Cost of Goods Sold (COGS) refers to the total cost of producing the candles you sell. It includes all expenses directly tied to making your candles, such as the cost of wax, wicks, fragrance oils, containers, and packaging. COGS also includes labor costs, like the time spent pouring and labeling candles, as well as overhead expenses like equipment and utilities used during production. Here’s the base calculation:

COGS = Materials + Labor + Overhead

For example, if a candle costs $5 to make and you sell it for $10, your gross profit is $5 per candle. Knowing your COGS guides your pricing and helps you evaluate your profit margins.

Skip to the bottom for a simple COGS calculator for candle makers.

Calculating COGS for Candle Making

To calculate your COGS accurately, it’s important to understand the three main cost categories involved in making candles: Materials, Labor, and Overhead costs. Let’s break down each category:

1. Materials

Direct materials are the raw ingredients needed to make your candles. These include:

• Wax
• Fragrance Oil
• Wicks
• Containers
• Packaging

To calculate the cost of materials, use this simple formula:

Material Cost = Cost per unit x Quantity

For example, if your fragrance oil costs $2.02/oz and one candle uses 0.8 oz:

Fragrance = $2.02 * 0.8 = $1.62

Repeat for all the materials in a single candle and add them up for a total material COGS:

Component	Units	Unit Price (A)	Conversion Factor (B)	Total Units per Candle (C)	Material Cost (A x B x C)
Wax	lb	$2.30/lb	1/16	12.49 oz	$1.80
Fragrance	oz	$1.83/oz	1	0.63 oz	$1.15
Wick	each	$0.10 / each	1	1	$0.10
Container	each	$1.96 / each	1	1	$1.96
Labels	each	$0.36 / each	1	1	$0.36
Material COGS					$5.37

In some cases you might have to convert the cost per unit to match the units you measure with. For example, wax is usually sold by the pound (lb) or kilogram (kg) and you’ll need to convert it into ounces or grams to match your candle recipe. Here is a guide:

Converting pounds to ounces

1. Find the cost per pound (lb)
2. Divide the cost per pound by 16 (there are 16 ounces per pound)

Converting kilograms to grams

1. Find the cost per kilogram (kg)
2. Divide the cost per kg by 1,000 (there are 1,000 grams per kilogram)

2. Labor

Direct labor includes the time and effort required to make your candles. This could be your own time or that of an employee. It includes tasks like:

• Melting and pouring wax.
• Adding fragrance and coloring.
• Setting the wick.
• Labeling and packaging the finished product.

To calculate labor costs, determine an hourly wage and multiply it by the time spent on each batch of candles. For example, if you pay yourself $20 per hour and it takes 5 hours to make 100 candles, the labor cost per candle would be:

Labor Cost per Candle = Hourly Wage x Hours Worked ÷ Number of Candles

For a batch of 20 candles that took 90 minutes (1.5h) to make (assuming a wage of $15/h):

Labor per candle = ($15/h) x (1.5h) ÷ 20 = $1.13 / candle

Confused? Here are some shortcuts:

• Estimate $15 – $20 per hour for wages
• Alternatively, add 15% to your materials cost for wages (if materials were $5.37, labor wo

3. Overhead

Overhead costs are the indirect expenses involved in making your candles. These are not tied to a single product but are necessary for production. Common overhead costs include:

• Equipment – Such as melters, thermometers, and molds.
• Utilities – Electricity and heating required for melting and pouring wax.
• Workspace and Storage – Rent or storage costs for your production space.

Calculate the total monthly expenses and divide them by the number of candles produced in that month:

Overhead per candle = Total overhead ÷ Number of candles

For example, if your monthly overhead is $300 and you produce 300 candles, your overhead cost per candle would be:

Overhead Cost per Candle = $300 ÷ 300 = $1.00 per candle

An easy shortcut is to add a flat rate of $0.50 to $1.50 per candle if you don’t feel like doing calculus to find your overhead rates.

Pricing Your Candles Using COGS

Once you’ve calculated your Cost of Goods Sold (COGS), the next step is to use this information to set profitable prices for your candles.

We’ve covered detailed pricing in a separate guide, but let’s walk through a basic formula:

Price = (COGS) x (1 + Desired profit margin)

For a COGS of $5.00 per candle and a 50% profit margin your sale price would be:

Price = $5.00 x (1 + 50%/100) = $7.50

What profit margin should you use when selling candles?

Most candle makers aim for a profit margin of 3-4 times their production cost when selling directly to customers. For wholesale pricing, a common practice is to sell candles at about twice the cost of materials.

For example:

Material cost	$5.00
Price for customers	$15.00
Wholesale	$10.00

Other expenses

Don’t forget to account for additional expenses that can affect your profitability:

• Shipping Costs: If selling online, include packaging and postage fees.
• Platform Fees: Consider fees from marketplaces like Etsy, Amazon, or your e-commerce platform.
• Marketing and Advertising: Include costs for social media ads, website hosting, or craft fair booth fees.

You can add these expenses to your COGS or factor them into your profit margin to ensure your prices cover all costs.

Simple COGS calculator

Play around with the different costs to see how your COGS is impacted by different parts of the candle process.

Want more? Check out MoonLite for a fully featured digital tool to automate COGS calculations and batch amounts.