solution

You are given a scenario, and asked to think about key components in the product, and what they would mean for the Bill of Materials (BOM), and Cost of Goods Sold (COGS).

The product you will examine is a very simple one: a cup of coffee from your favorite coffeeshop. At first glance, this might seem like a pretty simple and straightforward product. And it is! But this example helps to illustrate some key points that you can then apply later to more complex products.

Below is a diagram of the key components that go into your to-go coffee (not counting the coffee itself): a stir stick, a lid, the cup itself, and the sleeve to keep from burning your hand.

In addition to the physical components of the cup of coffee, you can make the assumption that the cost for the business to purchase the roasted coffee and to grind it is $0.75 per cup of coffee.

Use this diagram, together with price information you can find on this page (https://www.restaurantware.com/coffee-shop-supplies/ (Links to an external site.)) to:

1. develop a Bill of Materials for the “coffee cup product” (include the coffee itself),
2. develop a Cost of Goods Sold (COGS) estimate for the cup of coffee (include the coffee itself). You should list the prices on a per-unit basis! In other words, if you find a component that comes in a box of 500 and it costs $500, you should put a per-unit cost of $1 per unit. And,
3. complete a margin analysis