Economics of One Unit

1. Economics of One Unit Chapter 2 YEK

2. Profit • Pay Yourself • Expand the Business • Start other businesses • How do we determine gross profit???

3. Economics of One Unit • Unit of Sale • The product or service a business sells • Depends on the type of business • Retail : on item, sweater • Manufacturing: one order, 100 cases of coffee • Service: one hour of service time, hair cut • Wholesale: dozen of one item, cans of soup • Combination: average, tan plus lotion

4. Cost of Goods Sold • COGS • The cost of selling one additional unit (or the cost to make/buy one unit) Selling Price per unit/COGS per unit = Gross Profit

5. Examples • Watch • Cinnamon Roll

6. Keystone • Determining your price by doubling your COGS • COGS = $3.00 • Price you will charge =$6.00

7. Profit • Total Revenue – COGS = Total Gross Profit • Sell 20 watches @ $10 • COGS = $5.00 per watch • $200 - $100 = $100 • Total Gross Profit = $100

8. Break-Even Point Fixed Costs/Gross Profit Per Unit Ties sell @ $4 a tie Total Costs =$50 Profit per tie = $2 $50/$2 =25 25 ties must be sold to break even

9. Activities • Ice Cream Sundae worksheet • Caramel Apple worksheet