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    Food Costing

    Uploaded by

    MaryGraceCuyno
    This document provides a 5-step process for creating a costing template to determine pricing for food recipes sold as part of a business. Step 1 involves writing down the recipe and ingredient quantities. Step 2 calculates the cost of each ingredient. Step 3 totals the recipe costs. Step 4 calculates the cost per serving by dividing the total cost by the number of servings. Step 5 adds a markup, such as 130%, to determine the retail price per serving. An example is provided to demonstrate how to apply these steps to price a recipe for scrambled eggs. The document also discusses factors to consider like equipment and fluctuating ingredient costs when determining pricing.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd

    Food Costing

    Uploaded by

    MaryGraceCuyno
    751 views24 pages
    This document provides a 5-step process for creating a costing template to determine pricing for food recipes sold as part of a business. Step 1 involves writing down the recipe and ingredient quantities. Step 2 calculates the cost of each ingredient. Step 3 totals the recipe costs. Step 4 calculates the cost per serving by dividing the total cost by the number of servings. Step 5 adds a markup, such as 130%, to determine the retail price per serving. An example is provided to demonstrate how to apply these steps to price a recipe for scrambled eggs. The document also discusses factors to consider like equipment and fluctuating ingredient costs when determining pricing.

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    setyrduytuty

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    This document provides a 5-step process for creating a costing template to determine pricing for food recipes sold as part of a business. Step 1 involves writing down the recipe and ingredient quantities. Step 2 calculates the cost of each ingredient. Step 3 totals the recipe costs. Step 4 calculates the cost per serving by dividing the total cost by the number of servings. Step 5 adds a markup, such as 130%, to determine the retail price per serving. An example is provided to demonstrate how to apply these steps to price a recipe for scrambled eggs. The document also discusses factors to consider like equipment and fluctuating ingredient costs when determining pricing.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    751 views24 pages

    Food Costing

    Uploaded by

    MaryGraceCuyno
    This document provides a 5-step process for creating a costing template to determine pricing for food recipes sold as part of a business. Step 1 involves writing down the recipe and ingredient quantities. Step 2 calculates the cost of each ingredient. Step 3 totals the recipe costs. Step 4 calculates the cost per serving by dividing the total cost by the number of servings. Step 5 adds a markup, such as 130%, to determine the retail price per serving. An example is provided to demonstrate how to apply these steps to price a recipe for scrambled eggs. The document also discusses factors to consider like equipment and fluctuating ingredient costs when determining pricing.

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    Product Pricing Strategy And

    Costing Template For Food


    Recipes
    Posted by Fitz Villafuerte under Business, Sales and Marketing on July 16, 2009

    The food business remains as one of the top industries that


    entrepreneurs consider highly profitable.
    After all, food is a basic necessity; and with that stable market comes
    good earning potential.
    However, the food business is also a very competitive market. Your
    delicious offerings alone would not be enough to deliver business
    success.
    One needs more than great tasting food, but likewise a good location,
    sensible marketing and many other factors which also
    includes reasonable pricing.
    If you want to sell food, how do you determine your selling price? What
    is the right pricing strategy so that you can give your consumers an
    affordable product with optimum profits?
    Again, there are many factors to consider. But the most basic strategy is
    to come up with the costing template for your recipes. From there,
    you can easily determine and adjust your retail price that will fit your
    target market without compromising your income.
    So how to you make a costing template for your food recipes? Heres a
    five-step product pricing plan.

    Step 1
    Write down your recipe, including all the ingredients and their quantities,
    as well as the average yield. It helps to convert the quantity to
    measurable equivalents.

    Step 2
    Determine the price of each ingredient and calculate the cost per recipe.
    Simply divide the ingredient price by the total volume and multiply it by
    the equivalent measure in your recipe.
    Example:
    375 ml of cooking oil costs P20. So P20 divided by 375 ml multiplied by
    30 ml (from recipe) equals P1.60

    Step 3
    Add up the total cost of the ingredients per recipe to determine the total
    recipe cost.
    In our example, the total food recipe cost would be P17.86

    Step 4
    Divide the total recipe cost by the total yield to get the cost per serving.
    Since our recipe example will yield 4 servings, then our cost per serving
    will be P17.86 divided by 4 which is equal to P4.47
    Step 5
    Now add your mark-up to the cost per serving. If well follow the simple
    pricing strategy I wrote before, then this would be considered as a makeand-sell item that requires 130% profit margin.

