To effectively manage costs, it is easiest and best to consider sources of costs, quantify the opportunities, and deal with cost management based on specific priority considerations. Priorities can be determined by total cost saving, convenience, need and/or speed. Priorities vary from organization to organization and even within a single organization, so care is necessary when applying an appropriate priority to a cost savings opportunity.

Elements of cost include variable costs, fixed costs, yields and losses, and margin targets. Variable costs vary with production volume. The higher the production volume, the higher the variable costs. Variable costs can include mix ingredients, flavors/inclusions, packaging, labor, storage, freight/shipping, utilities, etc. Fixed costs are independent of volume. As production volumes increase, fixed costs, as percent of total cost, are reduced. Fixed costs include general, sales/administration (G, S & A), marketing, advertising, depreciation, taxes, etc. Of course, yields and losses are critical elements of cost as well.