CALCULATING

FOOD COST
CHAPTER OUTLINE
 What is food costing? Why is it important?

 Adjustments to food costs

 Tracking and analyzing food costs
 Calculating actual cost of sales
 Food Cost Percentage
 Significance of standardized recipes
 Estimating Yields
 Recipe Cost Cards
 Spice Factor and Q Factor
FOOD COST
• The actual value of the food used in a food service operation.
• It also includes the value of the food that is given away, wasted, or even stolen.
• It is the ratio of a restaurant’s cost of ingredients (food inventory) and the revenue that those
ingredients generate when the menu items are sold (food sales).
• Almost always expressed as a percentage known as food cost percentage.

Why is it important?
Food costing is one of the most important indicators of profitability of a restaurant.
By monitoring food cost, (typically 20-35%) a restauranteur can know when to change prices,
products, and purchases quantities to improve his or her percentage.
Ultimately, keeping a close eye on and optimizing food cost percentage can help achieve
maximum profit.
ADJUSTMENTS TO FOOD COSTS

• Adjustments must be done because actual cost of food used in an

operation includes costs that are not related to the sales generated
thus, many establishments make appropriate adjustments
accordingly.
• When these adjustments are made, the costs still exist so they must
be charged to some other expense category.
Common categories would be:
- Labor cost (employee meals)
- Promotions or Marketing (comp meals)
TRACKING AND ANALYZING FOOD COSTS

THEFT INCREASES FOOD COST

Employee theft can be difficult to prevent, but
its control is vitally important to ensuring
profitability.

 REDUCTIONS FROM COST OF FOOD

• Employee Meals – actual cost of the food served
to employees is subtracted from cost of food.
• Complimentary Meals – actual cost of the food
that is given away (not its selling price) is
subtracted from cost of food.
TRACKING AND ANALYZING FOOD COSTS

 GREASE SALES
Payments from sales of used oil or grease,
bones, and fat scraps are subtracted from
food cost.

 TRANSFERS TO/INTO OTHER

UNITS
• Transfers TO another unit = subtracted
• Transfers INTO another unit = added
TRACKING AND ANALYZING FOOD COSTS

 BAR TRANSFERS
Typical products transferred to the bar include
nonalcoholic beverages, fruits, vegetables,
spices, juices, and dairy products.
The value of items transferred to the bar for
making drinks is subtracted from food cost.
In a busy bar, the amount of food that is
transferred from the kitchen to the bar can be
significant.
CALCULATING ACTUAL COST OF SALES

FOOD COST FORMULA

Example:

Opening Inventory ₱ 300,000

+ Purchases a a 200,000
Total Goods Available for Sale 500,000
- Closing Inventory a 150,000
Cost of Sales ₱ 350,000
CALCULATING ACTUAL COST OF SALES

FOOD COST FORMULA DEFINITIONS

 Opening Inventory – value of the physical inventory at the beginning of an

accounting period.
 Purchases – value of all food purchased (less any appropriate subtractions)
during the accounting period.
 Closing Inventory – value of the physical inventory counted at the end of the
accounting period.

Physical Inventory
An actual/physical count of the products and materials that the business owns
must be undertaken.
FOOD COST PERCENTAGE
 Allows managers in one restaurant to  Is the proportion of the restaurant’s sales that
compare their food usage efficiency to is used to pay for food
that of previous time periods.  Means: “out of each peso” such that, a 25%
 Can be used to compare the food usage food cost percentage means that “out of each
efficiency of one restaurant to another. peso” of sales, the restaurant pays ₱0.25 for
 Allows comparison to the restaurant’s food.
budgeted food cost percentage or other  Must be controlled by the management.
standard.

 FORMULA

  ₱ 9,000
=0.225 𝑜𝑟 22.5 %
₱ 40,000
FOOD COST PERCENTAGE

 EFFECT OF COSTS AND SALES

 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,  If controls and standards are not in
food cost will go up and down in place, it will not!
direct proportion to sales.

 A food cost percentage is computed using a food cost (the numerator) and
sales (the denominator).
 An equal percentage increases (or decreases) in each of these will result in an
unchanged food cost percentage.
FOOD COST PERCENTAGE

•  20% INCREASE in Sales and Cost of Food

Original Cost of Food 6,000

Original Sales 20,000
 ₱ 6 , 000
Food Cost Percentage ₱ 2 0,000 30%
* With 20% increase in sales and food cost
New Cost of Food 6,000x.20=1,200 6,000+1,200 =   7,200

New Sales 20,000x.20=4,000 20,000+4,000 = ₱ 24,000

 
  ₱ 7,2 00
Food Cost Percentage ₱ 24 , 000
30%
FOOD COST PERCENTAGE

•  20% DECREASE in Sales and Cost of Food

Original Cost of Food 6,000

Original Sales 20,000
 ₱ 6 , 000
Food Cost Percentage ₱ 2 0,000 30%
* With 20% decrease in sales and food cost
New Cost of Food 6,000x.20=1,200 6,000-1,200 =  ₱ 4,800
 ₱ 16,000
New Sales 20,000x.20=4,000 20,000-4000 =

 ₱ 4,8 00 30%
Food Cost Percentage
₱ 16 , 000
FOOD COST PERCENTAGE

 ABC’s of 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.
FOOD COST PERCENTAGE

 Should be controlled.
 Should not be allowed to fall far below the restaurant’s standard.

