To work out coffee cost per cup, add the direct costs of one drink (coffee dose, milk, cup and lid), apply a waste allowance, then add labour per cup and overhead per cup. Bean cost is the bag price divided by its weight in grams, multiplied by your dose.
A customer hands over $5.50 for a flat white. What that cup actually costs you to produce is a different number entirely, and plenty of small businesses never sit down and work it out. They price from what the café down the road charges, or from what feels about right, and then wonder why the end of the month looks thin.
Cost per cup is arithmetic, not guesswork. Once you know the formula, you can run your own numbers in an afternoon and keep them current as suppliers change their prices.
The formula in one line
Cost per cup is the sum of everything that goes into making one drink, divided across the cups you actually sell.
Cost per cup = coffee dose + milk + packaging + labour + overhead + waste allowance
Two different kinds of cost sit inside that line. Direct costs rise and fall with each cup you make: beans, milk, a cup and lid. Absorbed costs stay the same whether you sell ten cups or a hundred: rent, power, insurance, finance on the machine, your barista's shift. Direct costs you calculate per cup. Absorbed costs you calculate for a period and then divide by the cups sold in that period. Mixing the two up is a common reason a cost sheet comes out wrong.
Step 1: Cost your coffee dose
Start with the dose, meaning the grams of ground coffee that go into the basket for one shot. Cost per gram comes from the bag: divide the price you paid by the weight in grams. Multiply that by your dose and you have the bean cost of a single cup.
| Line item | What belongs in it | How to get your figure |
|---|---|---|
| Coffee dose | Ground coffee per shot, including any adjustment shots | Bag price ÷ bag weight in grams × dose in grams |
| Milk | Millilitres poured per drink, including the jug you tip out | Cost per litre ÷ 1000 × millilitres used |
| Packaging | Cup, lid, sleeve, stirrer, sugar sachet | Pack invoice price ÷ units in the pack |
| Labour | Hourly cost to you, not just the hourly wage | Hourly cost ÷ cups produced in that hour |
| Overheads | Rent, power, water, insurance, equipment finance, repairs | Total for the period ÷ cups sold in the period |
| Waste | Purges, dialling in, remakes, milk tipped at close | Track it for a week, then add a percentage |
To see how the bean line behaves, use some example figures. A 1kg bag at $65 works out to about 50 cups at a 20g dose, or roughly $1.30 per cup. A 250g bag at $20 gives about 12 cups, or roughly $1.60 per cup. Notice the direction: the larger bag lowers the cost of each cup, but only if you sell through it before it goes stale. Buying bulk and binning half of it is a false saving.
Step 2: Milk, cups and extras
Milk is rarely the largest line, but it is the one most often estimated rather than measured. Work out your cost per litre, then count the millilitres that actually leave the fridge for a typical flat white, latte and cappuccino. Add the milk you steam, pour and tip out at the end of a jug. If you offer alternative milks, cost them separately, because they do not carry the same price per litre as dairy.
Packaging is straightforward if you buy in cartons and divide. Do not forget the small items: lids, sleeves, stirrers, sugar, chocolate powder, and the takeaway bag for a group order. Those cents add up across a few hundred cups a week.
Step 3: Labour per cup
Take the full hourly cost of the person making coffee, including the on-costs that sit on top of the wage, and divide it by the number of cups they produce in an hour. That second number matters more than most owners expect. A barista working a quiet mid-morning might make 20 cups in an hour, while the same barista in a rush might make far more. Your labour cost per cup on a quiet day is not the same as on a busy one, so use a realistic average across the week rather than your best hour.
If you sell food alongside coffee, split the wage between the two tasks honestly. Loading all of it onto coffee flatters the kitchen and makes the coffee look unprofitable.
Step 4: Overheads and equipment
Add up the fixed costs for a month: rent or the coffee section of it, power, water, insurance, card fees, machine finance or depreciation, servicing and repairs. Divide that total by the number of cups you sell in the same month. This is the figure that punishes low volume, because the same rent spread across fewer cups lifts the cost of every one of them.
