Joined: May 29, 2007
Posts: 101
Location: Jamaica
Birthday: Oct 12
Posted:
Tue Jun 05, 2007 11:31 am
I do not understand fully how to define the cost price of my products. I can basically cover the ingredient cost and packaging. However I do not know how to calculate the overheads. It is also difficult to do so because I work from my family home and it iam not able to caculate the business use seperate and apart from my home.
Right now I am not paying the over heads either but would like to pay my part. As well as it would be useful to know as intend to get my own shop sby the end of the year. Seeing as how I am starting from home I need my selling [rice to be realistic so that when I eventually aquire the shop there is not necessarily a dramatic jump in prices.
Is there a suggested percent that overhead should fall within that I can work with and get and idea as what my selling price would be?
My friend says I should not be focus on how much I make per item as my main goal is to make money off the mass production. She is basically saying I need to set a goal on how much of the product I need to sell to make a specific amout of money. However I do not know what is a profitable amount I need to make anyway so I can not decide on a goal.
I may be sound confuse because I am confused
indydebi Forum SuperStar!
Joined: Jul 07, 2006
Posts: 14221
Location: Indianapolis IN
Posted:
Tue Jun 05, 2007 12:16 pm
yes and no on the "how much do you make overall". Yes, at the end of the month, I have to have enough to pay the rent and the utilities and the insurance. But at the same time, you have to consider that overhead on small orders is greater than overhead on larger orders.
My rule of thumb is "how much is it costing me in payroll?"
Example:
Cookie recipe makes 3 dozen cookies. My baking sheets will hold 20 cookies.
Order #1 is for 1 dozen cookies. I mix the batch of dough (which makes 36 cookies); I line the baking pan with one sheet of parchment paper; Bake 12 cookies (on a 20 cookie sheet, so it's wasted capacity) for 20 minutes. Box the 12 cookies in a white 10x10 cake box. 20 minutes for clean up.
Order #2 is for 3 dozen cookies. Mix the batch of dough (same amount of time as order #1); I line the baking pan with one sheet of parchment paper .... and I can use the same parchment on the 2nd baking so no add'l cost there; Bake 20 cookies for 20 minutes ..... then bake 16 cookies for 20 minutes. Box the 36 cookies in a white 10x10 box. 20 minutes for clean up.
As you can see, I spent pretty much the same amount of payroll on both orders, but I only took in 1/3 the money on the first order.
Your market is a big factor in pricing. Find out what the going rates are in your area. Your pricing should be comparable (but not with walmart) and should be a fair market value for your talent and your work.
There are other threads in which electricity costs are discussed. I called my power company once and they figured that it cost me 3 cents per hour to run my oven. Another CC'er found out it costs $45 a year to run her refrigerator. So that aspect is not that great. Unlike in our mom and our gramma's era, where appliances were not NEAR as efficient as they are today, the cost is not as great as you think it is.
Hope some of this helps.
leily Forum SuperStar!
Joined: Jun 12, 2004
Posts: 5148
Location: Iowa
Posted:
Tue Jun 05, 2007 8:42 pm
indydebi wrote:
Example:
Cookie recipe makes 3 dozen cookies. My baking sheets will hold 20 cookies.
Order #1 is for 1 dozen cookies. I mix the batch of dough (which makes 36 cookies); I line the baking pan with one sheet of parchment paper; Bake 12 cookies (on a 20 cookie sheet, so it's wasted capacity) for 20 minutes. Box the 12 cookies in a white 10x10 cake box. 20 minutes for clean up.
Order #2 is for 3 dozen cookies. Mix the batch of dough (same amount of time as order #1); I line the baking pan with one sheet of parchment paper .... and I can use the same parchment on the 2nd baking so no add'l cost there; Bake 20 cookies for 20 minutes ..... then bake 16 cookies for 20 minutes. Box the 36 cookies in a white 10x10 box. 20 minutes for clean up.
As you can see, I spent pretty much the same amount of payroll on both orders, but I only took in 1/3 the money on the first order.
Can I take you to work and have you explain this to my customers? Granted my full time job is in metal and fabrication/installtion, however when I do quote for people they think the one should be the same price as if we did 20... Oh man I wish it was this easy to explain to everyone... Maybe I should start using the food analogy =)
indydebi Forum SuperStar!
Joined: Jul 07, 2006
Posts: 14221
Location: Indianapolis IN
Posted:
Tue Jun 05, 2007 8:50 pm
I know what you mean. I liked the ones who couldn't figure out why a box of 100 was cheaper than 10 boxes of 10. Because I had to use 9 more boxes and 9 times the tape to close the boxes, ya big moron!
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