A cake's margin turns on the hours: an 8-inch, three-layer celebration cake costs $111.70 in layers, buttercream, filling and decorations, the board and box, four hours at $20 and the card fee, and sells for $190.00, a 41.2% margin after paying those hours. A 6-inch has less cake but nearly as many hours, so it keeps a little less; a three-tier wedding cake keeps 32.4%, with its delivery and setup; and cupcakes keep the least. Margin = (price − cost) ÷ price. In the example below, a month of four lines brings $11,510 of sales and about $4,350 of gross profit, after the decorating hours and before kitchen rent and insurance.
The short version
- Margin = (price − cost) ÷ price; markup = (price − cost) ÷ cost.
- An 8-inch cake: $111.70, sold for $190.00, 41.2%.
- Hours are most of a cake's cost.
- A 6-inch keeps a little less than an 8-inch, on fewer servings.
- Wedding cakes keep 32.4%, with delivery and setup.
- TaroStack costs each cake from what each batch used. More below.
An 8-inch cake, costed
Desert Rose Cake Studio, the made-up cake studio in Albuquerque, New Mexico, I use in these examples, pays its hours at $20 in every cake:
| An 8-inch, three-layer celebration cake | Cost |
|---|---|
| Layers, buttercream, filling and decorations | $23.00 |
| Board and box | $3.00 |
| Baking, filling, decorating and the order, 4 hours at $20 | $80.00 |
| Card fees, 3% of $190.00 | $5.70 |
| Cost | $111.70 |
Prices by size and serving are in how to price cakes, and the studio's year in cake business plan.
Margins by channel
| Product | Sold where | Price | Cost | Gross profit | Margin |
|---|---|---|---|---|---|
| Celebration cake, 8 in | Orders, picked up | $190.00 | $111.70 | $78.30 | 41.2% |
| Celebration cake, 6 in | Orders, picked up | $145.00 | $85.99 | $59.01 | 40.7% |
| Wedding cake, 3 tiers | Delivered and set up | $650.00 | $439.50 | $210.50 | 32.4% |
| Cupcakes, a dozen | Orders, picked up | $42.00 | $29.76 | $12.24 | 29.1% |
The wedding cake's cost carries $60 of delivery and setup with its boards; the cupcakes keep 29.1%.
A month's numbers
A month for Desert Rose Cake Studio:
| Product | Units | Sales | Gross profit |
|---|---|---|---|
| Celebration cake, 8 in, orders | 25 | $4,750 | $1,958 |
| Celebration cake, 6 in, orders | 20 | $2,900 | $1,180 |
| Wedding cake, 3 tiers, delivered and set up | 4 | $2,600 | $842 |
| Cupcakes, a dozen, orders | 30 | $1,260 | $367 |
| Month | $11,510 | $4,347 |
The 8-inch cakes bring the most gross profit. A wedding cake keeps the most dollars a cake but takes 12 hours and a delivery; two 8-inch cakes take eight hours and keep about three-quarters as much. Every hour saved decorating an 8-inch cake adds $20 to its margin, more than any saving on butter. Counting the hours properly is in how to compute labor cost in baking.
Get the calculator
Download the cake margin calculator. One sheet: one line for each product and channel, with its price, materials, packaging, labor and fee rate; the cost, gross profit, margin, markup and the price your target margin needs fill in. It's an ordinary Excel file with no macros, and it works in Google Sheets, LibreOffice and Numbers.
Where this stops working
The calculator holds one cost per cake. A design that takes six hours instead of four, butter that jumped, and a wedding that adds a tier at the tasting change every number.
How TaroStack does it
TaroStack costs each cake from what each batch used, so margins sit on real cost.
True cost from the batch. Each batch takes butter, flour, eggs and sugar at the price of the deliveries they came from, so a price rise shows in the next batch's cost.
Labor on the batch. The minutes a batch took are recorded on it, so the hours behind each product are on record.
Margins by product. Margins are reported per product on that actual cost, and a price-creep report per supplier shows whose prices moved.
| The job | Spreadsheet | In TaroStack |
|---|---|---|
| What a cake cost | One price from last season | Cost from the batch's deliveries |
| The hours behind a batch | Remembered | Labor minutes on the batch |
| An ingredient creeping up | Noticed late | A price-creep report |
| Margins by product | Re-worked by hand | Margins on real cost |
Recipes, batches, costing and margin reports are on every plan, from $49 a month. The first 30 days are free, with no credit card. If you'd like a hand setting up, ask, and we'll do it with you.