How do you figure cost?

March 4, 2022

I confess that I am way to interested in how to cost items in my bakery.

In my bakery I do not accept that cost is equal to Materials solely. To me it includes Materials, Packaging, + Production Labor those 3 items make up my Cost. So when I deduct for Charity my cost is always 56% to 68 % depending on the operation.

What is left is my Gross Margin 44% to 32%. That includes:

Here is a question: Do you count the full costs of product labor?
I mean do you add the payroll taxes and Costs of Benefits to the above the line number? I would say YES Why? 

  1. Without that cost, I would have no Staff to make products.
  2.  It also gives me a more accurate picture of what I should charge for my products.
  3.  If you do any discounts/wholesale, having the true cost will help you keep from giving away product and not knowing it.
  4. But then there is another question: Where do I put the cost of new labor-saving equipment? I am not an accountant, so experience has taught me to put it in Overhead.

Why all the questions? I have found out by experience that if you truly believe you are doing the right thing (up to the point of defending your selection) you must communicate it to the experts that are working on your Taxes. If not you are going to get the least favorable option for you and to heck with it costing you money!

I will visit more costing in the future because we have just scratched the service. But as you can see this is a very important topic, one that has big implications for running your bakery.

I hope you enjoyed this Blog –
Rick C.the