Baking guides

How to cost a bakery product, overheads included

Most home and small bakers who undercharge do the ingredient sums correctly and stop there. This guide builds a full cost for one product, step by step, then shows three ways to turn that cost into a price and what each one tells you.

Last reviewed: 2026-10-25

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What goes into the cost

Oregon State University's food business programme lists five parts of a true cost of goods: ingredients, packaging, labor, overhead and freight. Mississippi State University Extension puts the goal plainly: "A sustainable price allows you to cover your costs, including the value of your labor, and earn a profit." That includes your own hours, even if nobody pays you a wage.

• Ingredients: everything in the recipe, including small items such as salt, yeast, egg wash and dusting flour.
• Packaging: bags, boxes, labels, cake boards, cases.
• Labor: the hands-on minutes per batch at an hourly rate, yours or an employee's.
• Overhead: rent, energy, equipment, insurance, fees, spread over the units you make.
• Freight: delivery costs, if you deliver or ship.

Worked example: 24 croissants

The prices below are example figures chosen to make the arithmetic easy to follow. They are not market data; use your own invoices.

Step 1: ingredient cost

For each line, divide the price paid by the pack size to get a unit cost, then multiply by the amount used. This is exactly what the recipe cost calculator does.

Step 2: waste and yield

The batch makes 24 croissants, but say 2 come out misshapen or are kept back as a test piece, so 22 are sold. The sellable items carry the cost of the whole batch: €7.52 ÷ 22 = €0.34 per croissant, not €7.52 ÷ 24 = €0.31. Use the number you actually sell, measured over a few weeks.

Step 3: packaging

One paper bag per croissant at an example €0.05. Add it per item sold.

Step 4: labor

Count hands-on time, not proofing or chilling time: mixing, laminating, shaping, egg-washing, baking and packing. Say it is 90 minutes per batch, at an example rate of €15 per hour. That is €22.50 per batch, or €22.50 ÷ 22 = €1.02 per croissant. On this product labor costs three times as much as the ingredients.

Step 5: overhead

Add up the monthly costs that don't belong to one product: a share of rent, energy, equipment repayments, insurance, card fees. Divide by the number of units you make in a month. With an example €1,200 a month over 6,000 items of all kinds, that is €0.20 per item. A more exact method weights overhead by oven time or labor time, but a per-unit average is a reasonable start.

Step 6: full cost per unit

The ingredient cost is €0.34, but the full cost is €1.61. Pricing from the first number alone would lose money on every croissant.

Turning cost into a price

1. Food cost percentage

Restaurants usually price from the ingredient cost alone: price = food cost ÷ target food cost percentage. Johnson & Wales University says a profitable restaurant averages 28–35% food cost and uses a 30% target in its own example. For this croissant: €0.342 ÷ 0.30 = €1.14; at 28%, €1.22; at 35%, €0.98.

All three are below the €1.61 full cost. The food cost method works when labor and overhead are a modest share of the price, as in many restaurant dishes. On labor-heavy pastry it misleads, so always check the result against your full cost. The menu pricing calculator does the division, and its reverse mode shows the food cost a planned price gives you.

2. Markup on cost

A food cost target is a markup in disguise. Dividing by 0.30 is the same as multiplying by 3.33; 28% means multiplying by 3.57, and 35% by 2.86. Thinking in multipliers makes it easier to see what you keep. If you sell this croissant for €2.80 (net of VAT), the food cost is 12.2%, the full cost is 57.7% of the price, and €1.19 per croissant is left as profit.

3. Selling through shops

If a shop resells your product, it takes its own margin. Oregon State's guide gives the usual chain for packaged foods: retailers often price at twice the wholesale price (keystone pricing, a 50% retail margin); wholesale is typically 2 to 2.5 times the full cost of goods; and the cost of goods should be no more than 25–40% of the final retail price. Its quick test: divide the target shelf price by 4. If the result is above your full cost, keystone wholesale can probably work.

For the croissant: wholesale at 2–2.5 times €1.61 is €3.23–4.04, and retail at twice that is €6.46–8.08. A €3.50 shelf price fails the test, because €3.50 ÷ 4 = €0.88 is well under €1.61. The guide is written for packaged products, but the arithmetic is the same: either the cost comes down, the price goes up, or you sell direct.

VAT

If you are VAT-registered and can reclaim the VAT on your purchases, cost ingredients and packaging without VAT, and compare against your selling price without VAT. If your counter price includes VAT, divide by (1 + rate) first. With an example rate of 10%, a €3.08 counter price is €3.08 ÷ 1.10 = €2.80 net. If you cannot reclaim VAT, the VAT you pay on purchases is simply part of your cost. Rates and rules vary by country and product, so check yours with a local accountant.

Keep the numbers current

• Re-cost when a big ingredient's price changes. In this example, a 10% rise in butter adds €0.54 to the batch and about €0.025 to each croissant.
• Time a batch now and then. Labor estimates drift, usually downwards on paper and upwards in reality.
• Review overhead when rent, energy tariffs or volume change. Making more units spreads fixed costs thinner.
• Track waste. Going from 22 to 23 sellable croissants per batch lowers the full cost per unit by about 6 cents.

Related: scaling recipes and pan sizes for costing a scaled batch, and the batch scaling calculator.

Frequently asked questions

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