Product Costing and Working the Numbers
Product costing was the order of the day on Saturday, 10 September.
Nodumo’s idea of opening a coffee shop in Kasi was put to the test as the class explored what it would cost Nodumo to make a “cup of coffee” and what she could sell it for in Green Village.
As a starting point, the selling price of a standard 350 ml cup of coffee in Kasi was identified courtesy of Lehubedu “Lemo” Mohlabe aka Mr Coffee to Car, as R15. Now a social media star, Lemo is an inspiration to all.
Coffee-preneurs
Mr Coffee to Car
Nodumo Mingiza
The class went online and identified the direct variable costs / inputs that made up the drink we so often take for granted. Electricity, water, cup, lid, stirrer, ground coffee, milk, sugar, and serviette.
The retail price of the various components was obtained from the Makro, takealot, PnP websites etc. and loaded into Google Sheets where a cost/unit component was calculated and from which the direct variable “cost of a cup of coffee” was determined.
It soon became apparent that using “milk pods” at R1,19 for a 20 ml pod was too expensive. UHT box milk would do just fine taking the best part of R2 out of the cost build up.
At R6.68 unit cost, a R15 selling price yielded a gross profit of R8.32. The class thought R15 was too cheap for the “coffee experience” on offer and settled on R20 a cup and a gross profit of R13.32!
It didn’t take long for the class to realise that they need only sell 30 cups to make a gross profit of R399.6 per day or R7 992 per month on a 20 day working month. Just imagine if wholesale prices had been used to calculate the cost components.
Access to data for free
While business/life is not a costing model on a Google Sheet, the insight the class obtained from this simple costing exercise unlocked a wider conversation covering other typical Kasi services and products such as laundry services, grilling whole chickens etc. It became apparent that the true cost of many of these services and products was not known to the entrepreneurs who owned these businesses.
Equally important was the recognition that the costing had been done on a laptop requiring data to search for input prices online. Even if we substitute the laptop for a smartphone, data would still be a limiting factor in Kasi.
Time to make data freely available, for free, in Kasi. Our economy won’t grow without it.
