Guide
How to calculate recipe cost, step by step
How to calculate recipe cost: add up everything one batch uses (ingredients, packaging, your labour, the oven or mixer, and a share of your monthly overhead) and divide by the number of pieces the batch yields. That gives you the cost per portion, the number every price should start from. This guide walks through each part of the formula with a worked example for a batch of 24 cookies, then shows how to turn that cost into a price.
The recipe cost formula
Recipe costing comes down to one line: cost per portion = (ingredients + packaging + labour + machines + overhead) divided by the yield. The yield is how many sellable pieces the batch makes, not how many you planned to make, so if two cookies always break, count 22.
Many home bakers count only the first term. Flour, butter and chocolate are easy to see on a receipt. Your hour at the counter, the oven running for 40 minutes and the rent or internet you pay every month are not, so they get left out and the price ends up covering ingredients and little else.
The recipe cost calculator runs this formula for one recipe with your own numbers.
Read next: Recipe cost calculator for bakers
Step 1: cost each ingredient by the gram
You buy in packs and use in grams, so convert every ingredient to a price per unit you actually measure. Divide what you paid by the pack size, then multiply by the quantity the recipe uses.
For example, a 1 kg bag of flour at 1.80 dollars costs 0.0018 dollars per gram. A recipe that uses 500 g of it spends 0.90 dollars on flour. Do the same for every line, including the small ones: vanilla, salt and baking soda add up across a year.
A recipe costing template lays these lines out in a sheet you can copy for every product. In Spain the same sheet is called an escandallo.
- Price per gram = pack price divided by pack size in grams
- Cost in the recipe = price per gram times grams used
- Eggs and other counted items: price per piece times pieces used
- Sub-recipes such as a frosting or a filling: cost them once as their own recipe, then use their cost per gram here
Read next: Free recipe costing template for bakers, Escandallo: what it is and how to make one for your bakery
Step 2: add packaging, labour, machines and overhead
Packaging is the bag, box, board, label or ribbon each finished piece leaves in. Count it per piece and multiply by the yield.
Labour is the time someone spends making the batch, at an hourly rate. If it is you, pick the rate you would pay a helper, or the hourly amount you want to earn. Leaving it at zero means you work for free and your prices can never pay for help later.
Machines are the energy the oven, mixer or proofer uses while the batch needs it. An electric oven that averages 2 kW for 30 minutes uses 1 kWh; multiply by your electricity tariff. Gas works the same way with your gas price.
Overhead is what you pay every month whether you bake or not: a share of rent, insurance, internet, software, cleaning supplies. Divide the monthly total by the hours you bake in a month to get an hourly rate, then charge each batch for the time it keeps your kitchen busy.
Worked example: how to calculate recipe cost for 24 cookies
Here is an example batch of chocolate chip cookies that yields 24. The prices are illustrative; use your own receipts and rates.
The batch costs 29.77 dollars in total. Divided by 24 cookies, the cost per cookie is about 1.24 dollars. Notice that ingredients are only 9.20 dollars of that: labour and overhead together are more than the ingredients. A price set at twice the ingredient cost, about 0.77 dollars per cookie, would lose money on every sale.
| Part | Detail | Cost |
|---|---|---|
| Flour | 500 g at 1.80 per kg | 0.90 |
| Butter | 250 g at 10.00 per kg | 2.50 |
| Sugars | 200 g brown at 3.00 per kg, 100 g white at 2.00 per kg | 0.80 |
| Eggs | 2 at 0.30 each | 0.60 |
| Chocolate chips | 340 g at 12.00 per kg | 4.08 |
| Vanilla, salt, baking soda | small amounts | 0.32 |
| Packaging | 24 bags at 0.10 each | 2.40 |
| Labour | 45 minutes at 18.00 per hour | 13.50 |
| Oven | 1 kWh at 0.17 per kWh | 0.17 |
| Overhead | 1.5 hours at 3.00 per hour (240 a month over 80 baking hours) | 4.50 |
| Total batch | sum of the lines above | 29.77 |
| Cost per cookie | 29.77 divided by 24 | 1.24 |
Cost per portion for cakes, trays and loaves
The same formula works for anything you cut. Cost the whole cake or tray, then divide by the number of portions you actually sell. An example 8-inch cake that costs 18.40 dollars to make and is cut into 12 slices has a cost per portion of about 1.53 dollars; cut into 10 slices, it is 1.84 dollars.
Decide the portion count before you price and stick to it. If you sell whole cakes, the cake is the portion, and the cost per portion is simply the batch cost.
From cost to price: markup and margin
Once you know the cost per portion, set the price from it. There are two ways to say the same thing. Markup is profit over cost; margin is profit over price. A cookie that costs 1.24 dollars and sells for 3.10 dollars has a markup of 150 percent and a margin of 60 percent.
To hit a target margin, divide the cost by one minus the margin: 1.24 divided by 0.40 is 3.10 dollars for a 60 percent margin. Then round to a price that is easy to pay, such as 3.25 dollars, which here leaves a margin of about 62 percent. Remember that labour is already in the cost, so the margin is profit on top of paying yourself.
The guide to pricing baked goods covers retail, wholesale, market and custom order prices, and the bakery profit margin guide shows how to convert between markup and margin.
Read next: How to price baked goods for profit, Bakery profit margin: how to work it out and how to raise it
Common recipe costing mistakes
Most underpriced bakes come from a handful of gaps in the cost, not from bad arithmetic.
Once the cost is right, your food cost percentage tells you whether the ingredients are a sensible share of the price.
- Costing ingredients only and leaving out labour, energy and overhead
- Using the planned yield instead of the pieces you can actually sell
- Pricing from an ingredient price you paid months ago
- Forgetting packaging, which can rival the ingredients on small items
- Costing a frosting or filling inside every recipe by hand instead of once as a sub-recipe
- Never re-checking costs after a supplier raises a price
Read next: The food cost formula for bakers
Recipe costing in Farinu
A spreadsheet works until prices change and you have to update every recipe that uses butter. Farinu does the formula above for you: you enter each ingredient with what you paid and the pack size, build recipes from ingredients, packaging and sub-recipes, and add the labour and machine time. Your hourly rates, energy tariffs and monthly fixed costs live in your bakery settings, so every recipe picks them up.
Each recipe shows its cost per unit split into materials, packaging, labour, machines and overhead, and a suggested price from your target markup or target price. When you record a new price for an ingredient, every recipe that uses it is recosted, and you get a margin alert if a product now sells below its target.
Costing is free for up to 10 recipes, and orders for up to 50 a month. The Team plan adds sales, unlimited orders, stock and helpers, who can log sales and production without ever seeing your costs.
Questions
- What is the formula to calculate recipe cost?
- Add the cost of ingredients, packaging, labour, machine energy and a share of overhead for one batch, then divide by the number of sellable pieces. The result is your cost per portion.
- Should I include my own time in the recipe cost?
- Yes. Use the hourly rate you would pay someone else or the rate you want to earn. Without it, your price only covers materials and you are not paid for your work.
- How do I work out overhead per recipe?
- Add up the costs you pay every month regardless of sales, divide by the hours you bake in a month, and charge each batch for the hours it occupies your kitchen.
- How often should I recalculate recipe costs?
- Whenever an ingredient price changes noticeably, and at least every few months. In Farinu, recording a new ingredient price recosts every recipe that uses it automatically.
Related pages
Know what every bake really costs
Create a free Farinu account and cost up to 10 recipes, with ingredients, packaging, labour, machines and overhead included.