A coffee price needs to cover more than beans and milk. Start with a consistent cost basis, then separate ingredients, packaging, and labour so a target percentage does not hide the costs still to be paid.
A flat white example
All prices and work times below are fictional inputs, not Australian market averages or wage recommendations. The example assumes a GST-registered cafe selling a drink subject to 10% GST. Purchase costs are after any claimable GST credits. Do not divide every purchase by 1.10: some purchases may be GST-free or ineligible for a credit.
| Input | Calculation | Cost per cup |
|---|---|---|
| Beans | A$42/kg × 20g ÷ 1,000 | A$0.840 |
| Milk | A$2.40/L × 180ml ÷ 1,000 | A$0.432 |
| Other ingredients | Assumed usage | A$0.180 |
| Cup and lid | Assumed purchase cost | A$0.450 |
| Ingredients and packaging | Sum | A$1.902 |
| Allocated labour | A$32/hour × 2.5 minutes ÷ 60 | A$1.333… |
Keep full precision through the calculation and round the displayed result at the end. If these quantities omit milk discarded during steaming or wasted doses, measure and add that waste. The 2.5 minutes must represent staff time per cup; overlapping work and batch preparation change the allocation.
What remains from a A$5.50 menu price?
For the taxable sale in this example:
Net sales = A$5.50 ÷ 1.10 = A$5.00
Ingredients and packaging share = 1.902 ÷ 5.00 = 38.04%
Amount after ingredients and packaging = 5.00 − 1.902 = A$3.098
Amount after allocated labour = 3.098 − (32 × 2.5 ÷ 60) = A$1.7647…About A$1.76 remains after these costs. It still needs to cover any staffing time excluded from the allocation, rent, utilities, maintenance, payment fees, and other expenses. Do not call it net profit or subtract the same labour a second time in the monthly total.
Set a target without mixing cost categories
Suppose you choose an ingredients-and-packaging target of 35% of net sales. This is an example decision, not a recommended industry benchmark.
Required price before GST = A$1.902 ÷ 0.35 = A$5.4343…
Price including GST = A$5.4343… × 1.10 = A$5.9777…At a displayed A$6.00 price, net sales are about A$5.4545 and ingredients plus packaging are 34.87% of net sales. After the same allocated labour, about A$2.22 remains for other expenses.
Dividing a cost that already includes labour by a target intended only for ingredients produces a different measure. Name the costs included in the numerator before using a percentage to set prices.
Alternative milk and waste
For a fictional alternative milk purchase cost of A$3.60/L, 180ml costs A$0.648. Compared with A$0.432 for dairy in the example, the difference is A$0.216 before waste. A price change, if any, also needs to reflect the tax basis and your commercial decision. A fixed national percentage uplift is not a substitute for your invoices and measured usage.
Track milk poured and milk sold over a shift. Do not add a generic waste percentage if the usage figures already include that loss.
Wages and displayed prices
Use the applicable current pay rules and actual employer costs for your team. A blended hourly assumption does not establish compliance with an award or cover every penalty, allowance, or employment cost.
Show customers the price they will pay and clearly disclose applicable surcharges. Check the ACCC price-display guidance before adding weekend, public-holiday, or payment charges. A worked tax calculation does not decide whether a surcharge is appropriate.
Keep recipe costs current
KitchenCost lets you save ingredient purchase prices and recipe quantities, then recalculate ingredient cost when you update those prices. Compare that cost with the selling price you choose. Keep labour allocation, GST treatment, and the cafe’s full operating result in a separate calculation.
Download KitchenCost if you need to keep those ingredient and recipe records together.
Check before changing the menu
- Use the same tax basis for sales and costs.
- Measure doses, milk usage, waste, and staff time.
- Keep ingredient targets separate from labour and total operating costs.
- Compare retained dollars at the proposed price with your monthly expenses and sales volume.