$$$....... A FOOD COSTING....... $$$
RESOURCE DOCUMENT

Table of Contents

• Online Tutorials | Powerpoint Tutorials: Run them online or download them to your computer. Currently includes a "Yield Factor" Microsoft Powerpoint Tutorial that explains Yield test, Yield factors and Yield % and how to calculate and use them,
  What Cost Control is, The Control Process and Purchasing, how/when to calculate your reorders using the Periodic and Perpetual inventory methods, The Control Process and Receiving,Theoretical versus Actual Cost and Daily Cost.

• Food Costing Forum | Discuss The Business of Running a Restaurant and More - Staying competitive with a healthy profit margin.

• Break-Even Volume | A technique for analyzing a new investment (like a new kitchen, new walk-in, etc), a new product introduction (example: a new menu item, opening a new restaurant or adding a second unit), a price change or, and this is very critical, inaction in response to a competitor's moves.

  Take the new online Break-Even Quiz and have your results and the correct answers emailed to you. This covers absolutely essential pricing knowledge that all chefs should be familiar with. Also available to test yourself against is the original Food Cost Primer Quiz which covers all the material presented in this tutorial except the Break-Even Volume material.

• Calculator Page | Useful Javascript Calculators to find out Food Cost %, Yield Test Factors and more.

• Yield Test Page | Find out how to calculate how much that chicken breast actually costs you when you bone-it-out of a whole chicken.

• Menu Card Page | Examples of the variations on Recipe Cards, Menu Cards, Pricing Sheets and more.

• Sales Mix and History | See the effect of different sales mixes with different earning potentials on your gross profits.

• Download Food Costing Spreadsheets | Linked Excel documents for easy maintaining/updating of your menu's recipe cards and costs.

PURPOSE

In this document I will provide some basic background information that hopefully will help chefs in their quest to better control and understand the concept of "Food Cost". This document will provide a broad overview of what the word and concept "food cost" implies and then continue on to break the concept down into it's component parts, define and analyze them and then reconstruct these same components into various simple, practical and usable mathematic formulas.

COMPONENT PARTS

For me the concept of food cost is a very general term that broadly indicates how much you are spending to buy the food you use, for whatever reason, in your food service operation.

Affecting Factors
1. Purchasing
2. Receiving
3. Chef
   • Usage
   • Waste
4. Point of Sales Control

Once in the door and stored, the concept and process begins to complicate itself. To better understand I will list and define the important and relevant terms.

GLOSSARY and TERMS

TERM	DEFINITION
Item Cost	This is the purchase price of the item. This cost is affected by the quality of the purchasing agent, the way the product is handled once it is received and how it is rotated once in inventory. TLC is recommended for all of your perishable purchases from start to finish.
Cost of Sales	This is the total of all your food purchases made for the cost period. What you paid to get the food you need to run your operation through the back door and into inventory. It is normally determined as follows: (opening inventory + all purchases) = Food available to be sold (Food available to be sold - closing inventory) = Cost of food consumed ( Cost of food consumed - food consumed internally) = Cost Of Sales
Yield Test	This test determines how much usable and nonusable product an Item yields. Example; process a whole chicken to determine the weight for the breast, legs, wings, bones, etc. From this information you can obtain a "Yield Factor" for these Items.
Yield Factor	This factor tells you how much your "Usable" product costs. This factor is based on how much waste a product has. Example, the price of a fish fillet as opposed to the original "Item Cost" of the whole fish. To obtain this factor a Yield Test must be done.
Yield Factor Cost	The adjusted cost of the item based on applying the yield factor to the original item cost.
Recipe card	This is the begining step in the calculation of various different costs. This "Card" should include all related costs involved in producing the recipe. Falling into this term are both production recipes and menu item recipes.
Plate Cost	Using the recipe cards and the yield factor costs this is how much each menu item costs the business to produce.
Menu Cost	Adding up all the "Plate Costs" for the menu items gives you this number. If you divide the total sum by the number of items you get the average plate cost.
Theoretical Cost	Dividing the "Menu Cost" by the number of items on the menu you can arrive at a hypothetical, theoretical food cost potential for the menu, if you sell one of each item, or an equal number of all items.
Plan Cost (budgeted)	As you set up your business or begin a new financial (fiscal) year, your business plan has a food cost number and subsequent profit which you target to achieve. This can be expressed in two ways;(1) A total sum spent to purchase the goods, (2) as a % representing the total cost vs. total sales. You will have to have a projection of the number of covers you plan to do and the average food check in order to do this exercise correctly. This is your planned cost.
Actual Cost	When you finish your accounting period, which customarily is monthly, you get your actual cost. Like the plan cost this can be expressed either as the total sum spent on food purchases or as a percentage based on the sales.
Sales Mix	You will need to keep a "Sales History" in order to do this. With this information you can then compare your "Theoretical Cost" to the actual cost. This will be very important if your cost presents a problem as it will help you pinpoint where the problem is. For example, if in one month you sold a much higher than usual number of the menu plates that have a high cost (lower margin), then you can expect you final cost to be higher than planned.
Issues	This is sum of all items" issued " or dispatched by the storeroom or warehouse, if you use a requisition and transfer system.
Closing Inventory	The dollar value of all the food items on the premises. To get this a physical-visual inventory must be done and all items listed. They are then "extended" or multiplied by their value and totaled to give the value of the inventory. Good internal controls calls for someone other than the person doing the ordering and purchasing to do this. Differences in inventories, purchases and issues need to be reconciled.
Opening Inventory	This is the same value as the closing inventory for the previous accounting period.
Credits	Also described as food consumed internally, these are credits given to the kitchen for the consumption of food items for reason other-than-sales. Examples could be promotional dinner for the press (A&P), employee's food, spoilage, special sales, advertising trade offs, happy hour food, etc.
Food Cost	We arrive at this number by calculating the; (opening inventory + all issues) - (credits + closing inventory) This will give the dollar sum total of the operational food cost for the accounting period.
Food Cost %	This is the Food Cost divided by the Total sales.

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