If you are buying equipment, the repayment period and the servicing schedule belong in this line rather than in the bean cost. For a business setting up a machine and grinder, the equipment package you choose shapes this number for years, so it is worth modelling before you sign. LygonCoffee's café equipment packages pair a commercial machine and grinder with beans, which gives you a clean starting point for the calculation.
Step 5: Waste and remakes
Every café throws coffee away. You purge the group head, you dial in the grinder in the morning and again when the weather shifts, you remake a drink that came out wrong, and you tip out milk at close. None of that reaches a customer, but all of it was paid for.
Do not guess at this line. Weigh a bag in on Monday, weigh the waste bin on Sunday, and compare the two against the cups you sold. That gives you a waste percentage you can apply with confidence. Add it to your direct costs before you add labour and overheads.
Putting it together
Add the dose, milk, packaging and any extras to get your direct cost per cup. Apply your waste percentage to that figure. Then add labour per cup and overhead per cup. The result is your true cost of making one coffee.
Keep the working on a single sheet and update it whenever an invoice changes. A supplier price rise or a new wage rate flows straight through the sheet, and you can see immediately whether your menu price still covers it.
What other operators' numbers look like
Other people's figures give you a sanity check, not a substitute for your own arithmetic. Café prices vary with location and with what the customer orders, so treat any average as a rough guide only.
On the cost side, the 20g-dose example above works out to about $1.30 per cup from a 1kg bag at $65. That is a bean-only figure. It shows the coffee itself is a small part of your cost, and that labour, overheads and waste are where the rest of the money goes.
Where the calculation usually goes wrong
- Costing beans only and calling it cost per cup, which leaves labour and rent invisible.
- Using the bag price without converting to a dose, so the number is per bag rather than per serve.
- Assuming a full kilogram becomes 50 sold cups when purges and dialling in eat into it.
- Spreading overheads across a busy month and applying the result to a quiet one.
- Setting prices purely by matching competitors, then discovering the margin was never there.
Turning cost per cup into a price
Gross margin is the difference between your sell price and your cost per cup, expressed as a percentage of the sell price: (price minus cost) ÷ price × 100. For argument's sake, a cup that costs $2.00 to produce and sells for $5.50 carries a gross margin of about 64%. That margin has to cover everything the overhead line already counted and still leave a profit.
Run the calculation at a few different prices and volumes before you settle on a menu. A busy site can trade on a slightly lower price because overhead per cup falls as volume rises. A quiet site cannot, and needs the price to carry the fixed costs.
Review the number regularly
Cost per cup is a moving target. Green coffee prices shift, milk and packaging move, wages change, and rents reset. Bean costs and menu prices do not always move together, so your cost sheet and your menu are two separate decisions that need reviewing on their own schedule.
Check the bean line whenever you open a new bag, and rebuild the whole sheet each quarter. If you buy wholesale, a roaster who can explain the yield per kilogram and the dose behind it makes this job much easier. For businesses buying beans at volume, wholesale beans and custom blends are worth comparing on cost per cup rather than cost per kilogram, because the dose and consistency are what you actually sell.
If you are setting up or reviewing coffee for your business, start with LygonCoffee's business coffee solutions.
Frequently Asked Questions
How do I calculate coffee cost per cup?
Add the coffee dose, milk, and cup and lid, then apply your waste percentage. Add labour and overhead per cup on top. Build it on a spreadsheet so a supplier price change flows through automatically.
How many cups does a 1kg bag of coffee make?
At a 20g dose, a kilogram gives about 50 shots. In practice you will sell slightly fewer, because purging the group head and dialling in the grinder use coffee that never reaches a customer, so allow for that in your waste figure.
Should labour be included in cost per cup?
Yes, if you are pricing coffee to sell. Labour is often invisible in bean-only calculations, which makes a cup look far cheaper than it is. Use the full hourly cost to you, including on-costs, divided by a realistic average of cups per hour across the week.
Why has my cost per cup gone up?
Beans, milk, packaging, wages and rent all feed the number, and each moves on its own schedule. If your own sheet has shifted, check each line against current invoices rather than assuming it is all beans.
How often should I recalculate?
Update the bean line every time you open a new bag or a supplier changes a price, and rebuild the full sheet each quarter. Volume changes matter just as much as price changes, so revisit overhead per cup whenever your weekly cup count shifts.
