Start with the cost change per sold portion
Assume a menu item currently costs £3.00 per sold portion and sells for £12.00. Updated recipe costing raises that portion cost to £3.60. These are illustrative figures, with the same ingredients and chosen direct costs included before and after the change. No further wastage adjustment is needed.
The example explicitly assumes 20% sales VAT throughout. That is an arithmetic assumption, not a tax classification of the item. Costs exclude recoverable purchase VAT and include non-recoverable VAT.
Recalculate the recipe from actual quantities and current supplier prices. A percentage increase on one ingredient is not necessarily the percentage increase on the whole dish.
See what happens if the menu price stays unchanged
Net sale = customer price ÷ (1 + VAT percentage ÷ 100). At the assumed rate, £12.00 ÷ 1.20 = £10.00 before VAT.
Originally, gross profit was £10.00 − £3.00 = £7.00 per sale. GP margin was £7.00 ÷ £10.00 × 100 = 70%.
With the new £3.60 cost and the same menu price, gross profit becomes £6.40 and GP margin becomes 64%. The cost rise removes £0.60 of gross profit from each sale. The original 70% is simply this example’s starting position, not a recommended target.
Option one: restore gross profit pounds per portion
To restore the original £7.00 gross profit, add the new cost to that amount: £3.60 + £7.00 = £10.60 required net sale. With the assumed 20% VAT, the customer price becomes £10.60 × 1.20 = £12.72.
General formula: customer price preserving GP pounds = (new portion cost + previous GP pounds) × (1 + VAT percentage ÷ 100).
This price restores £7.00 gross profit per sale, but GP margin is now £7.00 ÷ £10.60 × 100 = approximately 66.04%. Preserving pounds per portion does not preserve the percentage.
The required customer-price increase here is £0.72. Simply adding the £0.60 cost rise to the VAT-inclusive price would not restore the full £7.00.
Option two: restore the previous GP percentage
To restore the illustrative 70% GP margin, use: target customer price = cost ÷ (1 − GP percentage ÷ 100) × (1 + VAT percentage ÷ 100).
With the new cost, £3.60 ÷ 0.30 × 1.20 = £14.40. The net sale is £12.00, gross profit is £8.40 and GP margin is 70%.
The two candidate prices therefore answer different questions. At £12.72, you recover the previous £7.00 gross profit per portion. At £14.40, you recover the previous 70% margin and generate £8.40 gross profit per portion. Neither calculation establishes what customers will pay.
Compare sales volume before choosing
A higher gross profit per sale can still produce a lower total if fewer portions sell. Total gross profit for this item equals portions sold × gross profit per portion, assuming the entered unit cost remains valid at that volume.
Compared with the original £7.00 per sale, the £14.40 candidate generates £8.40 per sale. It would need approximately 83.33% of the original sales volume to match the original total gross profit: £7.00 ÷ £8.40. That corresponds to approximately 16.67% fewer sales.
This is a sensitivity calculation, not a demand forecast or a safe allowance for lost customers. Lower sales may also change unsold stock, batch efficiency and other costs. Gross profit still has to cover wages, rent, energy and expenses outside the entered portion cost; it is not net or take-home profit.
Reproduce the comparison in GP Calculator UK
Open the free calculator at / and choose Check my GP. Enter cost 3.60, customer menu price 12.00 and the assumed VAT rate 20. Then test customer prices 12.72 and 14.40, checking both GP pounds and GP percentage.
To reproduce the percentage-based price, choose Find selling price and enter cost 3.60, target GP 70 and VAT 20. If you choose a different final penny price, check that actual price again. The input explanations at /#guide can help you keep the cost basis consistent.
Use the rate applicable to your own sale. HMRC’s catering and takeaway guidance explains the relevant distinctions: https://www.gov.uk/guidance/catering-takeaway-food-and-vat-notice-7091
Purchase VAT recovery has conditions and exceptions, explained by HMRC here: https://www.gov.uk/charge-reclaim-record-vat/reclaim-vat-business-expenses
If you are not adding VAT, enter 0 and include non-recoverable purchase VAT in costs. This guide provides pricing arithmetic, not personalised tax advice.
Sources
Try the tools
Try your own figures
Use the free GP calculator to check selling prices, compare margins and save menu items on your device. Gross profit is before remaining business expenses.
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