Key takeaways
- Cost every ingredient per kilogram or litre, excluding VAT, from the delivered pack price.
- Adjust for yield: the usable cost is the purchase cost divided by the yield percentage.
- Cost sub-recipes by their finished weight after cooking, not their input weight.
- Add packaging and other per-unit costs before you set a price.
- Price ex-VAT = total cost ÷ target food-cost fraction. GP% = (price − cost) ÷ price.
- Costs go stale fast. Re-cost whenever a supplier price moves, or use software that does it for you.
Why recipe costing matters
A dish can be popular, well made and still lose money. Without a cost per portion you cannot know which items on the menu are carrying the business and which are quietly draining it. Costing gives you three things:
- A price you can defend. You know the margin on every item, so you can set prices deliberately instead of copying the competition.
- Early warning on price rises. When chicken goes up 10%, you can see exactly which dishes are affected and by how much.
- Less waste. Costing forces you to write down yields and portion sizes, and a kitchen that knows a portion is 180 g serves 180 g.
The method below works for a restaurant plate, a meal-prep box, a bakery line or a wholesale product. Only the packaging step changes.
The formula
At its simplest, the cost of a recipe is:
Recipe cost = Σ (quantity used × cost per unit of usable ingredient)
and the cost of one portion is the recipe cost divided by the number of portions.
Everything else in this guide is about getting the two inputs right: the quantity you actually use, and the true cost of a usable unit of each ingredient.
Step 1: Ingredient cost per unit
Start from the invoice, not the catalogue. For each ingredient you need a cost per kilogram (or per litre, or per item), calculated as:
Cost per kg = pack price (ex-VAT, delivered) ÷ pack size in kg
Three rules keep this honest:
- Exclude VAT. Most raw ingredients are zero-rated, but some items (confectionery, soft drinks, hot food, some snacks) carry 20%. Cost at the net price so every ingredient is on the same basis as your ex-VAT selling price. HMRC publishes the VAT rates on different goods and services.
- Include delivery. If a supplier charges carriage, spread it across the order. A £15 delivery on a £300 order adds 5% to every line.
- Convert everything to one unit. A 2.5 kg pack, a 400 g tin and a case of 12 all need to end up as a cost per kg. Tins of 400 g sold 12 to a case at £7.20 are 4.8 kg for £7.20, which is £1.50 per kg.
Step 2: Yield and waste
What you buy is not what you serve. Onions lose their skins, chicken loses bones and trim, fish loses heads and frames. The price per kg on the invoice is the as-purchased (AP) cost. What you need is the edible-portion (EP) cost of what is left after preparation:
Cost per usable kg = cost per purchased kg ÷ yield %
Onions at £0.90 per kg with an 88% yield after peeling cost £0.90 ÷ 0.88 = £1.02 per usable kg. A whole chicken at £4.20 per kg with a 60% boneless-meat yield costs £7.00 per kg of meat, which is why buying trimmed cuts is often cheaper than it looks.
Weigh your own yields rather than relying on published tables. Yield depends on the supplier, the season and the person holding the knife. A one-off yield test (weigh before, prep, weigh after) takes ten minutes and the figure is reusable for every recipe that ingredient appears in.
Step 3: Sub-recipes
Stocks, sauces, doughs, marinades and spice mixes are made in batches and used across many dishes. Cost each one as its own recipe, then divide by the finished weight of the batch to get a cost per kg that the main recipes can use.
The trap is dividing by the input weight. A sauce that starts as 6 kg of ingredients and simmers down to 4 kg has concentrated its cost into fewer kilograms. Divide by 6 and every dish that uses the sauce is under-costed by a third. The worked example below shows the difference in pounds and pence.
Sub-recipes can nest: a curry base may use a spice mix which is itself a sub-recipe. That is fine, as long as each layer is costed by finished weight and a price change at the bottom flows all the way up. Doing that by hand is the main reason spreadsheets fall over; it is also exactly what master recipes in Recipee are for.
Step 4: Recipe cost and cost per portion
List every ingredient in the main recipe with the usable quantity it needs and multiply by the usable cost per unit from steps 1 to 3. Add the lines up for the batch cost, then divide by the number of portions the batch actually yields.
Two details matter here:
- Use real portion counts. If the recipe says ten portions but the kitchen gets nine plates from it, cost it at nine.
- Do not skip the small stuff. Oil, salt, garnish and spices look trivial per portion, but across a menu they add up to a few percent of food cost. Cost them, even if the line reads £0.01.
Step 5: Packaging and other per-unit costs
For anything sold in a container, packaging is part of the cost of goods. Add the container, lid, label, sleeve and any share of a carrier bag or shipping box, each costed the same way as an ingredient (case price ÷ units per case).
Some businesses also add other per-unit costs at this stage: a delivery cost per order spread over the items in it, card processing fees, or a marketplace commission. Keep these separate from ingredients in your records so you can still see the food cost on its own.
