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Recipe Costing Fundamentals: How to Calculate the True Cost of Every Dish

A recipe without a cost is just a list of ingredients. Here's the step-by-step method for calculating the true cost of a dish — from yield factors to net and gross selling price.

iP
iCOST PRO TEAM
Recipe Costing Lead, iCOST PRO
June 7, 2026 8 min read
Recipe Costing Fundamentals: How to Calculate the True Cost of Every Dish

A recipe is not a cost — until you make it one

Every dish on your menu started as a recipe: a list of ingredients and quantities. But a recipe alone tells you nothing about profitability. To understand whether a dish makes money, you need to turn that recipe into a costed recipe — and then into a priced dish.

Step 1: Cost every ingredient per unit

Start with your supplier invoices. For each ingredient, calculate the cost per usable unit — not per purchased unit. A 5 kg bag of flour doesn't give you 5 kg of usable flour; there's always loss.

This is where yield factors come in:

  • A whole fish yields roughly 40–50% of fillets
  • Onions lose ~20% when peeled and trimmed
  • A bunch of herbs yields 60–70% usable leaves

If you cost at purchased weight, you're under-costing every recipe that uses that ingredient.

Step 2: Build the recipe cost

For each ingredient in the recipe:

Ingredient cost = (Quantity used × Cost per usable unit)

Sum all ingredient costs to get the total recipe cost. Divide by the number of portions to get the cost per portion.

Step 3: Calculate your margins

Once you have the cost per portion, the math is straightforward:

  • Selling price (net) = the price before VAT
  • Selling price (gross) = the price including VAT
  • Food cost % = (Cost per portion ÷ Net selling price) × 100
  • Gross profit margin % = 100 − Food cost %

Step 4: Set — or verify — your selling price

Most operators target a food cost percentage of 28–35%. But the real question isn't "what should my food cost be?" — it's "what selling price gives me the margin I need?"

A recommended selling price works backwards from your target margin:

Recommended price = Cost per portion ÷ Target food cost %

The automation advantage: When every ingredient has a tracked cost, updating a single supplier price should recalculate every recipe — and every menu margin — instantly. If you're still doing this manually, you're always working with yesterday's numbers.


Recipe costing isn't a one-time exercise. It's a living system that keeps your menu profitable every single day.

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See iCOST PRO in action. Book a free demo and discover how easy cost control can be.

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