Fixed costs, staff costs and target margin
All plans
Set up your monthly expenses, production team and target margin so that the recipe costing and the recommended price reflect reality.
What it is for
A cake doesn’t only cost what its ingredients cost. While it is being made, the bakery pays rent, electricity, insurance and the wages of whoever makes it. If those expenses don’t go into the cost, you end up selling below what it costs you without realising.
The Fixed and operating costs screen collects those expenses once, and Recipok spreads them across your recipes according to the minutes of work each one takes. In addition, the Target margin tab tells you what percentage to add on top of the cost to cover selling, the unexpected and your profit. It is used by the owner or the administrator.
Before you start
- You need to be the account administrator.
- Have the bakery’s monthly expenses to hand and, for each production person, their hours per month and their gross hourly wage.
- The screen is in General settings › Fixed and operating costs. It has three tabs: Target margin, Personnel costs and Fixed costs. Fill in the last two first.
Personnel costs
The Production team table lists the people who make the products. Click Add member to add someone: it can be a Recipok Registered user or a Custom member (someone who doesn’t use the app).
- For each member, enter the Hours/month and the Salary/hour; the Salary/month is calculated.
- The hours and salary of a registered user are edited on their profile, in General settings › Users (the Edit in Users section button). See Users and roles.
- At the bottom you see the Total hours/month and the Total salaries/month. Click Save changes.
Only include the people who produce. The team’s total hours are also what the fixed costs are divided by: if you have too many or too few hours, each recipe’s overheads come out wrong.
Fixed costs
In the Monthly fixed costs table, click Add cost and type the Description (Rent, Electricity, Insurance…), the Monthly amount and, if you like, a Category. With the Categories button you create your own (Premises, Energy, Other). Categories appear in each recipe’s cost report; keep them few and clear. Click Save.
| Description | Monthly amount | Category |
|---|---|---|
| Bakery rent | €900.00 | Premises |
| Electricity and gas | €550.00 | Energy |
| Insurance and accountant | €250.00 | Other |
| 2Monthly total | €1,700.00 |
- 1One item per line, with its monthly amount.
- 2This total, divided by the team’s hours, is what each minute of work adds to a recipe as overheads.
With €1,700 a month and a team working 340 hours, each hour of work carries €5.00 of overheads: the cheesecake, with 25 minutes of handling, adds €2.08. We explain how it goes into the cost in Recipe costing.
Target margin
This tab measures your recipes and recommends what percentage to add on top of the cost. It needs at least 3 finished recipes (with cost, time and selling price).
How you sell
Recipok works it out from your prices (retail price only: shop; wholesale only: bakery; both: mixed). Change it if it doesn’t fit: it sets the food cost benchmark for your sector.
Selling costs
What it costs to sell rather than to produce: shop wages, lighting in the shop, delivery, commissions. Use Add another concept. Recipok works out what share of your sales the shop takes.
Monthly sales
Your Total monthly sales (excluding VAT) for a normal month, or click “I would rather give the twelve months and let you average them” if your business is seasonal.
Profit and cushion
Adjust the Target profit and the Safety margin (waste, breakages, unsold goods, discounts). If you don’t know, a 5% cushion is a sensible starting point.
Save and apply
Click Save and apply to my recipes. Recipes without their own percentage receive it as a suggestion; the rest show the Apply to this recipe button. The margin column in Recipes and formulas is then measured against this target.
You will also see: Your margin at a glance (what you add today, our recommendation and your food cost), Result of an average month (with the warning “You are working at a loss.” if that is the case), the Break-even point, the Composition of your production cost and the Monthly evolution, with a snapshot on the 1st of every month. The measurement is kept for a day; click Recalculate if you have changed recipes.
If a recipe has an impossible margin (usually a batch price entered as a unit price), Recipok flags it. Correct it and click I have fixed them, recalculate.
Tips
- Review these amounts when something big changes: a rent increase, a new hire, the electricity bill.
- With everything set up, go to Selling price and margins to set your retail prices.