How Iraca Decides What a Unit Costs
Every sale, every stock valuation and every production run needs one number: what a unit of the product costs you. Iraca does not take that number from a single place. It looks in four places, in a fixed order, and uses the first one that has an answer. Knowing the order explains why a product can show no cost while its sales are costed correctly behind the scenes, and why a cost you typed a year ago can hide what the recipe says today.
The question
You have a product with a recipe and a Unit Cost field, and you want to know how they relate. Is the recipe's cost connected to the field? If you type a cost, do you still need the recipe? If you leave the field blank, does the product have no cost until you run production?
The answer is one rule, applied the same way everywhere a cost is used: when you sell the product, when stock is valued, when the batch calculator prices a batch, and when the product is itself an ingredient in another recipe.
The order Iraca looks in
- The last real production run. If the product's recipe has a completed run that was not a saved estimate, Iraca takes that run's total cost divided by what it actually made. This wins over everything else, including a cost you typed.
- The cost you typed. With no completed run, Iraca uses the product's Unit Cost field exactly as it is. The recipe is not consulted.
- The recipe. If the field is blank and the product has a recipe, Iraca costs the recipe right now: each ingredient at its own cost (found the same way, by these same four steps), plus the recipe's labour and overhead per unit, divided by the output quantity. No production run is needed for this. The recipe works on its own from the moment you save it.
- Nothing. With no run, no typed cost and no recipe, the product has no cost. A sale of it records no cost of goods sold, and its margin reads as if the product were free to make.
Two things that follow
- A typed cost replaces the recipe. The field is not a fallback that the recipe fills in; it is an instruction to use that figure instead of the recipe. That is useful when you want a fixed standard cost that does not move with ingredient prices. If you want the recipe to decide, leave the field blank or clear it.
- An ingredient with no cost counts as free. Each ingredient goes through the same four steps. One that has no run, no typed cost and no recipe contributes zero, and the recipe's total reads low rather than missing. The figure looks complete, so check that every ingredient has a cost before trusting a recipe cost.
A worked example
You make a chutney in batches of 12 jars. The recipe's ingredients come to $18 at their current costs, labour is set at $0.50 a jar ($6 for the batch) and overhead at $0.25 a jar ($3). The finished product's Unit Cost is blank.
- With no run yet, the product costs $2.25 a jar: ($18 + $6 + $3) ÷ 12. Every jar you sell records $2.25 as its cost, and that is what your stock of chutney is valued at.
- You then complete a real production run. The batch used a little more fruit than the recipe says, and it came to $28.80 for 12 jars. From that moment the product costs $2.40 a jar, for sales and valuation alike, until the next completed run replaces it.
- If someone had typed $3.00 into the Unit Cost field, every jar would have cost $3.00 while there was no run, with the recipe's $2.25 ignored. After the run completes, the run's $2.40 is used instead; the $3.00 stays in the field but has no effect.
What to do
- Give every ingredient a cost: type one, or give it a recipe of its own.
- Leave the finished product's Unit Cost blank, unless you deliberately want a fixed standard cost.
- Let completed production runs refine the figure; each one takes over from the last.
Related articles
- Creating a Product — where the Unit Cost field lives
- Creating a Recipe — ingredients, labour and overhead
- Production Runs — The Full Lifecycle — how a completed run records its cost