How to Calculate the True Cost per Kg of Cheese

Step 1: Milk cost in the batch

Multiply the milk volume by the actual price per litre, including transport if you pay for it. If the milk comes from your own farm, use the farm production cost per litre rather than the market price, then compare the two so you can see where the profit is made: on the farm or in the factory.

Step 2: Raw materials

Add up everything that goes into the batch: rennet, salt, calcium chloride, starter cultures and brine water if it has a cost. It is easiest to calculate this per 100 kg of milk and then multiply by the batch size.

Step 3: Direct labour

Calculate the wages of the workers who handled the batch: number of workers x daily wage x the share of the day the batch took.

Step 4: The batch share of fixed costs

This is the step most factories skip. Add up monthly fixed costs: rent, electricity and water, fixed salaries, maintenance and licences. Divide them by the working days in the month (usually 26) to get a fixed cost per production day.

If you run more than one batch a day, split the daily figure across batches in proportion to the kilograms each one produced.

Step 5: Divide by the kilograms actually produced

Add the four steps together and divide by the weight of cheese actually produced after draining and salting, not the expected weight. Then add packaging cost per kg.

Worked example: a 500-litre batch

The numbers below are illustrative only, in Jordanian dinars (JOD). Replace them with your own prices.

What this example tells you

Calculated from milk alone, the cost would be 225 / 74.5 = 3.02 JOD per kg. The gap of 1.26 JOD per kg is more than 40%. If you sell at 4 JOD per kg, you are actually losing money while thinking you profit.

Note the effect of yield as well: if it falls from 14.9% to 13.5% because of lower-fat milk or over-draining, the cost rises to about 4.73 JOD per kg without any price changing. Track yield on every batch.

How Lebnara calculates it automatically

In the factory module you record each batch once: milk with fat and protein, raw materials, labour and outputs. The software spreads fixed costs over 26 working days and then over the actual kilograms, and shows the cost per kg for each batch, its trend over the months, and an alert when yield deviates.

Frequently asked questions

Why 26 working days and not 30?

Most factories stop one day a week. Dividing fixed costs by the actual production days gives a more accurate cost for each production day.

Should I value my own farm milk at the market price?

Use its production cost on the farm to see the true factory profit, then compare it with the market price to learn whether processing earns more than selling raw milk.