BAKERY PRICING GUIDE
What is the difference between margin and markup?
Gross margin divides profit by selling price; markup divides profit by cost. For a target gross margin, divide cost by one minus the margin rate. For a cost markup, multiply cost by one plus the markup rate. Never switch between the two without changing the formula.
Use one cost base
Suppose ingredients, labor, packaging, and other costs total $40 for a decorated order. Decide whether your target is a percentage of the selling price or a percentage of the cost.
Compare the two answers
At a 25% gross-margin target, $40 ÷ 0.75 is about $53.3333, rounded up to $53.34. At a 25% markup on cost, $40 × 1.25 is $50.00. The margin-based quote is $3.34 higher.
See what the markup actually earns
A $50.00 quote on $40 of entered costs leaves $10. Dividing $10 by the $50 selling price gives 20% margin, not 25%. A 25% margin corresponds to about 33.33% markup on those costs.
Check the rounded result
At $53.34, the margin on the entered $40 is ($53.34 − $40) ÷ $53.34, just over 25% because the quote was rounded up. Costs omitted from the $40 base reduce the actual margin.
Use the same definition every time
If you compare two recipes, include the same categories of labor, packaging, and other order costs in both. This worksheet margin is not a complete business profit measure because overhead, tax, fees, and unsold products may sit outside the entered cost.
Try the numbers from your own order
A worked example is only a starting point. Enter your actual package prices, recipe amounts, and time.
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