    So from our costing template example, one order of scrambled eggs in


    my food business would cost P10.27 (or I can round it up to

    P10.50

    ).

    What is the basis of the 130% profit margin?


    Its just best practice as told to me by friends who are in the food cart
    business. They say that the 100% covers for the production cost and the
    30% is your product cost mark-up. I believe that theres really no
    economic basis for that figure.

    And of course, this is just one of the many pricing strategies you can do.
    After all, there are still other factors and business expenses to consider.
    Nevertheless, this very simple pricing strategy can be effective when
    youre just starting out such cases as when youre simply selling food
    to your officemates or maybe participating in a food bazaar.
    And that concludes our short business tip for today. I hope I was able to
    help you come up with a good pricing strategy for your food business.
    Do make sure you can catch the next business article here
    by subscribing to Ready To Be Rich.
    Advertisement

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    Tags: Business, price, pricing strategy, Sales and Marketing


    Home Product Pricing Strategy And Costing Template For Food
    Recipes
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    Eight Life Lessons From Running A Marathon

    12 Responses to Product Pricing Strategy And


    Costing Template For Food Recipes

    1.

    Real Estate Investment Software says:


    August 23, 2009 at 9:38 am

    Ive never seen a better breakdown of cost and pricing! Well done!

    2.

    Celine says:

    February 6, 2011 at 4:37 pm

    Extremely helpful! Thank you

    3.

    Randall says:

    April 16, 2011 at 10:02 am

    If we bought an equipment or machine, do we also need to add those in


    our costing? This is very helpful.. Thank you very much.

    4.

    Fitz says:
    April 17, 2011 at 1:58 am

    Hi Randall, ideally you should. But it entails some assumptions.


    The usual calculation for that is you divide the cost of the equipment by
    the number of months it will take for it to fully depreciate. Then divide
    that amount by the approximate number of product yield per month to
    compute the additional cost in production.
    Lets say you bought an electronic egg beater for P1,000 which you
    estimate will take 1 year before it breaks down and needs to be
    replaced. That will give you P84 per month depreciation cost (P1,000
    divided by 12)
    Assuming you usually produce 120 servings of scrambled eggs per
    month, then your total recipe cost will have an additional P0.70 (P84
    divided by 120) in it.
    I hope my explanation was clear. Thanks.

    5.

    Kat says:

    May 21, 2011 at 10:44 am

    I would like to ask a question that has been in my mind for such a long
    time now How do you compute for LPG cost? I plan of making a
    business out of my love for baking and I really find costing for LPG use

    difficult. I assume that I should include the preheating time in calculating


    for it, am I right? Thanks a lot!

    6.

    Cris says:

    August 12, 2011 at 8:33 am

    Regarding the purchase of capital equipment, the egg beater what about
    if you used it to other menu or product, does the additional cost added to
    scramble egg can be also used or add with other menu you made like
    lecheplan, or does the contributing cost to the product price will be more
    reduce since it also use in other menu or product.
    Thanks a lot have a great day.

    7.

    angelforangela says:

    December 1, 2011 at 10:27 pm

    hi just wanted to ask, how can i determine the quantity food to serve?
    For example in pasta servings, how many servings can a 1kilo pack of
    pasta make? Im newbe in this biz so I really need to be educated, I
    already atended seminars but they seemed not helping on this area,I
    want to know the particular grams/percent of food per servings. I need
    help on this pls, thank u so much!

    8.

    Rio says:

    January 28, 2012 at 7:59 pm

    Thanks for this very helpful explanation!


    The egg beater computation (as a fixed expense) is also very helpful.
    Admittedly, LPG computation is very complex, since a dedicated LPG
    tank for production must have been fully consumed before we can have
    a better estimate versus number of goods produced (better if it is just
    one SKU or item). I assume that the 100% production cost is a good
    leeway to cover the (yet) immeasurable expenses from the start.

    Mercky says:

    9.

    January 11, 2013 at 2:28 am

    Thanks for a great article. Ive a question, though. In such a scheme,


    how do you cope with fluctuations in the cost of your raw materials? Like
    LPGs (talking of, any advice on how to go about factoring this into the
    costing computation e.g. how exactly to you quantify LPG use per
    recipe)? Im assuming that certain accommodations would be factored
    into the profit portion, but what would be a standard, or safe figure? Say,
    your example gives 130%, but the prices of eggs are very erratic, and
    change daily, would a 140% profit margin be ideal for this situation?
    Whats the standard practice in such a situation?
    Thanks much!

