to make a profit on their investment of time and money It is also a useful planning tool Breakeven point is the.

PRICING Break Even Analysis. In order to cover expenses, businesses add a MARK-UP –Amount of money added to the original cost of the product to cover.

McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.

AAR YA PAAR. Marginal Costing & Break Even Point Analysis RAHUL JAIN (Striving for excellence) BCOM (H), MBA, FCS.

CENTURY 21 ACCOUNTING © Thomson/South-Western LESSON 15-1 Cost Characteristics That Influence Decisions.

Cost-Volume-Profit Relationships Chapter 6. © The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin The Basics of Cost-Volume- Profit (CVP) Analysis.

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 15-1 Cost Characteristics That Influence Decisions.

1 Cost-Volume-Profit Relationships Chapter 6. 2 Basics of Cost-Volume-Profit Analysis Contribution Margin (CM) is the amount remaining from sales revenue.

BREAK EVEN ANALYSIS  We use the breakeven analysis to look at the point where we start to make a profit in the business.  Any business wants to make.

Prepared by Diane Tanner University of North Florida Flexible Vs. Static Budgets Chapter 7.

Copyright © 2006, The McGraw-Hill Companies, Inc.McGraw-Hill/Irwin 11 th Edition Chapter 6.

EXCERCISES ON BES. Compute the Break-even sales in pesos and units 1.A product line is sold at a unit selling price of P9.00. Variable cost is estimated.

Analysis of Cost- Volume Pricing to increase profitability Chapter 3.

Contribution Margins. Cost-volume-profit Analysis: Calculating Contribution Margin Financial statements are used by managers to help make good business.

19-1 Cost Behavior Analysis … how costs react to changes in the level of business activity.   Some costs change; others remain the same.   Note “cost.

Marginal Costing & Break Even Analysis. Marginal cost The amount at any given volume of output by which the aggregate costs are changed if the volume.

MODIFIED BREAKEVEN ANALYSIS TOTAL COST CURVES: COSTS AVERAGE COST CURVES: COSTS FIXED COSTS VARIABLE COSTS TOTAL COSTS QUANTITY AVERAGE TOTAL COSTS AVERAGE.

Chapter 8: Short-Run Costs and Output Decisions. Firm’s Decisions.

Lesson Objectives All students will understand Most students will

Lesson 15-2 Determining Breakeven

Cost-Volume-Profit Relationships

BUSS1 Formula Profit= Total revenue - Total cost Contribution= Selling price - Variable cost per unit Break-even = fixed cost/ contribution per unit Total.

Total Revenue, Total Cost, and Profit

AMIS 310 Foundations of Accounting

The Basic Operating Statement MKT 210

Price Elasticity Using Coffee Example

Presentation Chapter 4 Profit Planning.

A what level of production does the business start to make a profit?

2F Break Even Analysis.

Lesson 15-1 Cost Characteristics That Influence Decisions

Presentation transcript:

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, Cost of Goods sold, V x Q $0.32 x 1069 $ Gross Profit, G = (P-V) x Q$3.18 x 1069$3, Servers$1, Adv & promotion$2,800.00$4, Marketing’s Contribution to Weekly Profit ($1,142.08) Calculating the the direct cost for making a cup of coffee (aka variable cost per cup, V )

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 QualityGoodBestOrganic Costs per cup0.09 Cost per lb$5$6$7 Shots per lb62.5 Cost per shot $lb/62.5 shots per lb Shots needed222 Cost of espresso Total cost per cup Total cups2,436 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 Dollars Quantity of Coffee Sold Total Cost of Goods Sold Total Variable Cost Total Cost of Goods Sold Increases As Production Increases.

Weekly Report on Marketing Performance Week #1 Revenue, R = P x Q$3.50 x 1069 cups$3, Cost of Goods sold, V x Q $0.32 x 1069 $ Gross Profit, G = (P-V) x Q$3.18 x 1069$3, Servers$1, Adv & promotion$2,800.00$4, Marketing’s Contribution to Weekly Profit ($1,142.08) Calculating the the direct cost for 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, Cost of Goods sold, V x Q Plus wasted coffee $0.32 x 1069 $ Gross Profit, G = (P-V) x Q$3.18 x 1069$3, Servers$1, Adv & promotion$2,800.00$4, Marketing’s Contribution to Weekly Profit ($1,142.08) Calculating the the direct 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)?