How I Calculate My Sell Prices

Running a business is a lot of fun... except for the math part.  


I really hate math!


Unfortunately, I have to do a lot of math when it comes to figuring out my costs, making purchasing decisions, and how much to charge.  But, it helps me realize how much math really applies in real life situations.  It is unescapable!!!  Ohhhh, the torture!!!


BUT, my favorite type of math is counting out my money after I've sold everything!  At first, I thought that the money I collected was how much I made, but my mom quickly pointed out that that wasn't quite so...  


But, I digress...


This is how I figure out my prices:


1.  I create a spreadsheet listing all the ingredients, packaging materials, and the amount of time I've spent making it.

2.  Then, I create columns for Amount of ingredient used, Price per Unit, and Total Cost for that ingredient.


3.  Next comes the tedious work, which I REALLY detest...  
Figuring the Price per Unit.  
To do that, I divide the cost of the ingredient by the number servings/units.  For example, say a 5-pound bag of flour costs $3.00.  There are 20 cups of flour in the bag.  So, to figure out how much 1 cup of flour costs, I divide $3.00 by 20 cups, which equals 0.15.  Therefore, 1 cup of flour = $0.15.  I do that for each ingredient...

4.  Then, to figure the total cost of that ingredient, I multiply how much I used of it by the price per unit.  Going back to my example, say I used 3 cups of flour.  I multiply 3 cups times $0.15, which equals 0.45.  My total cost of flour is $0.45.  Again, I have to go through and do that for every ingredient.  


5.  Next, I add all the Total Costs together and divide that by the number of servings it made.  For instance, for the Santa Cookies, my total cost was $4.37 (not including time/labor).  The recipe made about 30 cookies, so $4.37/30=$0.15/cookie.  Add in 2.5 hours of time at $8/hour... $24.37/30=$.81/cookie.  

 6.  To that, I add the cost of the packaging.  The boxes I packaged the Santa Cookies in were $0.35 each.  Six cookies fit in a box.  $0.81x6+0.35=$5.22/half dozen.

7.  Finally, I mark up the price to what I think sounds fair and reasonable.  I want to make it worth my time, but I don't want to gouge my customers either.  It's a tricky thing to do...  
In the case of the Santa Cookies, I actually took a bit of a loss because I didn't thing people would want to pay that much for sugar cookies.  I charged $4.00/half dozen.  That one was a bit of a learning experience.  


I think we'll stick to easier projects!


After it's all sold, I get to count out my money!! :)  But Mom burst my bubble by telling me that I have to subtract my costs from the money I brought in.  Hmmmm... guess I didn't make quite as much as I thought I did...  This is a lot of work!  And math!!!!


I LOVE MATH!!!!!   NOT!!!!!


In case you were wondering, this was not my first choice for a blog entry...  Mothers can be so persistent!! 


What is/was your least favorite subject in school?