units per period) T = Tax (as % of profit). More specifically, in (food) processing business, there are three types of variable cost: VC1 = Raw Materials and Ingredients, VC2 = costs of processing inputs into outputs, VC3 = costs of packaging materials, VC4 = cost of delivery. The fixed cost (FC) are also divided into three types: FC1 = depreciation of fixed assets, FC2 = interests paid, FC3 = overheads (salaries, transport, maintenance, ...), FC4 = cost of sales, marketing and advertising. Using these 5 parameters in simple formulas, a trained person can do a Cigar Box Profit analysis in half an hour. When data are missing, assumptions must be made using educated guesses. Profit calculation methods There are three different methods to calculate profit. All use the same parameters and lead to the same result. Bookkeeping method Sales - Total cost P*q - (VC*q + FC) Trader's method Profit per unit * units sold (P - VC - FC/q) * q Cigar Box method Contribution - Fixed cost (P - VC) * q - FC Excel The Cigar Box Method is an Excel-based model. Only one spreadsheet is needed per product. The Cigar Box Method purposely does not make use of specific software, is free of charge and is available in English, French, Russian and Spanish. References External links Global Facts : Download the free Cigar Box Method Wageningen Centre for Development Innovation Bakery Initiatives : we bake profit! Bakery Initiatives Agricultural economics