Roadside tea stall
Peter told this story: Papa and I went in our car for a long road trip. On the way, we stopped to have tea at a small roadside tea stall on a rural highway.
Papa asked for two glasses of chai (tea), and the man asks for rupees (Rs.) 20 which came out to Rs. 10 per glass of chai. The place had a cot – no chairs or tables. Customers sat on the cot and sipped the tea. I began to wonder, how much money this tea stall owner (chaiwala) makes, and I talked to him.
Chaiwala: Why do you want to know this? I am open 24 hours a day. When there are no customers, I just lie down on the cot but otherwise I work constantly. Even then, it is difficult for me to support my wife and two children with what I make. My wife and children complain that I don’t come home. Sometimes she brings the children here to see me. Why do you want to know about my sorrows. Do you also want to set up a stall?
Earnings and expenses
Peter: No, I am just a 10 year old boy going to school. I am curious. I still want to go to school for many more years. I do not mean to hurt your feelings. Think of me as your little boy asking this question to learn.
Chaiwala: I put about 200 milliliters of chai in one glass. I sell about 500 glasses of chai per day. I make good chai. A glass of chai has about 50 milliliters of milk in it. For this, I have to buy 25 liters of milk every day. Every day, I also use 2.5 kilograms of sugar and the same amount of chaipatti (tea leaves). Sugar costs me about Rs. 94 per kilogram and chaipatti is Rs. 150 per kilogram. They just raised the price of milk. Now it is Rs. 45 per liter. On top of that I have to pay for water, heat, oil for the lamp, rent for the stall, and even broken glasses. These bills come out to about Rs. 1500 every day. Three servants work in shifts to wash the glasses and to give chai to the customers who come here. I have to pay them Rs. 750 every day. I have been working here for 18 years. This is my life.
Peter: Thank you. I am writing these numbers and I will try to figure out at home. Thank you for not getting offended.
Peter went home and told Tanya and Tinku. They quickly made this table.
Tea stall – profit and loss |
|||
| Expenses per day | |||
| Milk | 25 liters | Rs. 45 per liter | Rs. 1125 total |
| Chaipatti | 2.5 kg | Rs. 150 per kg | Rs. 375 total |
| Sugar | 2.5 kg | Rs. 94 per kg | Rs. 235 total |
| Servants | Rs. 750 | ||
| Other expenses | Rs. 1500 | ||
| Total daily expenses | Rs. 3985 | ||
| Money from daily chai sale | 500 glasses | Rs. 10 per glass | Rs. 5000 |
| Daily Profit (money from sale minus total expenses) | Rs. 1015 | ||
They were surprised that in a day the chaiwala worked for 24 hours and made only Rs. 1015. With that money he supported the whole family. They felt bad for him but not so bad because many people make much less than that. They checked on the Internet and found that in some places an average farm labourer made less than Rs. 300 per day, and the farmer got the job only in the seasons when he was needed.
Challenge
Sohna’s father owns a small company that makes cricket balls. He wants to know how much profit the company made last year. He thinks that Sohna should learn these things and shows him the balance sheet for 2011. Determine, the net profit for the year and also the profit as a percent of the total sales.
Total Sales Rs. 6000000
Cost of raw materials Rs. 500000
Shipping expenses Rs. 500000
Advertisement expenses Rs. 100000
Salaries of employees R. 1500000
Rental cost and utilities Rs. 500000
Income tax Rs. 500000
Total Sales Rs. 6000000
Cost of raw materials Rs. 500000
Shipping expenses Rs. 500000
Advertisement expenses Rs. 100000
Salaries of employees R. 1500000
Rental cost and utilities Rs. 500000
Income tax Rs. 500000
All expenses including tax Rs. 3600000
Total sales Rs. 6000000
Solution
Net profit: Total sales minus all expenses and taxes = Rs. 6000000 – Rs.3600000 = Rs. 2400000
Profit as percent of total sales = 100 x 2400000/6000000% = 40 %.
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