Price and Profit Worksheet
Measuring Cup/ Measuring Spoons
The Ice Cream Sundae activity allows your students to practice calculating COGS and Price and Profit. This activity will build upon that foundation by adding in labor costs and sales projections.
Ask students, “How does a business decide what to sell their product for?” Lots of answers may arise, but students should recognize that the cost of the materials to create the product plays a major role. Today, we will practice calculating COGS by using a pretty sweet product – an ice cream sundae. We will then calculate labor cost and estimate sales projections to lead us to how much our net profit might be. So let’s get scooping!
- Purchase all materials for the activity for you to model and walk through virtually with your students. Another option would be to video yourself and then post to your virtual classroom platform.
- (Optional) If you would like students to participate along with you, post on your virtual classroom platform ahead of time the materials students may want to have on hand at their house.
- Review the activity and the Ice Cream Sundae Price and Profit Worksheet and modify as necessary.
- Use your receipt(s) to create your “answer key” for the Ingredients and Supplies Table of the worksheet.
- Decide how you would like students to respond to any of the debrief questions after they complete the activity and how they would do so.
- Post the activity to your classroom platform for students to access and complete or set up a Zoom session to walk through the activity with students.
NOTE: These directions are written for a collaborative session with students virtually – if not collaborating as a class virtually, you can post pieces of the directions online with the resources listed above.
- The first step is to determine what the cost per unit is for each ingredient and supply. After we figure this out, you can then make your “prototype” sundae. When making your “prototype” sundae, you must keep track of what you put in it.
- You will need your receipt(s). Share with your students the cost of each ingredient and supply. They will put these numbers in the Cost column of the Ingredients and Supplies table.
- Next are Servings per Unit column. You may also want to explain how to determine the servings per unit.
- Do the first few ingredients with them. Then let them complete the chart on their own.
- Once they have shown you their answers and they are correct, they are welcome to make their “prototype” ice cream sundae using those ingredients and supplies. Remind them to keep track of what they put in their “prototype” sundae in the My Ice Cream Sundae table.
- After students have made their “prototype” sundae, you can discuss the cost of the different prototypes.
- Protip: Have your students share in the chat the total COGS once they have it calculated. That will give you a visual to help with the discussion. If you are using a video conferencing tool with a polling option, that might also help create a quick visual.
- Analyze the results and discuss as a class – Are the COGS about the same? High? Low?
- The next step is Calculating Labor Cost. You will want to explain to your students the various ways in which employers might payout for labor: salary, hourly, etc. For this example, we will use hourly.
- Have your students decide what they think someone hired to produce ice cream sundaes should get paid per hour.
- The must decide how long they think it takes to make one ice cream sundae.
- They will then calculate the Labor Cost per Unit.
- Profit per Unit is determined by using the numbers from the previous tables. Students will first need to determine at what price they think they can sell their ice cream sundae.
- From their selling price, they must subtract COGS and labor costs. This will give them their Gross Profit per Unit.
- Making Sales Projections is the final step in the Ice Cream Sundae Activity. During this step, your students will gain the knowledge necessary for a successful Market Day experience.
- To complete the Making Sales Projections table your students must first know how long they will be selling their product. For the sake of this activity, you can say that it is one hour or any other amount of time you would like to use.
- The next problem that needs to be solved is how long it takes to sell one unit. It is hard for your students to understand that, depending on the circumstances, they may need to include things other than producing the actual product. For instance, at restaurants such as Dairy Queen, Baskin Robins, etc. they need to include the time it takes to greet the customer, take the order, make the order, take their money, and make change.
- After they have determined the amount of time it takes to sell one unit, they can then determine how many units they could potentially sell during the selling period.
- To determine their Net Profit for the selling period, they will multiply the gross profit per unit by the number of units they can produce.
You can reiterate this activity with just about any product you want your students to produce. You can reproduce the tables in the Ice Cream Sundae worksheet or have your students write their own sheets. Some examples can be found below.
- Sandwiches – bread, cheese, meat, condiments, plates, napkins
- Gift bags – gift bags, tissue paper, and gifts. Tell students they must put items in the bag that stays with the theme of the bag.
- Caramel Apples – apples, caramel, bowls, sticks, napkins
- Family meal at home – students can work with their parents/guardians to help make lunch or dinner and complete the calculations
Students can complete the debrief on paper by answering the following questions or in a group setting via Zoom (either as a full class or in breakouts) to discuss their learnings.
- What is the difference between fixed costs and variable costs?
- Were the costs experienced in this activity fixed or variable?
- What could you have done to decrease the COGS you experienced?
- What effects does a high COGS have on your product?
- Why is it important to pay attention to COGS when developing and producing a product?
- What are the ways you can apply Sound Judgment to keeping COGS under control?
- What effect does labor have on the cost of a product? What effect does labor have on the price of a product? Does this change your mindset on how much you should pay your labor?
- What things must one consider when making sales projections? What are the potential pitfalls with projections?
- What can happen if you do not meet your sales projections? Higher demand or lower demand for your product?
- Once you have calculated your COGS, how can you use that knowledge as you sell to customers? If a customer were to ask for extra of an item, would it be important to have knowledge of your COGS? Why?
- What did you take into consideration when making decisions on how many units of an item to include in one cup of ice cream sundae? Do you believe this represented sound judgment? Why or why not?
- As you decided how many units of an item to put in each ice cream sundae did you consider what the best use of resources was in making those decisions? Did you weigh the benefits versus the costs?
- Is there a relationship between understanding subjective value, using sound judgment and pricing one unit for sale?
- As you reflect on this activity do you see a relevant relationship between knowledge and sound judgment?