Article: Recipe Costing

Note: We strongly recommend reading this article before making any decision on whether or not to use the recipe costing functionality in My Recipe Manager.

We have created this article to give you an insight into what recipe costing involves, the challenges it presents and hopefully for you to make an informed decision on whether or not you would like to cost your recipes. On the face of it, the concept of costing out recipes sounds easy and straight forward (which it can be), providing you have the time and the right resources to do so. You may find yourself thinking:

I have heard of people doing this in a spreadsheet, so how hard could it really be?
It sounds so easy, so what's so hard about getting recipes to add up the cost of their ingredients and give a total cost so I can work out a budget?

From a 'technical' perspective, it's not that hard if you want to use a spreadsheet providing you know a bit about spreadsheets or have someone who can assist you. From a 'user' perspective however, there is a lot of manual and repetitive data entry as well as the time and effort required to maintain such a spreadsheet. This is especially true if you have 50 recipes, let alone 500 or more. There are other downsides to spreadsheets which in part are:

only one person can have the spreadsheet open at any one time unless you host it in the cloud e.g. OneDrive.
over time they become huge and unmanageable.
formulas may become corrupted or get accidently deleted.
you find that you are entering and repeating the same information over and over again e.g. entering butter as an ingredient on many of your recipes. Although this is possible, why would you want to do this?

One of the biggest challenges in recipe costing is managing the cost of your recipe ingredients and at the same time, thinking about how to manage those costs in the method that you are going to use e.g. a spreadsheet. Before you embark on recipe costing, you need to ask yourself a few questions. Depending on your answers, you can make a decision as to whether or not recipe costing is for you and your school. Take a few minutes to think about the below.

Question: Why you are wanting to cost your school recipes?

Answer: If your answer is just because you want to, then we would recommend that you don’t undertake recipe costing unless you really, really want to. If your answer is because you have an annual budget to work with and recipe costing would assist you in managing your budget, or you believe recipe costing will assist you in other ways, then these are good reasons to engage in recipe costing.

Question: Do you have the time to cost your recipes?

Answer: If you have the time, then great! Keep in mind there is no 'magic button' that just makes this happen. No matter what method you decide on to cost your recipes, you will need to invest your time and more than likely the time of other teachers to properly manage recipe costing. Knowing that recipe costing will involve your time, it is important that you decide on a recipe costing method that is streamlined, easy to use and has minimal impact on your time.

Question: How easy is this going to be for you and other teachers to manage at your school?

Answer: If you decide that recipe costing is going to be too hard or time consuming, we would recommend that you don’t undertake recipe costing unless you want to. Try to remember that what might be easy for you may not be as easy for other teachers. If the method you choose for recipe costing is relatively easy, then there is more of a chance that you and your other teachers will invest the time and effort to cost your recipes.

Question: Do you want to manage your recipe costing inside or outside of My Recipe Manager?

Answer: If your answer to this question is 'outside' of My Recipe Manager then you will need to consider some sort of spreadsheet, word document or other third party software package. If you go down this path then we wish you all the best. If your answer to this question is 'inside' of My Recipe Manager then we can offer you a streamlined, time saving and relatively easy method to cost your recipes which your teachers should find quite straight forward, albeit that you will still need to invest some time and effort into the process.

Understanding the Challenges

If you are still interested in proceeding with recipe costing, then you need to have a better understanding and appreciation of the challenges that you will face with recipe costing and what needs to be considered when costing your recipes.

Note: The below points (challenges) are not placed in any order of importance i.e. they all have an impact on recipe costing and in some cases they can have an impact on each other. You can overcome each of these challenges in one way or another as long as you are prepared to understand and accept their cause, impact and how you can best manage/mitigate them. Either way, you need to take these into consideration before making your final decision on recipe costing as they will affect the final cost of a recipe.

General

Do you have a teacher or teachers who are going to have the time or dedication to manage recipe costings?
What do you do if one teacher prefers a different brand from another teacher which will more than likely affect the price of the ingredient?
What do you do if one teacher prefers to purchase ingredients from a different store which will more than likely affect the price of the ingredient?

Recipe Cost

Recipe costing requires every ingredient in a recipe to be costed.
Accurate recipe costing requires the cost of every ingredient in a recipe to be maintained i.e. kept up to date as often as possible.

Ingredient Price

Will you use the price of a home brand, a well known brand or a more expensive premium/organic brand?
Will you use ingredient prices from a particular store that your school goes to or wherever it is the cheapest for that week?
The price that you enter for an ingredient is used for every recipe where that ingredient has been selected.
If you update the price of an ingredient it will affect the cost of every recipe that the ingredient is used in.

Location (Geographical)

The majority of schools will pay a different price for an ingredient compared to other schools because of their geographical location and the associated transport costs. This is especially true for schools that are located outside of the metropolitan area i.e. regional schools.

Stores

Which store will you base the price of an ingredient on?
If the store no longer stocks the 'brand' that you based the initial price on, you may need to update the cost of that ingredient.
If the store no longer stocks the 'item' that you based the ingredient price on, you may need to update the cost of that ingredient.

Weekly Specials

You may need to update the cost of an ingredient when a store reduces the cost of an ingredient because it is 'on special' that week, and the ingredient cost you a lot more the last time you purchased it.

Packaging (Size)

Where ingredients come in different sized packaging, and you purchase a different size than you would normally do, you may need to update the cost of that ingredient. You may buy the smaller packet regularly, but the larger packet for one week.

Example: The cost per kilo of a 200g packet of Cornflakes is much dearer than the cost per kilo of an 800g packet of Cornflakes, therefore the price per kilo will differ.

Packaging (Type)

Ingredients that are packaged differently will generally require a different costing e.g. Sesame Seeds:

a 200g packet of sesame seeds costs $3.05 which equates to $15.25 a kilo.
a 70g packet of sesame seeds costs $1.85 which equates to $26.43 a kilo.
a 37g glass spice/herb dispenser of sesame seeds costs $3.10 which equates to $83.78 a kilo.

Out of Stock

If the store that you based your ingredient price on has run out of stock and you need to purchase it from another store, then the price may be different and you may need to update the cost of that ingredient.

Demand

Some stores may raise the price of an ingredient due to low stock or where there is a heavy demand for that ingredient, therefore you may need to update the cost of that ingredient.

Summary

You can see from the above that managing and maintaining the cost of recipes is a challenging process. It's a lot easier for those industries out there that have large and endless budgets and are prepared to dedicate many resources to it i.e. money, personnel and software. In saying that, there are ways to make recipe costing as easy and accurate as possible which is where the 'smarts' of My Recipe Manager makes all of this possible.

If you still wish to proceed with recipe costing and would like to know how My Recipe Manager deals with these challenges and makes your recipe costing simple and easy to manage, then click here.

Example: No matter how easy or streamlined you make recipe costing, you still need someone to manage the cost of your ingredients.