The Grimoire indicates mixing recipes with little arrows between the items. For example, Hammer + Bear Trap = Axe, or Potion + Potion = Potion+.

Additionally to the recipes depicted in the Grimoire, there seem to be hidden "shortcuts" for mixing an item with cheaper ingredients. These generally seem to follow the rule of replacing one of the ingredients with one of that item's ingredients, but that doesn't work universally.

These are some recipes I've discovered:
Apple + Apple = Meat
Meat + Meat = Potion
Potion + Potion+ = Lucky Cat
Hammer + Axe = Force Ring
Cannon + Balista = Power Ring