How to Figure out the Profits for Sno-Cone Stands

Flaky ice crystals crunching between your teeth while blue and red raspberry sugar syrup tingles the tongue provide the joy of a sno-cone on a hot, summer’s day. Selling sno-cones is a profitable summer business or year-round career in hot climates because costs are relatively low compared to potential revenue. Set up a sno-cone ice machine at soccer or little league park, add your bottles of sparkling, colored syrup and watch the customers come running. But before you start shaving ice, know how to figure the profit and income from your icy enterprise. After all, turning ice into cold, hard cash is what the business of selling sno-cones is all about.

Cash Method of Accounting

Account for revenues, monies received in exchange for the sno-cones, and expenses in the sno-cone business on a cash basis, as this is simpler than the accrual basis alternative. In cash-basis accounting, revenue is recorded when received and expenses are recorded when paid. Because sno-cones are not made in bulk in advance, the cash basis of accounting is appropriate.

Cost of Goods Sold

Calculate the cost of goods sold, also called direct costs. This is the expense category that is the primary consideration in figuring profit. Cost of goods sold include anything that directly goes into producing the product. In the sno-cone business, this includes the ice, syrup and labor. These expenses vary, sometimes substantially, depending on how many or how few sno-cones you sell.

Gross Profit

Decide on a time frame for calculating profit, such as one month. Calculate the gross profit by subtracting the cost of goods sold from the revenue received in one month.

Net Income From Operations

Total operating and depreciable expenses and subtract them from gross profit to determine net income from operations. Operating expenses, also called indirect costs or overhead, include costs that are generated as a byproduct of producing and delivering the product. In the sno-cone business, such costs include fuel or other power sources, insurance, maintenance or lease expenses for any vehicle and machinery used to make or deliver the sno-cones. These expenses remain fairly fixed, independent of how many sno-cones you sell. Depreciable assets are fixed assets expected to last more than one year, such as vehicles and machinery. Account for these assets using a straight-line method of depreciation, which means you divide the total cost of the asset by the number of years it is expected to last. The product of that calculation is counted as an expense each year over the life of the asset.

Net income

Add or subtract any extraordinary asset gain or loss, if any, from net income from operations to determine net income. Extraordinary expense or income items include any gain or loss from selling fixed assets.