A truck can have the longest line in the city and still lose money. This week you learn how, and how to spot it on your own Daily Report.
Learning objectives. After this week you can (1) compute revenue for a menu; (2) sort costs into fixed and variable; and (3) compute profit and profit margin from your own Daily Report.
Remember this: revenue is what came in. Profit is what you keep.
1) Revenue: money in
Revenue = Price × Quantity
Sell 120 burgers at $8.50 and revenue is 120 × $8.50 = $1,020. Your truck sells three items, so do it once per item and add: burgers + fries + drinks.
2) Cost: money out, in two kinds
Total Cost = Fixed Costs + Variable Costs
- Variable costs grow with every item you sell. In your truck that is ingredients: about $3.20 for each burger. Sell nothing and you spend nothing on them.
- Fixed costs are owed even if nobody buys a thing: daily overhead, admin, permits, and the fee for the district you park in.
Wages are a bit of both. 45% of each staffer's $200 day is owed the moment they show up, so treat that part as fixed. The rest grows with how busy they were. Put it all together and opening Downtown with three staff carries a fixed block of $25 overhead + $25 admin + $25 permits + $120 district fee + $270 of committed wages = $465, before the first burger.
3) Profit and margin
Profit = Revenue − Total Cost
Profit Margin = Profit ÷ Revenue × 100
Revenue $1,020, total cost $640: profit is $380, and margin is 380 ÷ 1,020 ≈ 37%. You kept about 37 cents of every dollar that came in.
4) Profit: what's left
Here is the same truck on two different days. Same corner, same crew, same prices.
| Busy Tuesday | Quiet Sunday | |
|---|---|---|
| Revenue | $2,731 | $637.80 |
| Ingredients (variable) | $1,021 | $238.40 |
| Wages (part fixed, part variable) | $513 | $327 |
| Overhead, admin, permits and fee (fixed) | $195 | $195 |
| Profit | $1,002 | −$122.60 |
Ingredients fell with sales. The fixed $195 did not move at all. That is the whole story of a losing day: the sales went away, but the fixed costs stayed.
Try it
A slow Monday brought in $1,431 and cost $874.17 to run.
Profit = Revenue − Total cost
Fill in the boxes.
Worked example 3: same profit, different margin
Two trucks both make $600. Truck A did it on $1,500 of revenue, Truck B on $4,000. A's margin is 600 ÷ 1,500 = 40%; B's is 600 ÷ 4,000 = 15%. Same profit, but A keeps far more of every dollar and can ride out a bad day. Margin is how you compare days and trucks of different sizes.
Try it
That same Monday: $556.83 of profit on $1,431 of revenue.
Profit margin = Profit ÷ Revenue × 100
Fill in the boxes.
Quick self-check
You sell 100 tacos at $6.00, with $250 of ingredients and $150 of fixed cost. (a) Revenue? (b) Total cost? (c) Profit? (d) Margin? (Answers: $600; $400; $200; 200 ÷ 600 ≈ 33%.)
Common mistakes
- Calling revenue profit. "We sold out!" is about revenue. "We made money" is about profit.
- Forgetting the district fee. You pay it for parking there, not for selling.
- Dividing margin by cost. Margin always divides by revenue.
This week in the arena
Open your best and worst Daily Reports from this week and put them side by side. Which numbers changed a lot, and which barely moved? The ones that barely moved are your fixed costs. Write down roughly how big they are. You will use that number all term.