Costing, shrinkage and economics in the bakery
From cost price to selling price — and why skilled workers need to be able to calculate
The learning outcomes for the baker and pastry chef education require that you can prepare product calculations and set prices based on operating costs. This is no accident: a bakery is a business, and even the best craftsmanship runs out of money if products are sold too cheaply or waste runs rampant.
§Food cost — what does it cost to make the product?
The food cost is the sum of what goes into making the product. It is typically divided into raw material costs (flour, butter, eggs, sugar), labour costs (the time spent) and a share of fixed costs (rent, electricity, ovens, depreciation). If you don't know your food cost, you can't know whether you are making or losing money on a product.
- 01Råvarepris pr. portion = råvarens pris ÷ antal enheder, den rækker til.
- 02Løn pr. enhed = tidsforbrug × timeløn ÷ antal producerede enheder.
- 03Fixed overhead costs distributed as an overhead share on top.
§Contribution margin and sales price.
The contribution margin is the sales price minus variable costs (typically raw materials). It's that amount that's left to cover rent, wages, and earnings. A simple rule of thumb in many food companies is that raw materials can only account for a limited part of the sales price — precisely because wages, premises, and operations must also be paid from the same pool.
§Shrinkage and food waste
Shrinkage is everything that is made but not sold — day-old bread, misbakedgoods, returns and waste in production. Shrinkage costs double: both the raw materials and the work are wasted. The education's objectives place direct emphasis on minimising resource consumption and reducing food waste, both for economic and sustainability reasons.
| Type of shrinkage | Cause | Counter-pull |
|---|---|---|
| Overproduction | For large batches | Better sales forecasts |
| Faulty baking | Incorrect temperature/time | Routines, documentation |
| Expired / outdated. | For long expected durability | Reduced price reuse in other goods |
| Production waste | Cuts, leftovers | Reuse in other products |
§Key figures you should know.
A baker wanting to move forward — towards becoming a master or running own business — must be able to read a simple operating account: turnover, cost of goods, wage percentage and result. The competence targets specifically mention that you under guidance must be able to prepare basic accounts using IT tools. It is not accounting for accounting's sake — it is the ability to see if the business is healthy.
§From skilled to self-employed
The measuring equipment is just as important as the machines. A beautifully worked part with wrong dimensions is still wrong.
“You can bake the town's best bread and still lose money if you do not know your cost price.”
— Business economic basic rule for food trade.