Controlling

Foodservice
Costs

Calculate food cost.

Calculate food cost

percentage.

Explain the effect that

changes in food cost and sales
have on food cost percentage.

The actual dollar value of

the food used in a
foodservice operation
Often referred to as cost
of food sold

Includes the cost of food

sold to customers
Also includes the value of
food that is given away,
wasted, or even stolen

To reduce food cost

Reduce portion size.

Replace the item with a lower cost alternative.

Feature menu items with higher profit margins

(lower costs).

Raise menu prices.

To reduce food waste

Monitor portion control.

Monitor food storage and rotation.

Monitor food purchasing (buy

appropriate amounts).

Minimize production errors.

Waste

Over ordering
Over production

Theft
Food to Bar transfers
Food transferred to other units
Employee meals

Opening inventory
+

Purchases
Total food available

Closing inventory
Cost of food sold

Opening inventory
+

Purchases

$5,000
+

Total food available

Closing inventory
Cost of food sold

$30,000
$35,000

$4,000
$31,000

To accurately calculate cost of food

sold, managers must take a physical
inventory.

Opening inventory

Dollar value of the physical inventory at the

beginning of an accounting period
Purchases

Dollar value of all food purchased (less any

appropriate subtractions) during the
accounting period
Closing inventory

Dollar value of the physical inventory

counted at end of the accounting period

Food
cost

Sales =

Food cost
percentage

Food cost Sales =

$7,000

$25,000

Food cost
percentage

0.28 or 28.0%

Method One
Move the
decimal two
places to
the right.
.35 = 35%

Method Two
Multiply by
100.

0.35 x 100 =
35%

Allows managers in one restaurant to

compare their food usage efficiency
to that of previous time periods
Can be used to compare the food
usage efficiency of one restaurant to
another
Allows comparison to the
restaurants budgeted food cost
percentage or other standard

Is the proportion of the restaurants

sales that is used to pay for food
Means out of each dollar

A 35% food cost percentage means

that out of each dollar of sales, the
restaurant pays $0.35 for food.

Must be controlled by management

Food cost is a variable cost, so it

should increase when sales increase
and decrease when sales decrease.
If controls and standards are in
place, food cost will go up and down
in direct proportion to sales.
If controls and standards are not in
place, it
will not!

A food cost percentage is computed

using
both a food cost (the numerator)
and sales
(the denominator).
An equal percentage increase (or
decrease) in each of these will
result in an unchanged food cost
percentage.

Where:

A = Food Cost

B = Sales
C = Food Cost Percentage
1. If A stays the same, and B increases,
C decreases.
2. If A stays the same and B decreases,
C increases.

3. If A decreases, and B stays the

same,
C decreases.
4. If A increases, and B stays the
same,
C increases.
5. If A increases at the same
proportional rate that B increases, C
stays the same.

Original cost of food

$1,000

Original sales

$3,000

Food cost percentage

33%

With 10% increase in sales and food cost

New cost of food

$1,100

New sales

$3,300

Food cost percentage

33%

Original cost of food

$1,000

Original sales

$3,000

Food cost percentage

33%

With a 10% decrease in sales and food cost

New cost of food

$ 900

New sales

$2,700

Food cost percentage

33%

If food cost
percentages are
allowed to drop
below the
restaurants
standards, the
guests perceptions
of value may be
negatively affected.

Step 1 Copy the ingredients from

the standardized recipe card to the
cost card.

Step 2 List the amount of each

ingredient used.

Step 3 Indicate the cost of each

ingredient as listed on the invoice.

Step

4 Convert the cost of the invoice unit

to
the cost of the recipe unit.
Example

Milk purchased by the gallon for $2.80

Yields eight recipe-ready (EP) pints at
$0.35 each.
($2.80 8 pints = $0.35 per pint)

Step 5 Multiply the recipe unit cost

by the amount required in the recipe.

Example

Recipe amount required3 pints

Cost per pint$0.35
Ingredient cost$1.05
(3 pints x $0.35 per pint = $1.05)

Step 6 Add the cost of all ingredients.

Step 7 Divide the total recipe cost by

the number of portions produced.
Example

Total recipe cost$145.50

Total recipe yield50 portions
Cost per portion$2.91
($145.50 50 portions = $2.91 per
portion)

As Purchased (AP) method

Price of an item before any trim or waste

are considered
Exampleunpeeled, whole potatoes

Edible Portion (EP) method

Price of an item after all trim and waste

has been taken into account
Examplepeeled, cubed potatoes

Butchers tests

Cooking loss tests

To measure loss from deboning, trimming,

and portioning meats, fish, and poultry
To measure loss from the actual cooking
process

Conversion charts

Tell the expected or average loss of an

item from (AP) to (EP)

As Purchased (AP) refers to products as

the restaurant receives them.

Edible Portion (EP) refers to products as

the guests receive them.

1.

2.

3.

4.
5.

The cost of employee meals should be

(subtracted/added) to the cost of food before
computing a food cost percentage.
A restaurants food cost percentage should increase
when sales increase and decrease when sales
decrease. (True/False)
Which best describes food cost as an expense?
A. It is fixed
B. It is semivariable
C. It is variable
D. It is noncontrollable
A managers job is to reduce the food cost
percentage as much as possible. (True/False)
The formula to find a restaurants food cost
percentage is sales divided by food cost equals food
cost percentages. (True/False)