Step 6: Food cost %, gross profit and selling price
With a total cost per unit in hand, three numbers describe the margin:
| Measure | Formula | What it tells you |
|---|---|---|
| Food cost % | cost ÷ price (ex-VAT) | The share of each sale spent on ingredients and packaging |
| Gross profit (GP) | price (ex-VAT) − cost | The cash left to pay wages, rent and everything else |
| GP % | (price − cost) ÷ price | The same thing as a percentage; GP% = 100% − food cost% |
To set a price from a target food cost, turn the first formula round:
Price ex-VAT = total cost ÷ target food-cost fraction
A unit that costs £2.00 with a 30% target is priced at £2.00 ÷ 0.30 = £6.67 ex-VAT. If the item is standard-rated, add 20% VAT for the menu price (£8.00), then round to something a customer will recognise. Finally, check the margin at the rounded price, because the rounding moves it.
Worked example: chicken curry, batch of 10
A takeaway and meal-prep kitchen makes chicken curry with rice in batches of ten portions, sold in a container. All prices are ex-VAT and include delivery.
The sub-recipe: curry base (makes 4.0 kg finished)
| Ingredient | Usable qty | Usable cost | Line cost |
|---|---|---|---|
| Onions, peeled (£0.90/kg ÷ 0.88 yield) | 2.000 kg | £1.02/kg | £2.04 |
| Chopped tomatoes (12 × 400 g at £7.20) | 2.000 kg | £1.50/kg | £3.00 |
| Garlic & ginger paste | 0.200 kg | £4.20/kg | £0.84 |
| Rapeseed oil (10 L at £15.00) | 0.200 L | £1.50/L | £0.30 |
| Spice mix (500 g at £8.40) | 0.080 kg | £16.80/kg | £1.34 |
| Water | 1.500 kg | £0.00 | £0.00 |
| Batch total | 5.980 kg in | £7.52 |
After simmering, the batch weighs 4.0 kg. Cost per kg of finished base = £7.52 ÷ 4.0 = £1.88 per kg. Had we divided by the 5.98 kg that went in, we would have recorded £1.26 per kg and under-costed every curry by a third.
The main recipe: chicken curry with rice (10 portions)
| Ingredient | Usable qty | Usable cost | Line cost |
|---|---|---|---|
| Chicken thigh, boneless (2.5 kg at £13.75) | 2.000 kg | £5.50/kg | £11.00 |
| Curry base (sub-recipe) | 1.500 kg | £1.88/kg | £2.82 |
| Onions, peeled | 0.800 kg | £1.02/kg | £0.82 |
| Rapeseed oil | 0.100 L | £1.50/L | £0.15 |
| Fresh coriander (100 g at £1.20) | 0.050 kg | £12.00/kg | £0.60 |
| Spice mix | 0.030 kg | £16.80/kg | £0.50 |
| Basmati rice, dry (20 kg at £22.00) | 0.800 kg | £1.10/kg | £0.88 |
| Salt (1.5 kg at £0.80) | 0.020 kg | £0.53/kg | £0.01 |
| Batch total | £16.78 |
Food cost per portion = £16.78 ÷ 10 = £1.68.
Packaging and pricing
| Item | Per unit |
|---|---|
| Food cost per portion | £1.68 |
| Container and lid | £0.22 |
| Label | £0.04 |
| Share of carrier bag | £0.03 |
| Total cost per unit | £1.97 |
With a target cost of goods of 32%, the price ex-VAT is £1.97 ÷ 0.32 = £6.16. Adding 20% VAT gives £7.39, which the kitchen rounds to a £7.50 menu price. Checking the margin at that price:
- Price ex-VAT = £7.50 ÷ 1.20 = £6.25
- Gross profit = £6.25 − £1.97 = £4.28 per portion
- GP% = £4.28 ÷ £6.25 = 68.5%, so the food and packaging cost is 31.5%
What a price rise does. If chicken thigh rises 10% to £6.05 per kg, the chicken line becomes £12.10, the batch £17.88 and the portion £1.79. Total cost per unit is £2.08, GP drops to £4.17 and GP% to 66.7%. The dish is still profitable, but the kitchen now knows that by the numbers rather than by feel.
Keeping costs current
The costing above is correct on the day it was done. Supplier prices move weekly, and every change should flow through the ingredient, into every sub-recipe that uses it, and into every dish that uses those sub-recipes. In a spreadsheet that means finding every cell by hand, which is why most kitchens re-cost quarterly at best and price from stale numbers in between.
The practical fix is to store recipes against supplier prices rather than typed-in costs, so a price update cascades automatically. Recipee works this way: change a supplier price once and every portion cost, margin and production pack that depends on it is already updated. Whatever tool you use, the rule is the same: one price, stored once, used everywhere.
Common mistakes
- Costing from the catalogue price instead of the invoice, and missing delivery charges and price changes.
- Ignoring yield, so whole vegetables, bone-in meat and fish are costed as if nothing was thrown away.
- Dividing sub-recipes by input weight rather than finished weight.
- Guessing the portion count from the recipe card instead of counting plates.
- Leaving out packaging, garnish and oil because each one is small.
- Comparing an ex-VAT cost with a VAT-inclusive price, which flatters the margin by a sixth on standard-rated items.
- Never re-costing, so the menu is priced on last year's invoices.
If you want to see what fixing these is worth to your business, the ROI calculator estimates recovered margin from live costing. And if you are a new food business, the Food Startup Incubator tier gives you Recipee costing free of charge.