I was recently given the opportunity to "bail out" a fellow baker who double booked a wedding cake. Since our baking styles, fondant and icing are different, she is going to be baking, filling, crumb-coating and possibly icing and then freezing solid before she brings it. She'll even bring SPS supports and a cake drum and silver paint, and the sugar flowers. I will cover it in fondant, stack, paint swirls on it, and deliver about 40 miles away.
It is this cake, minus the borders, http://bayshorecakes.com/images/Ivory%20with%20dark%20red%20hand%20painted%20scrolls%20wedding%20cake.jpg It is to stack more seamlessly, no borders, and also have silver incorporated in it.
So this is the question, what should I charge that is fair to us both? I am sensitive to the fact that she didn't charge for delivery, due to the fact it was to be delivered in her home town, but now it is coming from 40 miles away. I really want to be fair and not take advantage of the fact I am saving her behind, but I don't want to undercharge either, because it is a lot of work, and driving.
I don't have an hourly wage that I pay myself, (I charge a competitive per slice price and get it done when it is done!!) and I don't have any clue as to how long it will take, but my prices are a little higher than hers as she raised her prices after she charged for this cake.....Maybe a percentage? I really don't know... I am a better decorator than business person!! 
But if you have a per serving price, that price should cover your hourly wage. I know how long it takes me to decorate a cake, I know how much I want to make an hour, I make sure my per serving price covers that expense as well. Try to sit down and do the math and how long it will take you to do the work. Now I know she didn;t charge a delivery fee, but she is going to have to take the lost and pay your delivery fee. When we double book, sometimes we have to take a loss to cover up our mistakes.
I have no idea how you can accurately set prices without setting an hourly wage for yourself, but when providing services like this you'll need to come up with one.
For example, if you decide on a wage of $15/hour, I would charge at least $18/hour (including travel time) plus your ingredient cost. The price she is charging the customer is irrelevant.
I have no idea how you can accurately set prices without setting an hourly wage for yourself, but when providing services like this you'll need to come up with one.
For example, if you decide on a wage of $15/hour, I would charge at least $18/hour (including travel time) plus your ingredient cost. The price she is charging the customer is irrelevant.
I don't have an hourly wage because I have 4 kids and a husband and I rarely do a cake all at once. I go in for a bit, then get interrupted over and over and over. I wind up working at night, all night, and I know for a fact I work better when I not exhausted, so it may take me twice as long at night. I generally just pay myself like a contractor, taking a very small percent from very few cakes, on the weeks we need money! I put nearly every cent back into the business to get stuff for it that will make my life easier (like an Agbay, a bigger mixer,) or just nicer, like little pretties for the consultation area, or just stuff I need, like impression mats and cake pans and sugar and business fees. I am fine with it, and so is my accountant, for now. Maybe next year I will start making a little money for myself.
ANd the way I set my prices are a happy medium of the prices around me. There are people that charge as little as $1.50 (cottage food law bakers over the river,) and as much as $6 per serving (retail location). I charge $2.75 for buttercream and $3.25 for fondant. It is what my customers will pay and my cost is MUCH MUCH less, and when I decide to stop pouring it all back into the business, there will be plenty for me.
Setting an hourly wage, plus costs and a profit margin to come up with a price are all well and good, but I know my customers and this area and people HAVE to be willing to pay the prices you set. I know how much each cake cost me. If i set an hourly rate of what I think i am worth per hour, and applied it, nobody would be able to afford me! And then there is the rare wedding cake I breeze through and do the math and wind up making $40 an hour. If I set that price at an hourly wage I was willing to work for plus expenses, I would have charged them $ .80 cents a serving, but as it was, I made a lot of money that day. 
If you were doing the whole cake for her, you would need to charge her the same phat you would charge a normal customer. How much of the work is she doing for you? 50%? Whatever that number is, that's what you should charge her PLUS the delivery fee. Gas isn't cheap and it's not YOUR problem that you're 40 minutes away from her.
Another thing to think about though is what condition are these cakes going to be in when she gets them to you? In a perfect world they'd be ready for fondant but what if they're cracked/squished/poorly assembled?
Just so you know I ahve a husband and children as well. I still like to make an hourly wage. On some cakes you may make a little more, on some a little less, but it all breaks even in the end. Some take longer, some take less time, but it all balances out.
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