Wedding Bid at ₦1,800 a Plate: Can the Caterer Afford to Say Yes?
A small outdoor catering outfit in Ibadan is invited to quote for a traditional wedding reception for 250 guests. The proposed menu is jollof rice, fried rice, pounded yam with egusi, grilled chicken, moi moi, salad and two soft drinks per guest. The owner's records from a recent 150-guest job give food purchases of ₦285,000 for 250-plate quantities bought in bulk, gas and transport ₦40,000, casual cooks and waiters ₦60,000, and hired chafing dishes, canopies and plates ₦25,000. Monthly overheads - shop rent, freezer depreciation and local permit - total ₦135,000, of which she allocates one-third to this job. She normally adds a 10% contingency to direct costs. The client insists on ₦1,800 per plate and wants the job in 12 days, which clashes with two smaller bookings already paid for. The owner has ₦90,000 cash, and suppliers want 70% upfront.
1. Calculate the full cost of the job, the cost per plate and the price per plate needed for a 25% profit on selling price. Should she accept ₦1,800 per plate?
Read the worked answer
Direct costs: food ₦285,000 + gas and transport ₦40,000 + labour ₦60,000 + equipment hire ₦25,000 = ₦410,000. Contingency at 10% = ₦41,000, so direct total = ₦451,000. Allocated overhead = ₦135,000 ÷ 3 = ₦45,000. Full cost = ₦451,000 + ₦45,000 = ₦496,000. Cost per plate = ₦496,000 ÷ 250 = ₦1,984.
Profit on selling price is not the same as mark-up on cost. Price = cost ÷ (1 − 0.25) = ₦496,000 ÷ 0.75 = ₦661,333, or ₦2,645 per plate. If she used a 25% mark-up on cost instead, the price would be ₦496,000 × 1.25 = ₦620,000, or ₦2,480 per plate.
At ₦1,800 per plate, revenue is 250 × ₦1,800 = ₦450,000. That is ₦46,000 below full cost before any profit, so the job loses money. She should refuse ₦1,800 or renegotiate. Her absolute floor is ₦1,984 to break even; her normal target is ₦2,480–₦2,645. There is also a cash problem: 70% of ₦285,000 is about ₦199,500, against only ₦90,000 cash on hand, so even a correctly priced job needs a client deposit before suppliers are paid.
2. The client may reduce the guest list to 200. Explain how fixed and variable costs behave and recalculate the cost per plate. What does this show about discounting for fewer guests?
Read the worked answer
Food is variable: ₦285,000 ÷ 250 = ₦1,140 per plate, so 200 guests cost about ₦228,000. Labour, equipment hire and allocated overhead are fixed within this range: ₦60,000 + ₦25,000 + ₦45,000 = ₦130,000. Gas and transport are semi-variable; with fewer trips and less cooking, assume ₦35,000. Direct costs = ₦228,000 + ₦35,000 + ₦60,000 + ₦25,000 = ₦348,000. Contingency at 10% = ₦34,800, giving ₦382,800, plus overhead ₦45,000 = ₦427,800. Cost per plate = ₦427,800 ÷ 200 = ₦2,139.
Total cost falls by ₦68,200, yet cost per plate rises by ₦155 because the fixed ₦130,000 is spread over 50 fewer plates. Contribution per plate at ₦1,800 is ₦1,800 − (₦228,000 + ₦35,000) ÷ 200 = ₦1,800 − ₦1,315 = ₦485. To cover fixed costs she needs ₦130,000 ÷ ₦485 ≈ 268 guests. With only 200, she cannot break even at that price. The lesson: never give a linear per-plate discount when guest numbers drop; quote a fixed setup charge plus a per-plate rate, or decline.
3. Assume the client will not move above ₦1,800. Propose three non-price or operational changes that could make the job viable, and state what she should put in writing to the client.
Read the worked answer
First, change the menu rather than the price: replace whole grilled chicken with chicken stew using 120 g of chicken per guest, use one soft drink instead of two, and drop fried rice in favour of jollof plus a vegetable side. This can cut food cost by 20–25%, roughly ₦285,000 to ₦215,000, reducing full cost to about ₦420,000, or ₦1,680 per plate. Second, protect cash and capacity: request a 50% deposit, negotiate 14-day supplier credit, and hire chafing dishes rather than buying; subcontract the two smaller bookings or move their dates so staffing and equipment are not duplicated. Third, add a service charge for distance, extra canopies or late-night service instead of hiding those costs in the plate price.
In writing she should state the final guest number and price, the exact menu and portion sizes, deposit and balance dates, what happens if numbers change within seven days, cancellation terms, and that the price covers only the items listed. She should also confirm the change in writing before buying anything. If the client still insists on the full original menu at ₦1,800, she should decline: a loss-making job also blocks profitable bookings and can exhaust her working capital.