 If food cost percentages are allowed to drop too far below the
restaurant’s standards, the guests’ perceptions of value may be
negatively affected.
FOOD COST PERCENTAGE
 Sample problems:

1. Sales for the day amounted to 5,000 and the food

• Finding Cost, Sales, and cost percentage is 22%. How much is the food
Percentage cost?
  Ans.: 5,000 x .22 = 1,100

 2. The cost of the buffalo wings for an event is 1,500

Cost and the business runs at a 25% food cost percentage.
How much should be company’s sales be?
÷

Sales   Ans.: 1,500 ÷ .25 = 6,000

× %

 3. The costs accumulated for a catered event was

recorded at 800 and the sales were at 3,500. What is the
food cost percentage?

Ans.: 800 ÷ 3500 = 22.9%

FOOD COST PERCENTAGE
• Another way would be:
If the cost of the menu item is given, and the selling price has been
determined, the food cost percentage can be found using the following formula:
  𝐼𝑡𝑒𝑚 𝑐𝑜𝑠𝑡
=Food Cost Percentage
𝑆𝑒𝑙𝑙𝑖𝑛𝑔 𝑝𝑟𝑖𝑐𝑒

 Example:Crispy Chicken Fillet costs 500 to make and can be sold at 1800 per
tray. What is the food cost percentage for that item?

  500
=27.8 %
1800
SIGNIFICANCE OF STANDARDIZED RECIPES
 BENEFITS

Consistency in Food Quality Accurate Purchasing

• Customer Satisfaction • Quantities defined and controlled

Predictable Yields Ensure compliance in

“Truth In Menu” laws
• Standard Portion Sizes • Identification of Food Allergens
• Consistent Preparation Method
• Consistent Nutrient Content
• Service Method Consistency
Assists in Training new
Food Cost Control employees
SIGNIFICANCE OF STANDARDIZED RECIPES

 DEVELOPING STANDARDIZED RECIPES

Observe Menu Consider Further

Item Preparation Evaluate Recipe Revisions
Process (if necessary)
1 6 7

Consider Implement and

Use Recipe for
Preparation Consistently use
Preparation
Details the Recipe
2 5 8

Review and
Write Recipe
Revise Recipe
Draft
Draft
3 4
SIGNIFICANCE OF STANDARDIZED RECIPES

 STANDARD RECIPES CONSIST OF:

Recipe Title
Preparation time

Ingredient details
Cooking methods
Volume of portions
Cooking/baking time
and temperature
Ingredient weights and
measures Portioning, Plating, and
Garnishing
Necessary equipment
and tools
Storage and preparation
Procedures
SIGNIFICANCE OF STANDARDIZED RECIPES
 RECIPE INGREDIENT COSTING ALTERNATIVES

 As Purchased (AP) Method  Edible Portion (EP) Method

- refers to products as the - refers to products as the
restaurant receives them. guests receive them.
o Price of an item before any o Price of an item after all
trim or waste or considered. trim and waste has been
Ex. Unpeeled, whole potatoes taken into account.
Ex. Peeled, cubed potatoes
SIGNIFICANCE OF STANDARDIZED RECIPES
 MANAGERS MUST!

1. Determine if recipe ingredients are listed in AP or EP format

2. Apply the correct costing method to ingredients

3. Use the information to price menu items

4. Periodically re-cost recipe ingredients.

ESTIMATING YIELDS
• BUTCHER’S TESTS
- to measure loss from deboning, trimming, and portioning meats, fish, and
poultry

• COOKING LOSS TESTS

- to measure loss from the actual cooking process

• CONVERSION CHARTS
- tell the expected or average loss of an item from (AP) to (EP)
ESTIMATING YIELDS
• YIELD AND LOSS PERCENTAGE

AP Amount – Loss = Yield

25 𝑙𝑏−18 𝑙𝑏=7 𝑙𝑏
 

  𝒀𝒊𝒆𝒍𝒅   18 𝑙𝑏
=%  𝐘𝐢𝐞𝐥𝐝 =72 %  𝑌𝑖𝑒𝑙𝑑
𝑨𝑷 𝑻𝑶𝑻𝑨𝑳 25𝑙𝑏

  𝑳𝒐𝒔𝒔   7 𝑙𝑏
=%  𝐘𝐢𝐞𝐥𝐝 =28 %  𝑌𝑖𝑒𝑙𝑑
𝑨𝑷 𝑻𝑶𝑻𝑨𝑳 25𝑙𝑏
ESTIMATING YIELDS

BUTCHER’S YIELD TESTS

- Used to determine EP meat costs
- Results vary, based upon the AP quality of meat purchased
- Measures losses from: fat removal, bone removal, trim and packaging removal, etc.

