The Complete Guide to Recipe Costing for Artisan Makers
Published 22 February 2026 · Last reviewed 15 March 2026
You're probably undercharging — here's how to find out
Most artisan makers set prices by gut feel. They add up a few ingredients, double the number, and hope for the best. The result: margins that look healthy on paper but vanish once you account for packaging, platform fees, market stall costs, and the three hours you spent labelling jars on a Sunday evening.
Recipe costing fixes this. It gives you a real number — the true cost of producing one unit of your product — so you can price with confidence instead of crossed fingers.
This guide walks through the full process: the COGS formula, a step-by-step costing method, and the hidden costs most makers miss.
What COGS actually means for a maker
COGS stands for Cost of Goods Sold. The standard accounting formula is:
Beginning Inventory + Purchases − Ending Inventory = COGS
That works for accountants filing year-end returns, but it doesn't help you price a batch of soy candles or a tray of brownies. For artisan producers, the more useful version is per-unit production cost — what it actually costs to make one candle, one soap bar, or one jar of chutney.
Your per-unit cost breaks into three layers:
- Direct materials — every ingredient and component that goes into the product
- Direct labour — the time you spend making it (yes, your time has a cost)
- Production overheads — everything else: packaging, energy, equipment wear, platform fees
Add all three, divide by your batch yield, and you have your true cost per unit.
Step 1: List every ingredient with its real unit price
Start with one recipe. Write down every ingredient, the quantity used per batch, and what you paid for it.
The trap here is using the price you think you paid rather than the price you actually paid. Pull up your last supplier invoice. Prices change, and the difference between £4.50/kg and £5.20/kg of fragrance oil compounds across hundreds of candles.
Example — Lavender Soy Candle (batch of 24):
| Ingredient | Quantity per batch | Unit price | Batch cost |
|---|---|---|---|
| Soy wax (Golden 464) | 6 kg | £3.80/kg | £22.80 |
| Fragrance oil (lavender) | 600 ml | £12.00/litre | £7.20 |
| Cotton wicks (CD 18) | 24 | £0.08 each | £1.92 |
| Glass jars (200 ml) | 24 | £0.95 each | £22.80 |
| Warning labels (CLP) | 24 | £0.04 each | £0.96 |
| Dust caps | 24 | £0.03 each | £0.72 |
| Total materials | £56.40 |
Materials cost per candle: £56.40 ÷ 24 = £2.35
Step 2: Add your labour cost
Your time is not free. If you wouldn't do this work unpaid for someone else, it has a value.
Pick an hourly rate. A reasonable starting point for a UK sole trader in 2026 is £12–£18/hour — roughly what you'd pay a skilled part-time assistant. You can adjust upward as the business grows, but start honest.
Time the full production cycle once: weighing, melting, mixing, pouring, curing, labelling, packing. Include cleanup. Most makers underestimate this by 30–50% because they don't count setup and cleanup separately.
Example continued:
| Task | Time | Rate | Cost |
|---|---|---|---|
| Prep + weigh ingredients | 20 min | £15/hr | £5.00 |
| Melt, mix, pour | 45 min | £15/hr | £11.25 |
| Cure + demould (hands-off but uses space) | 5 min active | £15/hr | £1.25 |
| Label + pack | 30 min | £15/hr | £7.50 |
| Cleanup | 15 min | £15/hr | £3.75 |
| Total labour | 1 hr 55 min | £28.75 |
Labour cost per candle: £28.75 ÷ 24 = £1.20
Step 3: Account for overheads (the costs makers forget)
This is where most recipe costings fall apart. Direct materials and labour are obvious. Overheads are invisible — until they eat your margin.
