Every term here comes with a worked example, because a definition you cannot apply to a cake is not much use. Terms are grouped by what they are for rather than alphabetically, so related ideas sit together.
Jump to: costing · pricing · stock · money and bookkeeping
Costing terms
Cost price
What it costs you to make one of something, before any profit. For a cake it is ingredients + packaging + labour + a share of overhead. A cake whose ingredients come to $19, box and board to $5, and 3 hours of labour at $25 has a cost price of $99 before overhead.
Recipe yield
What one batch of a recipe produces, stated in a unit you can measure: servings, weight, or a piece count. The single most useful number in a bakery's costing, because every other per-unit figure divides by it. A vanilla batter recipe that yields 4,000 g, not "about 3 cakes".
Cost per gram
A recipe's cost divided by the grams it yields. Lets you cost any cake made from that batch, at any size, without recalculating the recipe. A $45 batch yielding 4,000 g is $0.01125 per gram.
Cost per serving
A product's cost price divided by the servings it gives. The figure to compare against a per-serving price. A cake costing $134 that serves 48 is $2.80 per serving.
Cost per piece
The same idea for things counted rather than weighed. A $44.50 cookie batch yielding 40 cookies is $1.11 a cookie.
Amount used
The quantity of a recipe a product actually consumes, in the recipe's own unit — the number that replaces guessing a fraction. A 9" tin takes 950 g of a 4,000 g batch, so that line costs $10.69 — not "about an eighth".
Sub-recipe
A recipe used as an ingredient inside another recipe, so a base sponge or a buttercream is costed once and reused. 450 g of a 2,000 g buttercream batch that cost $12 rolls in as $2.70.
Mould (or tin) weight
How many grams of batter a particular pan holds. Saved once, it turns a tin size into a cost. 9" round = 950 g; loaf tin = 800 g.
Batch cost
The total cost of making one full batch of a recipe — the numerator of every per-unit figure above.
Labour cost
Your time, or an employee's, priced at a rate per hour and counted honestly: mixing, waiting, decorating, washing up, packing and driving. Leaving it out is the most common reason a full diary does not produce an income.
Overhead (indirect cost)
Costs that exist whether or not you bake today — rent, insurance, power, software, website, licences. Allocated to products by dividing the monthly total by the units you make in a month. $900 a month over 60 cakes is $15 a cake.
Waste / wastage
Ingredients and product that never reach a paying customer: trimmings, failed bakes, split buttercream, expired stock. Usually 3–8% of ingredient cost and genuinely part of the cost of the things you do sell.
Shrinkage
Stock that disappears without a sale — breakage, theft, spoilage, over-portioning. Measured as the gap between what your records say you hold and what a count finds.
Yield loss
The share of a raw ingredient that does not end up in the product: trimmed cake, peel, evaporation during a bake. A recipe costed on raw input weight without yield loss understates its true cost.
Pricing terms
Sell price (retail price)
What the customer pays before discount and tax.
Markup
The percentage added to cost. Cost $100 with a 70% markup is a $170 price.
Margin (gross margin)
Profit as a percentage of the price. A $170 price on a $100 cost is a 41% margin. Markup and margin are different numbers for the same cake and confusing them is the commonest pricing mistake in baking.
Margin formula
price = cost ÷ (1 − margin). A $2.80 cost per serving at a 70% target margin gives 2.80 ÷ 0.30 = $9.33 a serving.
Food cost percentage
Ingredient (or total) cost as a percentage of the price — the same information as margin, from the other side. A 30% food cost is a 70% margin.
Multiplier
The shortcut version of the margin formula: 1 ÷ (1 − margin). A 70% margin is × 3.33; a 75% margin is × 4.00.
Price basis
The unit you quote in: flat price, per serving, per kilo, or per unit/dozen. $30/kg × 2.5 kg = $75.
Per-serving pricing
Rate × servings. The norm for US and Canadian wedding and custom cakes. Requires a defensible serving count — see the cake serving size chart.
