How to Calculate Food Cost. Running a restaurant, catering service, or culinary school can be an expensive and complex undertaking. To make sure your business stays afloat, you must make regular and accurate calculations of your food...
In case you're not familiar with the manual method for determining food cost percentage, let's first take a look at the formula. Food Cost Percentage Formula. To calculate the food cost percentage of an individual portion or menu item, you simply add up the cost of the ingredient(s) and divide that result by the menu price.
Monthly Food Costs Monthly food costs are determined by taking a monthly physical inventory of food stock, evaluating the inventory, and then adjusting the valuation to more accurately reflect the cost of food consumed. The basic formula to determine the cost of food in a month is: cost of food = opening inventory + purchases – closing inventory
Using food cost formula is a good practice for successful restaurants, but remember to track other expenses as well. Importance of Food Costs. By running the food cost formula consistently, restaurant owners can determine menu prices that will maintain or increase their food profit margin.
Food costs can either be the bane of your existence or the most helpful restaurant metric you’ll ever calculate. Many restaurateurs don’t calculate food cost percentage for individual items on their menu because it can be time-consuming and confusing.
The simplest way to calculate it is the part (the amount spent on food) divided by the whole (the total amount of revenue)...that will give you your percentage...I like to keep a daily running food cost so I can catch a high food cost early and fix it before it gets out of hand.
The basic food cost formula. If you want to know how to calculate food cost at your restaurant, just follow this simple food cost formula: Once you’ve calculated your food cost percentage (or tracked it over several months), you should be in a better position to develop strategies that help save on food and increase margins.
In addition, many people have asked me for an industry benchmark for food cost percentage. While the food cost formula is straight forward, it may be impossible to arrive at a true industry benchmark percentage. There are far too many industry segments with unique cost characteristics. Let's start with the basic food cost percentage formula:
Cost accounting is a valuable tool you use to reduce and eliminate costs in a business. You also use cost accounting to determine a price for your product or service that will allow you to earn a reasonable profit. Familiarize yourself with the most important formulas, terms, and principles you need to know to apply […]
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