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HOW DO I PRICE MY PRODUCTS? | breaking down costs of goods using excel | soap business

Jerika Zimmerman・16 minutes read

Calculating the Cost of Goods (COGs) is crucial for businesses to set prices that cover expenses and generate profit. It involves tracking material costs, recipes, and pricing strategies to ensure sustainability and business growth.

Insights

  • Calculating the Cost of Goods (COGs) is vital for businesses as it helps determine total expenses, including materials, time, and utilities, necessary for setting appropriate product prices to ensure profitability.
  • Pricing soap products requires careful consideration of factors like material costs, production time, and pricing strategies to set retail prices at least four times the production cost to cover all expenses, including hidden costs, ensure profitability, and support business growth.

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Recent questions

  • What is the importance of calculating Cost of Goods (COGs)?

    Calculating COGs is crucial for businesses to determine the total expenses incurred in making products, including materials, time, and utilities. This calculation helps in setting appropriate product prices to cover expenses and generate profit.

  • What are the key pieces of information needed to calculate COGs accurately?

    To calculate COGs accurately, four key pieces of information are needed: material cost, amount purchased, amount used in the recipe, and the number of units produced.

  • How can software assist in tracking and calculating COGs for soap making?

    Software like Soap Maker 3 for PCs or Excel spreadsheets for Mac users can help track and calculate COGs efficiently. Excel spreadsheets can organize material costs, recipes, and calculate the cost per gram or kilogram for each ingredient.

  • What is the pricing strategy for soap products based on COGs calculation?

    Pricing strategies for soap products often involve multiplying the cost per bar by a factor like four to set a retail price, ensuring profitability and covering business expenses. Wholesale customers expect a price around 50% off retail, so it's crucial to price your products at least four times the production cost to account for your time, value as an artisan, hidden costs, and ensure a sustainable profit and business growth.

  • What materials should be included in the COGs calculation for soap making?

    For soap making, all materials used in the process, such as oils, butters, colorants, and additives, must be included in the COGs calculation. This ensures a comprehensive calculation of all expenses incurred in the production process.

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Summary

00:00

Determining Soap Making Costs and Pricing Efficiently

  • Cost of goods (COGs) is crucial for businesses to determine the total expenses incurred in making products, including materials, time, and utilities.
  • COGs calculation is essential for setting appropriate product prices to cover expenses and generate profit.
  • COGs primarily focuses on material costs for simplicity, but other expenses like time and utilities can be included for a comprehensive calculation.
  • To calculate COGs accurately, four key pieces of information are needed: material cost, amount purchased, amount used in the recipe, and the number of units produced.
  • For soap making, all materials used in the process, such as oils, butters, colorants, and additives, must be included in the COGs calculation.
  • Software like Soap Maker 3 for PCs or Excel spreadsheets for Mac users can help track and calculate COGs efficiently.
  • Excel spreadsheets can organize material costs, recipes, and calculate the cost per gram or kilogram for each ingredient.
  • Creating separate tabs for material costs and recipes in Excel allows for easy updating and referencing of data.
  • Calculating the cost per bar of soap involves determining the total recipe cost and dividing it by the number of bars produced.
  • Pricing strategies for soap products often involve multiplying the cost per bar by a factor like four to set a retail price, ensuring profitability and covering business expenses.

15:00

"Wholesale Pricing Strategy for Artisans"

  • Wholesale customers expect a price around 50% off retail, so it's crucial to price your products at least four times the production cost to account for your time, value as an artisan, hidden costs, and ensure a sustainable profit and business growth.
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