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Once all the costs have been calculated it is then necessary to put them together to work out total marketing costs. The calculation will vary according to the complexity of the marketing channel, whether there is processing or not, and how many intermediaries there are. Figure 8 shows one of many possibilities.
The gross profit of the wholesaler and retailer has, of course, to cover all costs which cannot be calculated on a per kilogram basis. These occur over a year and can only be apportioned with great difficulty to individual commodities. Operating capital and licence fees would be incurred by the wholesaler, while, among other things, the retailer would have the expenses associated with renting and running his shop. Thus the net profit made by both would be much less.
Figure 8
A cost calculation
Assume that farmers growing tomatoes wait at the side of the load for traders to come and buy from them. They carry the tomatoes to the road in baskets and sell to traders at $0.50 per kilogram. Traders repackage the tomatoes in reusable wooden boxes containing 10 kg. The traders then take the tomatoes to a wholesale market where they are bought by retailers at an average price of $0.90 per kg. These retailers supply their own boxes to transport the tomatoes to their shop or stall and sell tomatoes to consumers in plastic bags each containing 500 grams. Losses are considerable. While with the traders they amount to 10 percent so they sell only 0.9 kg of every kilogram purchased. The retailers lose a further 10 percent of what they purchase so they sell 0.81 kg of every kilogram purchased by the trader from the farmer. The average retail selling price is $1.17 per kg.
| Per kg purchased from farmer | |
| Purchase of tomatoes from farmers (1kg x $0.50) | $0.50 |
| Packaging ($0.50 ÷ 10 kg box) | 0.05 |
| Labour employed by wholesaler to pack, load and unload | 0.02 |
| Transport to wholesale market ($1.50 per box ÷ 10 kg) | 0.15 |
| Costs en route such as road blocks | 0.01 |
| Market fees | 0.01 |
| Market agent's fees | 0.02 |
| Total costs | $0.76 |
| Quantity sold (0.9 kg x weighted average selling price of $0.90 per kg) | 0.81 |
| Trader's gross profit | $0.05 |
| Retailer's buying price ($0.90 x 0.9 kg) | $0.81 |
| Market fees | 0.01 |
| Packaging from market to shop | 0.02 |
| Porter's fees in market | 0.01 |
| Transport to shop (0.9 kg x $0.50 per 10 kg box) | 0.04 |
| Weighing, cost of plastic bags, and retail packaging (for 0.81 kg) | 0.02 |
| Total costs for retailer | $0.91 |
| Revenue from sale of 0.81 kg (0.9 kg x 0.9) at a weighted average selling price of $1.17 per kg | 0.95 |
| Retailer's gross profit | $0.04 |