Originally Posted by MerlotCook
I, personally, do not take into consideration the cost of my home for doing cakes. I would live here anyway.
The way I look at overhead is from an opportunity cost perspective. If you pay $2000/month in rent for your home for personal use, and 20% of the square footage is unavailable for personal use 25% of the time, $100/month of rent that is going to pay for the business to run instead of for you to live there.
While that 25% utilization figure (~40 hrs a week) may seem high if you have low volume, you need to average out workspace utilization with storage space used to store ingredients and supplies for the business, since this storage space is never available for personal use it is 100% utilized for the business.
As mentioned above utilities are another source of overhead, and don't forget things like advertising, accounting, insurance, license fees, and anything else that applies to the business as a whole instead of individual orders.