Fixed overheads (spread across all products monthly):
- Kitchen/workshop rent or home-use portion
- Insurance (product liability, public liability)
- Equipment depreciation (wax melter, scales, moulds — divide purchase price by expected lifespan in months)
- Software and subscriptions
Variable overheads (tied to each batch or sale):
- Energy (gas/electric for melting, oven time, curing space heating)
- Packaging beyond the product itself (tissue paper, boxes, branded stickers)
- Platform fees: Etsy charges a £0.15 listing fee + 6.5% transaction fee + 4% + £0.20 payment processing on UK sales
- Postage and packing materials for online orders
- Market stall fees (if selling in person — divide by typical units sold per market)
- Waste and failed batches (a 5–10% waste allowance is realistic)
Example continued:
| Overhead | Monthly cost | Per-candle allocation |
|---|---|---|
| Workshop portion | £80/mo ÷ ~200 units/mo | £0.40 |
| Insurance | £25/mo ÷ ~200 units/mo | £0.13 |
| Equipment depreciation | £15/mo ÷ ~200 units/mo | £0.08 |
| Energy per batch | £2.50 ÷ 24 | £0.10 |
| Outer packaging | — | £0.35 |
| Waste allowance (5%) | — | £0.18 |
| Total overheads per candle | £1.24 |
Step 4: Calculate your true cost per unit
Add the three layers together:
| Cost layer | Per candle |
|---|---|
| Direct materials | £2.35 |
| Direct labour | £1.20 |
| Production overheads | £1.24 |
| True cost per unit | £4.79 |
If you were only counting ingredients (£2.35), you'd think a £7.50 selling price gives you 69% margin. The real margin at £7.50 is 36%. Still healthy for a candle — but very different from what the ingredient-only number suggested.
Step 5: Price for profit (not just survival)
Your selling price must cover:
- True production cost (£4.79 in the example above)
- Sales channel fees (Etsy's 6.5% + 4% + £0.20 + £0.15, or market stall fee per unit)
- Your profit margin (what's left after everything)
A common pricing formula for artisan products:
Selling price = True cost per unit ÷ (1 − target margin − channel fee rate)
If you want a 40% gross margin and sell on Etsy (roughly 11% in fees):
£4.79 ÷ (1 − 0.40 − 0.11) = £4.79 ÷ 0.49 = £9.78
Round to £9.95 or £10.00. That's your floor price — below this, you're losing money once everything is counted.
For wholesale, the maths changes. Wholesale buyers typically expect 40–50% off retail, so your retail price needs room. If wholesale is part of your plan, cost your recipes before committing to a wholesale price — not after.
The costs that catch makers out
After working through this method, most makers discover the same surprises:
- Platform fees are larger than expected. Etsy's combined fees (listing + transaction + payment processing + offsite ads if enabled) can total 12–15% of the selling price. Factor these in per unit, not as a vague "they take a cut."
- Labour is real. A batch of 48 soap bars that takes 3 hours to produce, label, and pack costs £45 in labour at £15/hour — nearly £1 per bar before a single ingredient is counted.
- Packaging adds up fast. A branded box, tissue paper, thank-you card, and outer mailer can easily cost £1.00–£1.50 per unit. That's often more than the fragrance oil.
- Small batches are expensive. Cleanup time, equipment setup, and minimum ingredient quantities mean a batch of 12 costs nearly as much in time as a batch of 24. Doubling your batch size doesn't double your labour.
How to keep your costings accurate
Recipe costing isn't a one-time exercise. Ingredient prices shift, suppliers change, and your process gets faster (or slower) as you add products. Review costings:
- When any ingredient price changes by more than 10%
- When you change suppliers (different unit sizes, shipping costs)
- Quarterly as a general check — even if nothing obvious has changed
- Before accepting a wholesale enquiry — wholesale margins are thinner, so your numbers need to be current
Keep your costings in a format you'll actually update. A spreadsheet works for 5–10 recipes. Beyond that, the formulas get unwieldy and mistakes creep in — missed ingredients, outdated prices, wrong batch sizes. For guidance on what to look for in a dedicated tool, see How to Choose Recipe Costing Software as an Artisan Maker.
Recipe costing checklist
- Every ingredient listed with current supplier price
- Labour time measured (not estimated) at least once
- Overhead allocation calculated monthly
- Platform/channel fees included per unit
- Waste allowance (5–10%) added
- Price tested against target margin
- Costings reviewed within the last 3 months
Practical takeaway
Pick one product — your best seller. Run through the five steps above with real numbers from your last supplier invoice and an honest time estimate — or use our Recipe Cost Calculator to do the maths for you. Compare the true cost per unit to your current selling price.
If the margin is thinner than you expected, you have three levers: raise prices, reduce ingredient cost (larger supplier quantities, alternative sources), or increase batch size to spread labour and overhead across more units.
This guide applies to UK artisan producers — sole traders and micro-businesses selling handmade products via Etsy, Shopify, markets, and small wholesale accounts. It is not financial advice. For tax-specific questions about COGS reporting, consult a qualified accountant.