My husband and I have been baking/decorating cakes from home for a little less than 2 years. Setting prices has been a constant struggle. Is this too expensive or not enough? What's fair? I've been working up every quote upon request. I would love to at least know our basic pricing so I don't have to panic when talking to someone - I have a tendency to give in to knee-jerk reactions. I took a workshop on pricing and was supplied a formula but sometimes I wonder how it stacks up.
ingredient cost x 15% x 2.5 + cake board & box = final cost
Based on this formula, an 8 inch round is $30. If it were covered in fondant, it'd be $55.
So... is this on par?
You also need to consider labor cost and overhead cost, as well as the full ingredient cost (I'm not sure why you're multiplying ingredient cost by 15% then by 2.5) and your profit margin (usually 20-30%).
If the ingredients and packaging for an 8" cake cost $10, the cake takes an hour to bake and decorate, your wage is $15/hour, you can legally bake commercially from home, and the per-order overhead contribution (insurance, license fees, utilities, accounting, etc.) is $5, the cost of the cake would be $10 + $15 + $5 = $30, and your price would be $30 * 1.25 = $37.50.
If LA requires the use of a commercial kitchen and you can rent one for $15/hour, your cost would be $45 and your price would be $56.25.
The numbers may look similar to your estimate, and using the ingredient multiplier pricing method can work for simple cakes. However, if that 8" cake has complex decorations that take an additional 3 hours to complete, the cost would be $75 and the price would be $94. (With a commercial kitchen, cost = $135 and price = $169.)