The main objective of this study was to provide detail information on production costs and gross profits of coffee production under smallholder farmers. The study was conducted at four districts of Jimma zone namely Limu Kosa, Gomma, Manna and Gumay Districts. A total of 110 coffee plots from 90 coffee producing households were selected for this study. Data was categorized under five coffee growth stages and analysis was undertaken based on the stages. Stage I covers from coffee establishment stage to coffee age of one year. Stage II covers a coffee age of two and three years. Stage III covers coffee age of four to eight years. Stage IV covers a coffee age of nine to twelve years. Finally, stage V covers coffee age of greater or equals to thirteen years of age. Descriptive, gross margin, benefit-cost ratio, sensitivity, and break-even analysis was conducted to summarize the data. The result of the study showed that at stage I, seedling purchase cost is the most important cost. For the establishment of a hectare of new coffee and plant management until one year, Birr 79920.95 is needed. A single coffee tree need Birr 31.9 at this stage. At stage II, the highest cost is cost of slashing followed by watering and digging. The mean total variable cost at this stage is Birr19053.14 and the mean cost per tree is Birr 7.62. At stage III, the highest cost share goes to harvesting followed by weeding and digging. The mean per hectare total variable cost at this stage is Birr 22039.29 and the mean cost per tree is Birr 8.82. Harvesting, weeding and digging are three important cost of coffee production at stage IV. The mean total variable cost and per tree cost is Birr 18247.00 and Birr 7.3, respectively. The highest cost at stage V goes to harvesting and digging. The mean total variable cost at this stage is Birr 19843.27 and the mean per tree cost is Birr 7.94. The overall mean cost of coffee production per year per hectare of land was Birr 24696.53. The maximum clean coffee yield per hectare was observed at stage III (867.05 kg/ha). Gross Margin is negative at stage I and stage II, and it is positive and peak at stage IV. The highest benefit-cost ratio was observed at stage IV (2.01) followed by stage III (1.67). The overall gross margin was Birr 3156.40 and the benefit-cost ratio was 1.13. The study realized that high cost of production at all stages has jeopardized the gross margin. Therefore, encourage utilization of improved coffee seeds and seedlings to boost the gross return and cost minimization through utilization of different creative and innovative ideas such as machines are crucial to increase the gross margin.
