Start with the portions you can sell
Suppose ingredients for a batch cost £40 and it makes 10 portions. Without waste, ingredients cost £4 per portion. If two portions are wasted, only eight are sold: £40 ÷ 8 = £5 of ingredients per sold portion. Adding £0.50 packaging for each sale makes the cost £5.50 per sold portion. These are illustrative figures, not industry benchmarks.
The calculation assumes packaging is used only on sold portions. If you pack portions before they are wasted, include the wasted packaging in the batch cost instead. Do not charge the same packaging twice.
Why adding 20% to the cost gives the wrong answer
Twenty per cent of the ten portions made is wasted, leaving 80% for sale. The cost adjustment is division by 0.80, not multiplication by 1.20. Ingredients rise from £4 to £5 per sold portion, a 25% increase. Simply adding 20% would give £4.80 and leave some batch cost uncovered.
General formula: cost per sold portion = batch ingredient cost ÷ [portions made × (1 − waste percentage ÷ 100)] + packaging per sold portion.
See what the change does to your margin
Assume a customer price of £20 and an explicitly assumed sales VAT rate of 20%. The sale before VAT is £16.6667. At £4.50 cost (£4 ingredients plus £0.50 packaging), GP is £12.1667 and GP margin is 73%. At the waste-adjusted £5.50 cost, GP is £11.1667 and GP margin is 67%.
For a comparison holding sales at 100 portions, the £1 extra cost reduces gross profit by £100. This is not a sales forecast or a calculation of net business profit. Rent, wages and expenses outside the entered cost still need to be paid.
Turn it into a price test
For an illustrative target of 70% GP and the same assumed 20% sales VAT, £5.50 cost gives a customer price of £22: £5.50 ÷ 0.30 × 1.20. With £4.50 cost it gives £18. Neither price nor target is a recommendation. Test customer demand and the remaining expenses your gross profit must cover.
Open the calculator, expand Help me work out the portion cost, and enter batch 40, portions 10, waste 20 and packaging 0.50. Choose Use this portion cost. Then compare potential customer prices before making a decision.
Measure the right kind of waste
This calculator’s waste input means unsold or wasted portions. It does not model cooking shrinkage or the difference between purchased and usable ingredient weight. If your recipe already costs the usable cooked yield, keep that yield in the recipe calculation and do not add it again as portion waste.
Track what was made, what was sold and what was discarded across a useful period. Use a measured assumption for future batches and revisit it when recipes or sales patterns change. WRAP’s hospitality resources provide broader guidance on measuring and reducing food waste.
Keep VAT and cost scope consistent
Exclude recoverable purchase VAT from costs and include purchase VAT you cannot recover. Choose the sales VAT rate applicable to the specific sale; the 20% above is only an arithmetic assumption. The calculator does not classify food for tax purposes. Label whether your portion cost includes packaging and other chosen direct costs so comparisons answer the same question.
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.
Open GP Calculator UK →