KENYA · GUIDE 0104 · EDITION 4.2
Dried chilli packing in Kenya: Pricing and Break-Even
Price an accepted unit, not an activity title
Start with this sale unit: pack.
Choose whole chilli, flakes or powder for the customer's actual preparation routine, making format and batch description explicit without inventing numerical heat ratings.
A quotation needs the accepted quantity or scope, exclusions, completion point, delivery arrangement and payment schedule. Without that specification, two apparently similar prices may pay for different work.
Build the direct-cost sheet
- chilli
- processing
- packaging
Include sorting, stem removal, grinding or flaking, protective handling, cleaning and packaging, comparing accepted packed output rather than gross incoming dried weight alone.
| Calculation | How to use it |
|---|---|
| Variable cost per accepted unit | Direct inputs, labour, delivery and measured losses divided by accepted units. |
| Contribution per unit | Agreed selling price minus variable cost per unit. |
| Period operating surplus | Contribution from units sold minus fixed overhead for the same period. |
| Break-even units | Fixed overhead divided by positive contribution, rounded up. |
Count rejected output, unsold stock and correction time. Keep fixed overhead in a consistent period; a daily contribution cannot be compared directly with a monthly overhead figure. If contribution is zero or negative, extra sales do not establish a workable break-even point.
Reconcile the cash separately
A customer's unpaid balance cannot pay today's supplier bill. List actual collections, advance payments, supplier deadlines, refunds and recurring bills by date. Separate refundable deposits and money held for an uncompleted commitment from funds freely available for expansion.
An inconsistent source mix makes familiar dosing unreliable, while powder disappoints a customer seeking visible pieces even when the underlying chilli flavour is acceptable.
Test a weaker outcome
Recalculate with fewer accepted units, a delayed customer collection or a higher input quotation. Change one assumption at a time to see which constraint matters. Use the actual pilot record: Record source batch, prepared format, rejected material and cooking feedback, reviewing a new source before describing later stock as equivalent to the accepted sample.
Do not interpret the invented financial teaching exercise in the complete manuscript as a market price or predicted income. Replace its assumptions before using it for a real decision. The public planning tool can help with arithmetic; it does not validate the inputs.
Work through this business's example
Test the listed example when things change
These calculations are invented teaching cases derived from this guide's example, "Invented teaching scenario; not a market quotation or income forecast". They are not observed customer results, local quotations or forecasts. They hold the listed input bill constant unless the row explicitly changes it. Excluded expenses and tax still need to be added.
| Case | Accepted / priced output | Example revenue | Listed cost | Difference before excluded costs / tax |
|---|---|---|---|---|
| Original example | 500 | KSh 22,500.00 | KSh 17,800.00 | KSh 4,700.00 |
| 20% fewer accepted units, rounded down | 400 | KSh 18,000.00 | KSh 17,800.00 | KSh 200.00 |
| 10% reduction in the assumed selling price | 500 | KSh 20,250.00 | KSh 17,800.00 | KSh 2,450.00 |
| 10% increase in every listed cost | 500 | KSh 22,500.00 | KSh 19,580.00 | KSh 2,920.00 |
The lower-acceptance case represents the loss of priced output, not a prediction of the actual reject rate. With 400 accepted units, the same listed bill costs KSh 44.50 per accepted unit. Do not divide it by the original 500 units and hide the loss. A whole-job price needs its own agreed acceptance and partial-payment treatment.
Inspect the cost that can change the decision
The largest listed line is Dried chilli flakes, kg: 12 at KSh 900.00, giving KSh 10,800.00. A 10% increase in this line alone adds KSh 1,080.00 to the example bill. Check its exact unit, scope, quotation validity and whether it is a one-off resource or a repeat input before changing the quote.
Keep every input quantity separate from priced output. A fall in accepted output does not automatically reduce already-purchased inputs. Use the itemised costing tool to change the real quantities, rather than scaling the whole bill by a sales percentage.
Connect the commercial check to quality
For dried chilli packing, investigate this concrete failure: Some sachets contain stems. The guide's diagnostic check is: Compare buyer flake/defect reference. Proposed response: Hold affected packing interval and inspect/regrade..
Record what was actually found and rechecked; do not mark a corrected item accepted until the agreed buyer checkpoint has passed. Any rework materials, transport, labour or credit must be added to the actual cost/result record.
A cash-timing exercise using the same example
Assume solely for arithmetic practice that opening cash is zero and the entire listed input bill of KSh 17,800.00 must be paid before handover. With no advance, that amount must be funded before any sale is collected. This deliberately simplified case does not establish when your actual suppliers need payment.
If a buyer hypothetically pays a 30% advance on the example revenue of KSh 22,500.00, cash received would be KSh 6,750.00. Paying the listed bill then leaves KSh -11,050.00. The additional cash needed to avoid a negative balance at that point is KSh 11,050.00. The unpaid remainder is KSh 15,750.00; it is a receivable, not cash already in the business.
The 30% figure is an invented teaching assumption, not a recommended or agreed customer term. Check whether deposits are refundable and which commitments they can actually fund. Do not count the advance again when entering the final collection. Add equipment payments, tax, owner drawings and unlisted operating bills to the dated cash plan as appropriate. The 13-week planner in file 10 shows week-end funding gaps; inspect intra-week dates for a large payment.