    10.

    Fitz says:

    January 13, 2013 at 5:08 am

    Hi Mercky, you can use the upper limit of the price for your computation
    instead of the current price, so when price fluctuates, you wont have to
    increase your selling prices.
    Doing 140% profit margin is also acceptable, but doing what I said above
    is better.
    Lastly, price of raw materials do increase, which means eventually, your
    products should too thats inflation.

    11.

    angel_abby says:

    April 12, 2013 at 12:22 pm

    excellent! super thank you for this!

    12.

    Juztin888 says:

    March 31, 2015 at 10:33 am

    Great Article Sir!


    I am currently running a personal food
    business at home & expanding it to a restaurant, and I am having a hard
    time computing for cost with the shrinkage of the raw meat after its
    being cooked. For example: I am cooking a pork belly slab which i
    bought at P220/Kilo for 5 kilos with bone/ribs. I then strip off the bones
    (around half kilo) the slab, season and cook as it shrinks about more or
    less another 1 kilo more. I can get the computation if the weight of the

    pork belly I get is at a consistent weight, but of course it has different


    sizes and weight every time someone orders. So may I ask how to get a

    Plan Your Bakery


    1.
    2.
    3.
    4.
    5.
    6.
    7.
    8.

    Select the kind of bakery. One of the first decisions you'll have
    to make is what kind of bakery you want to open. ...
    Write a business plan. ...
    Shop for space. ...
    Price your baked goods. ...
    Have a defined friends and family policy. ...
    Find support. ...
    Be original. ...
    Be prepared to market your product

    ow to Start a Home Bakery


    Starting a home bakery isn't as easy as it sounds. To successfully
    start and run a home-based bakery, you'll have to comply with local
    laws and treat the business seriously. Read the following tips to give
    you an idea of how to start a bakery at home.

    Steps
    1.

    1
    Determine the legality of home-based bakeries in your area.

    While opening a home-based bakery might seem easy,

    you should be aware that there can be limitations involved. For


    example, in some states, home-based bakers are prohibited. In
    others, there are many permit and insurance requirements that you'll
    have to meet before opening your bakery's doors. Check with your
    state's health department or food and agriculture agency to
    determine if starting a home-based bakery is legal in your area.
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    2
    Look into certifying your kitchen.

    3
    After you've determined that you can open a home-based
    bakery, you'll want to modify your home kitchen into a
    commercial kitchen area. This will allow you to sell baked goods to
    customers. There's a good chance that you'll have to modify your

    kitchen somehow before inspectors will certify your kitchen.


    Research what modifications you have to make and complete them
    before an inspector makes his first visit.

    4
    Get all your paperwork in order.
    o

    Home-based bakeries can require that their owners have


    food preparation certificates. In addition, liability insurance and
    permits can be required of a home bakery's owner, like they would
    of any other business owner.

    5
    Come up with a business plan.
    o

    A home-based bakery takes as much planning as a


    business located in a downtown shop. Include information about

    start-up costs, cost analysis, and the costs of your ongoing business
    operations in your plan. Set clear goals for your business and aim to
    complete them.

    6
    Research your target market.

    You need to know to whom you plan to sell your baked

    goods so that you can direct your advertising and marketing efforts
    accordingly. Decide who will make good customers and aim to sell
    your products to them.

    Make sure you stand out from the crowd.


    o

    Offer baked products that are new, different, or special


    somehow. This can be something that can get you an edge on
    competing bakery businesses.

    8
    Spend money on advertising your products.
    o

    There will likely be many bakeries with which you will


    have to compete. Don't scrimp on advertising and marketing. Invest
    in professional photographers and advertising companies. Your
    advertising efforts can have a big effect on how successful your
    business will be.

    9
    Keep your customers satisfied with consistent-quality
    products.

    10
    Experimenting with recipes and offering different batches of
    baked goods under the same name will likely hurt your
    business. If you must experiment with recipes, make sure to clearly
    advertise deviations from the normal recipes. For example, you can

    market a cookie with a different icing than you normally put on top of
    the cookie as a seasonal cookie.

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