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Thread: Help - how do you cost a product

  1. #1

    Help - how do you cost a product

    Can anyone help? My wife has been asked to prepare a food product and has been asked to submit an invoice for costs time etc. She has never done this before it has started a discussion on doing this. We could do an invoice just to cover ingredients which I would be happy with but I would also like to know the true cost of the product for future reference.

    Does anyone have any experience of doing this or any advice on how to properly cost out a product and what items would be reasonable to charge for , or is there a rule of thumb used and then a % added for reasonable profit.

    We are totally in the dark so any help or advice would be appreciated.

    Kind regards SBM

  2. #2
    One formula was to add cost of all product portion costs and multiply by 3.75, this will give a price that included labour (and maybe VAT) can't quite remember.

  3. #3
    Looking at some prices it seems to take the cost of the ingredients or parts then add 100% then times that by 10 and divide by the day of the month and voila a price!

  4. #4
    You need to decide how much you want to make from providing the service, and then add that to your direct costs such as the ingredients, electricity, time it takes you to procure the ingredients, any insurances or costs such as hygiene certificates etc, be very careful if customer is asking for full breakdown of all these costs as its normally a way of getting you to work for nothing!
    If I was you I would be offering to do it for an agreed fixed price that you set, its then up to them if they want to accept

  5. #5
    Thanks for the very speedy replies, it has given me a good start and I think we will work out the basic costs and just give a single cost and make it clear it is for this batch only and see how it goes.

    I will then start a complete breakdown of all time costs, ingredients, electricity etc and add a profit element and see what we come up with. We will also see what others charge and see if we are too far out in what our figures come out as. Thanks once again. Regards SBM

  6. #6
    Unless it was for charity, cost of ingredients, x hours at minimum wage then add 50% to the total.
    If it`s not for charity your Mrs deserves something out of it even if it`s only for her time.
    "He who kills sow with piglets empties the forest of boar" My neighbours dad on new years eve 2011.

  7. #7
    The way I charge is cost of raw materials plus 20%(covers consumerables and sundries plus electricity etc) and then add on an hourly wage. The hourly rate depends on the level of skill required, 10/hr for general work, 20/hr when doing electrical work sometimes more depending on how difficult/skilled/unpleasant the work is. All depends on how much you value you (or your wife's) time.

  8. #8
    Basil/nun_hunter many thanks. Regards SBM

  9. #9
    rule of thumb is Direct costs (labour +materials ) x 2 this used to give use 5% Profit on sales for a manufacturing company

    you need ot work out your labour cost ie hrs x rate

  10. #10
    And most small businesses try to work out what it actually costs to produce, the total cost. Then they charge as much as they think they can get away with It's not unusual to charge a different price to different buyers.

    That's the real world, not the theoretical one.

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