A typical measurement and cost list for your chocolate chip cookies should look like this: $2.38 for 5 pounds of flour, $1.00 for 2 pounds of baking soda, $.58 for 26 ounces of salt, $4.99 for 1 pound of butter,

$3.5 for 6 pounds of sugar, $1.5 for 4 pounds of brown sugar, $3 for a dozen eggs, $4.12 for 2 ounces of vanilla extract, $2.38 for 12 ounces of semi-sweet chocolate morsels, and $4.88 for 8 ounces of chopped walnuts.

For the sake of this article and for proper clarity, we will be calculating the cost of a recipe that makes 24 chocolate chip cookies.

For instance, if a dozen eggs cost $3 and the recipe calls for 2 eggs, the cost of the eggs per batch of cookies is 50 cents or slightly more than 2 cents per cookie or 24 cents per dozen cookies.

While for the sugar (normal and brown sugar), if a 10-pound bag costs $5 and the recipe calls for 1 pound (or 2 cups) of sugar, the cost of sugar per batch of cookies is 50 cents or slightly more than 2 cents per cookie or 24 cents per dozen cookies.

Once you have analyzed and stated the cost of each ingredient per cookie, you will have to sum them together to get the total cost per cookie.

Again, for the sake of clarity, imagine that all the main ingredients to make 1 cookie total 27 cents.

To account for any extras, such as salt, baking soda and vanilla extract, it’s advisable to add a few cents, meaning that each cookie probably costs more like 30 cents to make.

Catalog each of your recipe’s costs, and then periodically check for ingredient price increases, so that you can make changes to your prices, as needed.

You should also factor your time into the cost of making the cookies, let’s assume and state the cost of your time at $20 per hour.

Hence, if you can make 4 batches or 96 cookies in an hour, that’s $5 per batch or roughly 21 cents per cookie.

Using the above cost analysis, it simply means that each cookie now costs 51 cents to make.

You also need to consider your overhead costs, like your power bill, the wages of a helper, your initial costs to set up your home bakery and any losses from burnt or botched batches. Note that to recoup some of these costs, you have to do a bit more maths.

You might have to summarize the cost of each cookie to at least 60 cents or about $7 per dozen to avoid losing money. This brings us now to the profit margin of Chocolate chip cookies!

Analyzing the cost of making homemade chocolate chip cookies isn’t as hard as most people envisage, although it can be confusing due to the calculations involved.

It’s better to start analyzing with the recipe you are conversant with, adding the prices or receipts for each major item on it.

While doing this, it might be pertinent to convert some of your recipe’s measurements from cups, tablespoons and teaspoons to pounds, grams and ounces.

This might be where you need the help of a conversion app. Nonetheless, you want your ingredients’ units of measurement to line up with the product’s measurement of weight on the package or vice versa, which makes it easy to calculate the cost per cookie.

The Profit Margin on Chocolate Chip Cookies

Note that the profit margin on a product is simply the difference between your cost and the selling price.

This cost can be the wholesale price you pay your supplier or the cost to manufacture the product if you make it yourself.

You will then have to minus the cost from the sale price to get profit margin, and divide the margin into the sale price for the profit margin percentage.

However, before you can calculate your profit margin of your chocolate chip cookie, you have to first work out your costs. There are typically two types of costs to understand: direct and indirect.

1. Direct Cost (Ingredients)

These are the costs of every single ingredient used to make your cookie, just like we stated above.

You have to know the cost of a single chocolate chip and the cost of every tablespoon of sugar.

If you are using 24 chips in each cookie, you need to know how adding 24 chips affects your profit margin.

Note that adding 30 chips rather than 24 chips means you will have fewer chips to make the next cookie. It’s as simple as that!

The price of those chocolate chips takes all of these food costs into account. That’s why most successful bakeries are still in business.

2. Indirect Costs (Non-food)

This involves all the costs (apart from ingredients), that you must have incurred from running your food business.

These expenses are sometimes referred to as operational costs. You definitely have to make allowance for these when pricing your product. Here is a sample list of indirect costs:

• Rent (when producing food from a commercial kitchen)
• Mortgage payments (when producing food from an approved home kitchen).
• Commercial rates (refuse collection, water etc.)
• Equipment (even if you already own it)
• Packaging
• Logo design
• Business planning software
• Labour (how long did you or employees take to make the cookies?)
• Lighting and heating
• Website hosting and maintenance

In this business era, a lot of bakeries or home based baking businesses crumble because the owners failed to properly inculcate the indirect costs (non-food) into the selling price.

It would be a mistake to assume that the costs of your cookies should not include the costs of labour and operational costs (i.e. the costs of running the business).

Just because you ‘already own’ an oven does not mean you should not include the cost of it and electricity as costs of production.

It is a wrong approach to product costing and many businesses have paid dearly for it.

Calculating your Profit Margin

Notably, according to the bakery industry data, your new chocolate chip cookie business should aim for a Gross Profit (GP) of between 65-70%.

This is a standard profit margin in the industry. Let’s imagine you decided to sell your cookies for $10 per pack.

At this point you must have worked out, just like we stated above, that your ingredients (direct costs) amount to $7.

To effectively calculate your profit margin, minus the cost ($7) of your cookie ingredients from your selling price ($10).

That leaves you with the sum of $3. At this point, convert this result to percentage: $3/$10 x 100 = 30%.

30% is your profit margin on the above product, and since you should be aiming for a gross profit of 65-70%, you may need to choose cheaper ingredients or increase your sales price significantly in order to cover costs.