 Determine actual costs associated with buying larger cuts of meats and fabricating
 Some will just calculate the cost based on the final end product and use that for
pricing others factor value for each utilization
 Utilization of by products (100% or less?)
 Weigh each component
 Determine market value for components used.
ESTIMATING YIELDS

BUTCHER’S YIELD TESTS

 Total trim weight and value
 Subtract trim weight from AP weight to determine yield of item (fabricated
EP weight)
 Subtract trim value from AP cost to determine net price (fabricated EP cost)
 Divide net price by yield of item to get Cost per Pound EP
 Also consider labor and cooking loss
RECIPE COST CARDS

STEP 2 STEP 3 STEP 4

STEP 1
Copy the List the Indicate the Convert the cost of the
invoice to the cost of the
ingredients amount of cost of each recipe unit.
from the each ingredient
standard ingredient as listed on
recipe card used. the invoice. Ex.:
  Milk purchased by
to the cost gallon at 100.

card. • Yields 8 pints at 12.5

each (100÷8= 12.5); or

• Yields 16 cups at 6.25

per cup (100÷16= 6.25)
RECIPE COST CARDS

STEP 5 STEP 6 STEP 7

Multiply the recipe Add the cost Divide the total recipe
unit cost by the cost by the number of
amount required in the of all portions produced.
recipe. ingredients.
 Ex.:
Recipe amount required
= 5 pints  Ex.:
Total recipe cost = 1,000
Cost per pint = 12.5
Total recipe yield = 50
Ingredient cost = 62.5 portions
(5x12.5=62.5)
Cost per portion = 20
(1000÷50=20)
SPICE FACTOR (S FACTOR)

- Can be used instead of costing out every spice

herb and seasoning.
- A way to account for “to taste” spices in a recipe
- Spreads the cost of spices, herbs and seasonings
over all menu items so those that require a larger
quantity do not bear the entire cost of spices.
- Can also include garnishes or “lost” items as a
result of chef error.
SPICE FACTOR (S FACTOR)
  𝑉𝑎𝑙𝑢𝑒 𝑜𝑓 𝑠 𝑓𝑎𝑐𝑡𝑜𝑟 𝑖𝑡𝑒𝑚𝑠(𝑜𝑣𝑒𝑟 𝑡𝑖𝑚𝑒 )
 Determining a spice factor: 𝑉𝑎𝑙𝑢𝑒 𝑜𝑓 𝑡𝑜𝑡𝑎𝑙 𝑓𝑜𝑜𝑑 𝑝𝑢𝑟𝑐h𝑎𝑠𝑒𝑠 (𝑜𝑣𝑒𝑟 𝑠𝑎𝑚𝑒 𝑡𝑖𝑚𝑒)
• Consider which items to include
• Calculate the value of all selected items over a period of time
• After the value is calculated, determine the s factor with as follows:
• Adjust recipe’s cost by increasing the total cost by the s factor percent – multiplying by
s factor.

• Sample Problem
1. If the spice factor items cost 2,000 for a six month period and the total food purchases over the
same period of time are 60,000. what is the spice factor?
2,000÷60,000 = 3.33%
2. If the total recipe cost for Chicken Parmesan which serves 12 people is 55. what is the spice
factor adjusted recipe cost?
 55 x (1+ .0333) = 56.83
Q FACTOR

- A method to account for side dishes, add-ons or

other freebies that come with entrée dishes.
- Only factor for the entrees offered by the business
- Determine cost of each of the side or add-on
possibilities
- Identify the most expensive options that could be
selected.
- Add this cost to every entrée.
Q FACTOR
•  Sample Problem:
A business offers entrees that include a choice of soup or salad, choice of vegetable or starch,
bread and butter. What is the Q factor if the costs are:
Tomato soup 0.85 French onion soup 0.65
House salad 0.92 Caesar salad 1.35
Broccoli side 0.43 Carrot side 0.16
Green bean side 0.25 Smashed potato 0.53
Angel hair pasta 0.35 Bread 0.11
Butter 0.08
Q FACTOR
 •Q factor of 2.07 should be added to all entrees for this business that offer the
same add-on’s.
• If the business uses both S and Q factor, the s factor should only be added once
for each entrée. Then, add the q factor as well as the s factor.
• So for our Chicken Parmesan, what is the cost per portion using both the spice
factor and the q factor.

•  
Answer: Chicken Parmesan serving 12 people cost of recipe is amounting to
53.75 with a spice factor of 3.33% and a Q factor of 2.07.

53.75 x 1.0333 = 55.54 recipe cost with spice factor

Cost per portion = ₱ 55.54 ÷ 12 = 4.63
Add Q factor: 4.63 + 2.07 = 6.07 cost of entrée
 THANK YOU!
P R E PA R E D B Y:
J O H N N I K H O P. N I T U R A
BSHRM 4-1
SUBMITTED TO:
MRS. CHINCHINELLA S. BOFIL