Ask a food manufacturer what their best-selling product costs to make, and you’ll usually get a number. Ask how they arrived at that number, and you’ll usually get a pause.
Most food manufacturing operations know their ingredient costs. Fewer account for yield loss, rework, and the flour that sticks to the mixer. Almost none update their cost calculations when ingredient prices change mid-month.
Start With the Recipe, Not the Product
Product costing in food manufacturing starts with the recipe. For each ingredient, you need three numbers: the quantity used per batch, the current purchase price per unit, and the yield factor.
A simple example: your chocolate chip cookie recipe calls for 50kg of flour per batch at $0.80/kg. That’s $40.00 in flour cost per batch. If the batch produces 2,000 cookies, that’s $0.02 per cookie for flour alone. Do the same for every ingredient and sum them up.
Except that calculation assumes no waste, no yield loss, and no variation in ingredient prices. None of those assumptions hold.
Where the Hidden Costs Live
- Yield loss. If your recipe says 50kg produces 2,000 cookies but actual output averages 1,850, your real flour cost per cookie is $0.022. Over a year, that 10% adds up.
- Scrap and rework. Reworked product offsets some material cost but adds labour. Scrapped product is pure loss.
- Ingredient price volatility. If your costing spreadsheet uses six-month-old prices, your margin calculations are fiction.
- Packaging materials. Bags, boxes, labels, trays. A box at $0.15/unit doesn’t sound like much until you’re producing 50,000 units a month.
- Labour and overhead. Direct labour, equipment time, and facility overhead matter especially when comparing products with different production times.
The Calculation: Step by Step
- List every ingredient with quantity per batch, including sub-recipes and packaging.
- Apply current purchase prices. Use the most recent price paid.
- Calculate theoretical batch cost. Sum all ingredient costs per batch.
- Apply yield factor. Divide batch cost by actual output, not theoretical.
- Add packaging cost per unit.
- Allocate direct labour based on production time per batch.
- Review monthly. Ingredient prices change. Your costing should too.
Why Costing Drifts
The most common failure: the costing spreadsheet gets updated quarterly or annually, while ingredient prices change weekly. The margin you think you have isn’t the margin you actually have.
How FlexiBake Helps
FlexiBake calculates product costs from live recipe and ingredient data — updated automatically when purchase prices change. No separate costing spreadsheet. No manual recalculation. Real costs, in real time.