Entrepreneurship · Class 12

Active learning ideas

Unit of Sale, Unit Price, and Unit Cost

Let's uncover the financial secret behind every successful business, from the local chaiwala to a large company like Reliance.

• CBSE Learning Outcomes
• CBSE: Class 12 Entrepreneurship - Unit 5: Business Arithmetic

• 30–60 min
• Pairs → Whole Class
• 3 activities

Activity 01

• Collaborative Problem-Solving
• 45 min · Small Groups

Chai Stall Economics

Students will calculate the unit cost of one cup of chai. They must list all variable costs (milk, sugar, tea leaves, ginger, cup) and a portion of fixed costs (rent, gas cylinder) to find the true cost per unit.

Explain the importance of defining a clear 'unit of sale' for a business.

Facilitation Tip

Provide a sample list of costs to guide their thinking, but encourage them to add more they think of.

What to look for

Give students a short case study of a small business (e.g., a home baker). Ask them to identify the unit of sale and list 3 variable and 2 fixed costs.

• Apply
• Analyze
• Evaluate
• Create
• Relationship Skills
• Decision-Making
• Self-Management

Activity 02

• Collaborative Problem-Solving
• 30 min · Pairs

Product vs. Service Costing

In pairs, one student chooses a product (e.g., a t-shirt) and the other a service (e.g., one hour of tutoring). They each define the unit of sale and list all the components of their unit cost, then compare their lists to highlight the differences.

Analyse the components that make up the 'unit cost' for a product versus a service.

Facilitation Tip

Emphasise that for services, the primary cost is often the provider's time and expertise.

What to look for

Students create a one-page financial plan for a hypothetical business. They must clearly define their unit of sale, provide a detailed calculation of their unit cost, and justify their proposed unit price based on cost and perceived market value.

• Apply
• Analyze
• Evaluate
• Create
• Relationship Skills
• Decision-Making
• Self-Management

Activity 03

• Collaborative Problem-Solving
• 60 min · Individual

Local Market Price Survey

Students research the selling price of a common item (like a samosa or a pen) from three different local vendors. They then discuss in class why the prices might differ, connecting unit price to factors like quality, location, and brand.

Compare the concepts of 'unit price' and 'unit cost' and their relationship to profit.

Facilitation Tip

This can be a homework activity followed by a whole class discussion to consolidate findings.

What to look for

Provide a checklist for students to review their unit cost calculations. The checklist should include prompts like 'Have I included raw material costs?', 'Have I included a portion of monthly rent?', 'Is my unit of sale clearly defined?'.

• Apply
• Analyze
• Evaluate
• Create
• Relationship Skills
• Decision-Making
• Self-Management

A few notes on teaching this unit

Start with a very simple, relatable product like a pen or a samosa. Physically list all its components and their costs on the board to build the concept of unit cost visually. Then, introduce fixed costs by asking 'What about the shop's rent or the electricity bill?' This helps scaffold from tangible variable costs to the more abstract concept of allocating fixed costs.

By the end of this topic, your students will be able to take any business idea and calculate exactly how much it costs to produce one unit and how to price it for profit.

---

Watch Out for These Misconceptions

• The selling price of a product is all profit.

  The selling price (Unit Price) is the total amount a customer pays. Profit is what remains after you subtract the total cost to produce it (Unit Cost) from the Unit Price.

• Unit cost only includes the cost of raw materials.

  Unit Cost is the sum of all costs to produce one unit. This includes not just direct materials (variable costs) but also a share of the business's overheads like rent, electricity, and salaries (fixed costs).

• The 'unit of sale' is always a single physical item.

  A unit of sale is what the customer actually buys. For a consultant, it could be one hour of time. For a caterer, it could be a 'per person' meal package. For a software company, it could be a monthly subscription.

---

Methods used in this brief

• Collaborative Problem-Solving