How to calculate

Pricing & Costing

 PRICING COMPONENTS AND SIMPLIFYING
THE COSTING CALCULATION.

It is imperative that we must charge rightfully so that we are not making loss in business.

We have these components in pricing

Cost of all the Ingredients - A

Overheads – B (this is cost of making, electricity, rents, salaries, staff etc.)

Selling price after Profit Margin – C (to pay for your efforts and remove packaging and marketing
expenses)

So we have A, B and C
First calculate all the ingredient cost.

Calculate line by line all ingredients, to do this you have to know your purchase cost. Quite often we
say the cheaper you purchase, better profit margins you will have.

For ease of purpose let’s say your ingredient cost is rs 100

A =100

B= A+40% which is 140

C= B + (Bx3) which is 140 + (140x3) = 560

So if a product has ingredient cost of 100rs then its selling price should be 560

Some of you may find it difficult to sell at this price.

So what is the last we should sell? I strongly recommend to sell like this C= B + (Bx2)

If you will follow this formula, most of your products will be covered in this formula
Few exceptions like fondant design cakes, some expensive ingredients, wedding cakes or any skill
which you have deployed to make a product should have some premium.

There are two approaches to calculate that.

Either add 20% extra on your final price.

OR

Add extra per variant or skill you added.

For example you added 2 fondant figures on the ganache cake.

Let’s say you charge 1000 for ganache cake so by first approach it will 1000+20% = 1200

Now second way would be to charge per figure which is 150/- per figure. A fondant figure typically
consume 50-70gm of fondant which will cost you 30rs so rest 120 is our labor + overheads charge.

We can’t charge too much also.

Now in wedding cakes we can do that.
You can charge premium up to 50% on normal price. And for special occasions people will shell out
also.

There could be other exceptions like healthy bakes, gluten free, vegan etc... If you feel you are sole
player in your area, you can charge premium. But don’t go out of line, as we need repeat business.
Even if you do exceptionally expensive ingredients that has been taken care in calculation already.
Because very minute the “A” becomes high, the final selling price will become high.