Pricing on a hunch usually means one of two things: leaving money on the table, or losing it slowly without noticing. The fix isn't complicated, but it does mean actually accounting for everything that goes into making a product - not just the obvious material cost.
The workshop we will use as an example
Numbers make this concrete, so everything below is worked through on one business: a candle workshop that produced 1,200 candles last month and sells them at €24. Its books for the month:
| Line | The month | Per candle |
|---|---|---|
| Raw materials consumed | €7,500 | €6.25 |
| Labour (130 hours at €18) | €2,340 | €1.95 |
| Workshop overhead | €1,560 | €1.30 |
| Packaging | €1,680 | €1.40 |
| True cost per candle | €13,080 | €10.90 |
Take that figure apart line by line and you can see where each one comes from, and where each one usually goes wrong.
Materials
Start with the direct cost of every raw material in the recipe or bill of materials, at the price you actually paid - not a round number you remember from a while back. If you buy the same material at different prices over time, use the batch you're actually consuming (FIFO), not a flat average that can drift away from reality.
There are two ways to arrive at the number, and they answer slightly different questions. Add up the recipe (155 g of wax, 15 ml of fragrance, a wick, a jar, a lid) and you get the cost of a perfect candle: €6.10. Take what actually left the shelf over the month and divide by units produced, and you get €6.25 - the difference being everything that spilled, failed or was thrown away.
This line is usually the biggest one, and it has enough detail in it to deserve its own guide: how to calculate direct materials cost covers both formulas, a worked example, and the four mistakes that quietly make the figure wrong.
Packaging
Packaging is a real material cost and belongs in the same calculation as raw materials - the jar, the label, the box, the shipping mailer. It's an easy one to forget because it doesn't feel like "the product," but it's still a cost incurred for every unit made.
The trap here is that packaging is not the same for every sale. A candle handed over at a market stall needs a box and tissue paper. The same candle posted to an online customer needs a mailer, filler and a shipping label on top. If you carry one average packaging cost across every channel, one of them is quietly subsidising the other and you cannot see which.
Cost packaging per channel and the answer changes: the market stall candle might cost €10.40 to put in a customer's hands, the posted one €12.30. Same product, and a sale price that works for one may not work for the other.
Labour
Estimate the time it genuinely takes to produce one unit, and apply a real hourly labour cost to it. This doesn't need to be precise to the second - a reasonable, consistent estimate per product is far more useful than skipping labour cost entirely because it's harder to measure than materials.
Two things people get wrong here.
They time the wrong thing. Pouring one candle takes ninety seconds, and it is tempting to cost ninety seconds. But you do not melt wax for one candle. Time the whole batch, start to finish, including melting, cleaning, curing checks and labelling, then divide by the units it produced. In the example, 130 hours produced 1,200 candles: 6.5 minutes each, not ninety seconds.
They use the wrong hourly rate. If you pay someone €14 an hour, they do not cost you €14 an hour - employer contributions, holiday pay and insurance all sit on top, and in most of Europe that is another 20-30%. If it is your own time and you pay yourself nothing, use what you would have to pay someone to replace you. Otherwise the day you hire, every product you sell becomes unprofitable at once and you will not know why.
Overhead
Rent, utilities, equipment depreciation, insurance - these costs exist whether you make one unit or a thousand, so they need to be allocated across production somehow. A simple approach: divide your monthly overhead by your typical monthly production volume, and apply that per-unit figure consistently.
The word typical is carrying weight in that sentence, because overhead is fixed and the division is not:
| Candles made this month | 600 | 1,200 | 2,400 |
|---|---|---|---|
| Overhead for the month | €1,560 | €1,560 | €1,560 |
| Overhead per candle | €2.60 | €1.30 | €0.65 |
A quiet month makes every product look expensive and a busy one makes them look brilliant, without anything changing on the bench. Pick a normal month and stick with it, then recheck when your volumes genuinely shift - not every time they wobble.
One more boundary worth drawing: manufacturing overhead is what production consumes - workshop rent, power, equipment, cleaning supplies. Your accountant's fee, your website hosting and your advertising are business costs, and folding them in here will make your products look more expensive to make than they are. That can talk you out of products that are perfectly fine.
Waste and loss
Account for the batches that don't come out right, the trims that get discarded, the material lost to spoilage or spillage. If you never track this, your cost calculation is quietly optimistic - real production always has some loss, and ignoring it means underpricing.
But count it once. This is the single most common double-count in product costing. If your materials figure came from what actually left the shelf, waste is already inside it - the €6.25 in the example is €6.10 of recipe plus about 3% that never made it into a jar. Adding a separate waste line on top would charge for it twice.
from actual consumption: €6.25 ← waste already included
Either method is fine. Doing both is not.
Putting it together
Four lines, one number:
= €10.90 per candle
Sold at €24, that leaves €13.10. Which is a comfortable-looking number until you notice how much of it was invisible: a maker who counted only materials would have thought each candle cost €6.10 and pocketed €17.90. The gap between those two beliefs, across 1,200 candles a month, is €5,760.
Margin
Once you have a real total cost, decide your margin deliberately - as a percentage on top of that number - rather than picking a sale price that "feels right" and hoping it covers everything. This is the only way to know in advance whether a price is actually profitable.
price for a 60% margin = 10.90 ÷ (1 - 0.60) = €27.25
Be careful with the word, though: margin and markup are different calculations and mixing them up will underprice you badly. Both are spelled out in the product cost formula reference.
And remember what this number does not yet cover: marketplace commission, payment fees, discounts, returns and the cost of getting anybody to look at your product in the first place. A 54.6% production margin is not 54.6% profit - pricing handmade candles works that gap through in full on the same candle.
Four ways this quietly stops being true
1. The recipe changed and the costing did not
A slightly bigger jar, a little more fragrance, a second label. Each change is too small to prompt anyone to reopen the pricing sheet, and a year later the sheet describes a product you no longer make.
2. Supplier prices moved
The only line that changes without you doing anything. Wax at €8.50/kg in spring and €9.40/kg in autumn is an 11% rise on your largest cost, and nothing about it will announce itself.
3. Unit-of-measure slips
Fragrance bought by the kilogram, dosed by the millilitre. Sheet material bought by the square metre, used by the linear metre. Every conversion is a chance to be out by a factor of ten, and the wrong answer still looks like a plausible number.
4. One product carries the others
Once you cost each product properly rather than averaging across the range, it is common to find one line quietly losing money while a strong seller covers it. That is fine if you chose it. It is expensive if you never knew.
Automatic calculation in Masto Control
Masto Control builds the material and packaging side of this automatically from your bill of materials and actual batch costs, so you don't maintain a separate spreadsheet alongside your production data. Every purchase is its own batch at the price you paid, production consumes the oldest first, and the per-unit figure moves when your supplier prices move. Packaging is set per sales channel, so the market stall and the posted order carry their own costs. Margin against your set sale price is visible per product rather than recalculated by hand.
To be straight about the boundary: the software will not time you. Labour itself is calculated - you set what an hour of a role or an operation costs, put the minutes it takes on the product card, and every unit carries the result - but there is no stopwatch and no per-worker time log, so those minutes are your estimate of the work. Overhead stays a judgement call too: your own expense types, as a fixed amount per unit or a percentage of cost or price. That split is deliberate: materials and packaging drift silently every time a supplier changes a price and are worth counting from the purchase, while a rate and a set of minutes you decide once and revisit a couple of times a year.