When you take an order for a cake and you have to by cake pans and a tub of fondant and other materials that will be used in the future for other orders. Do you charge the customer for the cost of the cake pans that were needed for filling their order? or for the full price you paid for the fondant or gumpaste when only a protion of that will be used to complete there cake? and if not how do you determine what amount to charge them for the use of the supplies you currently have like flavorings and extracts, fondant, gumpaste, powdered sugar, meringue, etc.?
i am really stuck with this and can quite figure out what would be a fair price to charge if at all for in the case of the cake pans which will more often then not be used again in orders down the line.
Cake pans are tools. Do not charge for tools.
You charge for the actual amount of fondant you use on this cake. When you use the rest of the tub on another order, you get paid back for that part of the price.
You prorate the price by weight: say the tub has 10 lbs, then you divide the price of the tub by 10 to get the price per pound, and then multiply by the pounds for each order. Same for the gumpaste. For minor ingredients, what you charge depends on the size of the cake.
You need to decide for yourself how you will price your cakes. Most orders are priced at so much per serving, and then extra for decorations if they are very fancy.
You know the recipe you use, so you go to the grocery store and write down all the prices. You know more or less how much fondant you will add to the cake. Then you calculate how much time it takes. You calculate the price of your work not including flowers. That gets you to a price per serving of cake that should be consistent for all customers who order this same kind of cake.
Then you figure a price for the decorations based on how fancy the customer wants them to be.
I know this is a long answer. The short answer is that you are setting up "stock" just like a business, and that means putting some money in up front. The money comes back when you sell the product.
Everything used to create a cake can be considered a consumable, and the cost of that consumable needs to be divided up among however many orders it can be used for.
For ingredients like fondant, flour, sugar, extracts, etc. it's relatively straightforward: the amount (by weight or volume) used for the cake should be included in the cost.
For supplies like cake pans, you need to estimate the useful life of the item and allocate the cost across all orders that would use that item during its useful life. To simplify this you can include all items with a similar useful life together. For example, if you spend $500 on various supplies (cake pans, utensils, a mixer) that will last for 5 years, you have $100/year to allocate. If you estimate one order per week (with 2 weeks off for vacations), you can allocate $2 to each order to pay off these supplies.
The largest cost component of a cake is usually the labor though.
thank you so much! this was a big help!
I agree with the above. Pans are something you will use over time and they are an expense of the business. If someone requests a specialty cake that requires a pan you don't have like a pasley or petal shape then you might not use again then I think you can charge a supply fee like you would if you had to special order a mold or somthing. But overall I would say no.
Also you should look into the Cake Boss software (www.cakeboss.com) if you're having trouble with pricing. This software made a huge differnce in helping me manage my pricing as well as the order and customer management features. It's $150 and CC members get a 10% discount. I promise you this software is worth every penny for managing your pricing, it even has reports for shopping lists, income and expense statements. It's great!
thanks sillywabbitz! i will definantley look into it!
You can very easily do your own "cake boss" math. I keep a current list of prices for ingredients. I break down the total into working numbers. For example, a bag of sugar has x number of cups. Divide the price into that number. Now you have the price per cup.
In the upper left corner of all of my recipes, I have the approximate cost based on the unit prices. I say approximate because prices fluxuate, but as they have been going up, my quantity has been going up, allowing me to have better costs.
That price now reflects the cost of one "batch" of that recipe. I use this to calculate my price. Then comes my fixed overhead that I attribute to the batch based on volume of orders, and last, my money is added based on a fixed number I use to determine my "wage". Add packaging and this is your cost. Don't for get profit and make sure you allow for taxes and any credit card processing percentages.
In the end, your revenue and receipts will determine your true profit, etc., but this will give you a working amount.
My pricing for packaging is about $2.00 on certain items, so I know that every time I use a certain size box, cake board, card, and ribbon, $X must be added to that cost in the upper corner.
This is the same as what Bakingirene and sillywabbitz said, but having the info readily available on the recipe really helps.
If I wasn't clear, pm me and I'll share more details.
I agree with scp1127 that you can do a lot of this with excel but I'm not sure I would call it easy. I did have an excel spreadsheet with pricing etc prior to buying cake boss but it did barely a 1/10th of what I get from the Cake Boss software. For pricing alone I'm still better off with Cake Boss because when flour goes up or I get a new supplier for boxes, I update it in one location and all recipes are updated. Orders are super simple to calculate, hourly wage super easy to add in and adjust for harder cakes. But the fact that it includes customer tracking, order tracking, invoicing, shopping lists and end of year statements. I couldn't ask for more.
Another way to look at it is this...how much do you pay yourself an hour for your time? At the low end I assume it's $10 an hour. That means the software costs you 15 hrs of your time. I spent more than that trying to do most of this on my own and I get an awesome interface, super helpful support, customer tracking and professional invoicing. Not to mention the time it saved me for having a truly accurate costing mechanism...because when I did this on my own I was always leaving off something. Anyway yes you can do it on your own but time and benefit wise I would definately check it out.
I agree with scp1127 that you can do a lot of this with excel but I'm not sure I would call it easy. I did have an excel spreadsheet with pricing etc prior to buying but it did barely a 1/10th of what I get from the software. For pricing alone I'm still better off with because when flour goes up or I get a new supplier for boxes, I update it in one location and all recipes are updated.
If you set up the Excel spreadsheet correctly it can work the same way, where you keep ingredient costs and your hourly wage in one place, then refer to these numbers elsewhere in the workbook so changing the numbers in one place will automatically update costs everywhere.
Another way to look at it is this...how much do you pay yourself an hour for your time? At the low end I assume it's $10 an hour. That means the software costs you 15 hrs of your time.
Definitely agree with you here. If you aren't good with Excel (and don't have access to someone else who can help you here for cheap) then Cake Boss is worth it. Otherwise you are probably better off putting your money towards a full-fledged accounting solution like QuickBooks, which you will need anyway unless you hire an accountant.