Marketing Foundations

Costs Breakdown
By Nour Boustani
What is a cost analysis?
Cost analysis is the action of calculating the costs that are involved in operating your
businesses; those costs include the following:

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Variable Costs Fixed Costs Marketing Expenses Tax

Costs that are involved in Costs that involved in Costs and expenses that The tax you will pay to the
producing your product. operating your business, are involved in marketing government on your
Those costs are changeable those costs are fixed and promoting your profit.
depending on the quantity of regardless of producing a product.
your production. product or not.
What is COGS?
COGS or cost of goods are the cost that involved directly in producing your
product, those costs are:

C HE E S E TO MATO pineapple re d p e p p e r

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b aco n b l a c k o l i ve s M U S H R O OM ham

egg gre e n p e p p e r PE P P ER O N I o ni o n

tuna chili R O Q UE F O R T CH E E S E BASIL

Cost Of Goods (COGS) Materials Cost Labor Cost

List of items for costs of goods to consider, those costs may vary
depending on your product, you may include them in your final
price or charge separately:

C HE ESE TOMATO pine appl e red peppe r

b aco n b l a ck ol i ve s M US HR OOM ha m

e gg gre en p ep pe r PE PPE R ON I onion

tu n a chi li R OQUEF OR T CH EE S E BAS IL

Materials Cost Direct Labor Cost Standard Shipping Fees Transaction Fees

State Tax/Vat Maintain Warranty Fees Product Liability Insurance

What is profit margin?
Profit margin equals to how much money will you make on selling one unit of your
product.

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Price Cost Of Goods Profit Margin

What is gross profit?
Gross profit equals to how much money will you make on your total revenue.

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Total Revenue Total Cost Of Goods Gross Profit

How to increase
gross profit margin?
You can increase your gross profit margin by increasing the purchase value
of your customer; Here is how:

Up-Sale | Upsize Up-Sale | Buy More Cross-Sell | Bundle

Ask your customers to Ask your customers to Sell your customers

upgrade to a larger size buy more of your product complementary products
at a discounted price. at a lower price or special or a packaged offering.
discount.
What are fixed costs?
Fixed costs are the necessary costs for your business to operate; those costs
include the following:

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Cost Of Goods (COGS) Utilities Labor Salaries

List of items for fixed costs, those costs may vary depending on
your business:

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Rent Salaries Utilities Insurance

Property taxes Maintenance Expenses Machinery Cost

What is break-even?
A break-even is when your sales numbers match your costs, all sales you
make beyond this point are considered as profit.

Total Sales Variable Costs Fixed Costs Marketing Expenses

0
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Total Revenue Total Expenses Break-Even

What is a net-profit?
Net profit or bottom line is how much money you make at the end of a
period: 3-Months | 6-Months | 1 Year

Net Income Total Revenue Variable Costs Fixed Costs Marketing Expenses Tax

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 Pricing models
Different types of brands use different types of the pricing model; your
pricing should match your business positioning and your target audience.

Commodity Perceived Value Market Price Competitive

Costs x 2 = Wholesale Price The price of the product equals In this pricing model, you compare the This pricing model is used as a quick
Wholesale Price x 2 = Retail Price the perceived value of a product relative pricing of your product in the way to penetrate a new market and
such as high social status & market and come up with an average undercut your competition, not
education. price. recommended for small business.