How Much Does A Cake Typically Cost You To Make In Material?
Decorating By jennifercullen Updated 1 Aug 2011 , 4:31pm by jennifercullen
I just worked out prices today for 2 cakes (i only charge people for my materials and if they choose to give me more hey who am I to argue 
) and even I was surprised to find that my cakes are costing me around £1-£1.20 per serving, this is just for vanilla/chocolate sponge covered in fondant. It's worried me a little bit as I'm starting to think that price is only gonna go up and if I ever decided to start selling my cakes at a profit there doesn't seem to be one on that in my area! I just wondered if anyone else would care to share their costs [/i]
It really all depends on the complexity of your cake and how many tiers, fondant or gumpaste decorations etc etc... Also you can charge an hourly rate if you felt you were good enough. Im not a seasoned professional but thats how I charge. Per slice, costs for materials and a small hourly fee because as I said Im just starting out It takes a lot of work to make custom cakes for specific needs so you need to be compensated appropriately for your time.
Depending on the cake, and 8in round can cost me anywhere from $9-$18 just in ingredients. A large wedding cake usually costs between $70-$150 in ingredients. But none of this includes labor. I was apalled at how expensive things are when I did the math on things. Remember to include all of your costs, even little things like cupcake liners, disposable pastry bags, cake boards, boxes, etc.
I would estimate that we average about 20% materials, 60% labor + overhead, and 20% profit. This is based on a business in northern California operating out of a rented commercial kitchen (we rent by the hour so it's easier to combine labor and overhead costs). If home-based bakeries were legal here the overhead percentage would be considerably lower.
My average cost for ingredients/supplies is $1 per serving.
A great way to cost out a cake is: material cost + estimated time x hourly rate x 20%.
My markup is 20%, I charge 10 and hour (lower than most pros) so as a crazy example:
$10 (materials) + $40 (4 hours x $10) x 20% = $60
Hth!
A great way to cost out a cake is: material cost + estimated time x hourly rate x 20%.
That's pretty much what we do, except you also need to take into account overhead. The equation we use with a 20% markup is price = (materials + labor + overhead) x 120%, since you should mark up materials and overhead in addition to labor.
Just out of curiosity, why 20% for the mark up. Is it standard?
I'm just a hobby baker, but I noticed that 20% keeps getting mentioned in various threads. Where did that percentage come from?
Based on industry surveys successful retail bakeries typically make 10-20% net profit. Without a storefront, the lower overhead allows one to shoot for margins on the higher end of that range (or even higher than that) assuming the market will support your prices.
We do mostly birthday cakes, margins (without a storefront) tend to be closer to 25-30% for higher-end cakes.
So if you are a one-person business...are you still supposed to count hourly wage before you count profit?
The last two years I've figured about a 50% net profit after all deductions are counted and expenses (I work from home legally).
However that's not counting an hourly wage or anything, that's just what I see after expenses are paid and deductions figured.
I assume if I counted all my hours of work including all email, errands, computer research, and actual baking and decorating, my "wage" would look fairly poor. haha.
So if you are a one-person business...are you still supposed to count hourly wage before you count profit?
Correct...your labor is a part of the cost of your products, in fact it's usually the biggest part.
If you are relying on your business to pay the bills, it's critical to have a good idea of what your wage is, since if you underprice you may find out that it makes more financial sense to work at McDonald's.
There are actually two kinds of profit: gross profit and net profit. Gross profit is revenue - COGS (cost of goods sold, which includes materials and labor directly attributable to making products). Net profit also subtracts out overhead such as marketing, administrative costs, insurance, etc. Gross profit gives you a good idea of how profitable you are when looking at the product-manufacturing process itself, while net profit tells you how much money is flowing into the business every year once you pay all the bills. The 10-20% figure I quoted before is net profit.
So if you are a one-person business...are you still supposed to count hourly wage before you count profit?
Correct...your labor is a part of the cost of your products, in fact it's usually the biggest part.
If you are relying on your business to pay the bills, it's critical to have a good idea of what your wage is, since if you underprice you may find out that it makes more financial sense to work at McDonald's.
LOL...well, I price my work about according to the going cake-shop rate in the area...if I maybe work too slowly in some areas then its my own fault...or, working from home, its obviously going to take me longer to bake batches of cake than it would for somebody who has two or three ovens, etc. But since I'm able to stay home with my kids (still have one not in school) then I guess the hourly wage doesn't matter quite as much as the fact I'm working from home...and sometimes the hourly would be difficult to figure since I can put something in the oven and then go do whatever I need to do...or put a crumb coated cake in the fridge and then tend to the kids or write someone an email....etc.
I charge between $2.50 and $3.00 (USD) per serving. On average it costs me .62/serving for ingredients/materials/utilitities.
When you figure tax deductions are you supposed to deduct what you are paying yourself as a wage? Or is that only if you are LLC?
If you are a sole prop with no other employees, your wages are rolled into your business's profits for tax purposes (usually put in a "draw account"), so I don't think you'd be able to deduct your own wages against your income. The profits from Schedule C are actually treated as your wages by the IRS, and you owe self employment tax (15.3% for 2010 or 13.3% for 2011) if you have more than $400 in net profits to cover Social Security and Medicare.
There is no difference if you have an LLC that's taxed as a sole prop. If you set up your LLC to be taxed as an S-corp there are ways to avoid some self employment taxes by structuring part of your wages as dividends from the business.
I just did my first wedding cake. You can see it in my picture gallery. It weighed in at 50.00 for materials for a 10" and 12" with ribbon and edible pearls, the brides family provided flowers. I made my cake boards, used a 2.00 and 1.50 spool of ribbon and paid 5 dollars for sugar pearls.
I get it now. Cakes are expensive for a reason.
I figured this cake at 75 servings at 66 cents a serving. But, my husband reminded me it was 50.00 a serving, since it was cut for a picture. 
Since this is not a business for me, it made an expensive wedding gift.
.62 per serving seems good! Do you use cake mixes or scratch cakes? I make scratch and have been looking into making it cheaper but I don't think I even can aside from buying in bulk. I already buy the shops own brand ingredients! My fondant is £5 for a kg, I think if I made my own it would save a bit or I'd at least get more for the money, but as I'm not charging for my time only ingredients, and I HATE making mmf lol I really don't want to do that! I guess I just have to think that's what it costs, tough! I guess what worries me is that I can't see people paying a price for a cake if I charged for ingredients and minimum wage for the hours I put in around here! People are already shocked at The ingredients alone price! (some people anyway) I was asked to do an owl shaped cake, with a base cake, in total to feed 70 people, I worked it out at 75 pounds, which was an estimate so I may have gone over or I may have come in under but they said hmm... what about for 50 people?
Jennifer, I can have as much as $25.00 in ingredients in an 8 inch cake, buttercream, simply decorated with a border and rosettes. The time is also a big factor with all scratch fillings and frostings. You just need to market to upper income people, not the masses. People who buy premium products usually do it across the board. Nice house, nice cars, nice dinner party, premium dessert. But you must sell the value, and the taste of the fine ingredients must really shine through.
Thanks scp1127, i'll bear that in mind. Although I won't be going into business for some years yet! In fact, by the time I'm confident enough in my work to sell them for what they are worth the kind of cakes everybody wants at the moment will probably be out of fashion haha. oh well I'm having lots of fun whatever happens!
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