Per-kilo pricing
Rate × weight. The norm across most of Europe, Asia, the Middle East and Latin America.
Complexity tier
A named multiplier applied to a per-serving rate to price the hours a design takes rather than the batter it uses. Simple ×1.0, Detailed ×1.5, Intricate ×2.0, Showpiece ×3.0.
Minimum order
The smallest order you will accept, as a value or a serving count. Protects the fixed time in every order — the enquiry, the quote, the setup, the wash-up — which does not shrink with the cake.
Deposit
A part payment taken to secure a date, usually non-refundable and typically 25–50%. It books the slot; it is not a discount on the cake.
Break-even price
The price at which an order makes exactly nothing. Below it you are paying for the privilege of baking. Worth knowing before you negotiate, not after.
Stock and inventory terms
Stock on hand
How much of an ingredient or supply you hold right now, in that item's own unit — grams, millilitres, pieces.
Par stock (par level)
The level you want an item kept at, so a purchase order can be generated as the difference between par and what you hold. Par 10 kg of flour, 3 kg on hand → order 7 kg.
Reorder point
The stock level that should trigger a purchase, set to cover the time a delivery takes plus a buffer.
Days of cover
How long your remaining stock will last at your recent rate of use — a threshold that works for grams and eggs alike, where "warn me under 10" does not. 2 kg of butter with 150 g a day of recent use is about 13 days of cover.
Stock-out
Running out of something you needed. The expensive kind is discovered mid-bake.
Money and bookkeeping terms
COGS (cost of goods sold)
The direct cost of everything you actually sold in a period — ingredients, packaging, and usually direct labour. Revenue − COGS = gross profit.
Gross profit
Revenue minus COGS, before overhead. What the baking itself earns.
Net profit
What is left after overhead, fees and tax. The number that tells you whether the business works.
Processor fee
What a card or payment platform keeps, typically 1.5–3.5% plus a fixed amount per transaction. Charged on the whole order including tax, which is why it is bigger than it looks.
Surcharge
A fee added to a customer's bill to recover a card cost. It is a fee, not a tax — it is usually part of your taxable revenue, and some jurisdictions restrict or prohibit it. Check locally before adding one.
Tax-inclusive vs tax-exclusive
Whether your displayed price already contains tax (inclusive, the norm in the UK, EU, Australia and much of Asia) or has tax added at checkout (exclusive, the norm in the US and Canada). Getting this backwards moves every price on your menu.
Frequently asked questions
What is the difference between margin and markup?
Markup is a percentage of cost; margin is a percentage of price. A 70% markup on a $100 cost gives a $170 price, which is a 41% margin. They describe the same cake with different numbers, so a baker aiming at "70%" needs to know which one they mean.
How do you calculate cost per serving for a cake?
Divide the product's full cost price — ingredients, packaging, labour and a share of overhead — by the number of servings it gives. A $134 cake serving 48 people costs $2.80 a serving.
What does recipe yield mean in baking?
What one batch produces, stated in a measurable unit: servings, a weight such as 4,000 g, or a piece count such as 40 cookies. Every per-unit cost in a bakery is the batch cost divided by its yield.
What is a good food cost percentage for a bakery?
Around 30% is the figure most often used for custom cake work, which is the same as a 70% gross margin. Retail counter products commonly run higher, and high-design work can run lower.
What is par stock in a bakery?
The level you want an item kept at. A purchase order becomes the gap between par and stock on hand — par 10 kg of flour with 3 kg on hand means order 7 kg.
Is a card surcharge a tax?
No. It is a fee you add to recover a processing cost, it is normally part of your taxable revenue rather than a tax you collect, and some jurisdictions restrict or prohibit it. Treating it as a tax misstates both your revenue and your tax return.
Working through these on your own numbers? Bake Boost does the costing and the pricing maths from your real ingredient prices — see costing by the gram and pricing by the slice, or the full method in how much should you charge for a cake.