Calculate a batch cost you can explain.
Work through material quantities, packaging costs and actual yield to estimate material cost per finished unit.
Define a specific output
Write the recipe for a known output: one kilogram, ten pieces or one batch. Specify each input’s unit and quantity. Treat packaging separately from ingredient mass. Confirm unit conversions before multiplying by a purchase rate.
Add material and packaging cost
For each input, multiply quantity used by cost per unit. Add all input costs and packaging to obtain the batch’s material cost. Keep the method consistent and discuss inventory valuation with your accountant when required.
Divide by actual usable output
Material cost per finished unit = total material and packaging cost ÷ usable output. If a run produces fewer usable units, the same batch cost is spread across fewer units. Record waste and output rather than hiding the difference.
Know what the estimate excludes
Labor, power, rent, transport, taxes and other costs may not be included. A material-cost estimate is not total product cost or net profit. Record the assumptions and add the appropriate costs before setting a selling price.
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