Breakeven Analysis

Chapter 5

Cost of Goods Sold Method

In situations where the volume of different products makes the traditional approach impractical, the cost of goods sold (COGS) method¹ may be more appropriate. For example, you operate a restaurant that offers a large number of menu selections to customers. Calculating the unit variable cost for each menu item might be difficult when many ingredients are used in small amounts for each item sold. The selling price of each menu item is known, but the combination of menu items that each customer selects is highly variable, making the job of calculating the unit selling price very difficult. Over time we may be able to develop some rules of thumb for average per-customer revenue for different times of day and ...