Food Costing: Food Cost Control

“Food costing” is understanding the ratio between the cost of raw materials that make up a dish and the revenue generated by that dish. By calculating how much was spent, you’ll be able to understand the amount of actual profit you make on your sales. If your food cost is too high, you will struggle to make a profit and keep your business afloat, if it’s too low you may be turning off customers with high prices. While other costs may be less flexible (like labour costs and fixed costs – rent, utilities, etc.), food costing needs to be compatible with your actual sales.

Calculation of Food Cost:-

There are several basic terms, which are used in the calculation of the food cost.

1. Food cost– This refers to the cost of food incurred in preparing meal severed.
2. Gross profit- The excess of sales over the cost of the food expressed as a percentage.
3. Potential food cost– The food cost under perfect condition.

METHOD OF DETERMINING FOOD COST

• Weekly/monthly food cost report- This system is used by the small organization where manager controls each activity as daily routine. It is a reconciliation report of daily activities. The calculation procedure is

Opening stock + total purchase for the period – closing stock = Total food sale

• Daily food cost report- This method is used in the medium-sized operation.

1	2	3	4	5	6	7	8	9	10	11	12
		Today	Today	Today	Today	Today	Today	To date	To date	To date	To date
Date	Day	O.S	Food purchase	Total food	Requis.	Sales	Food cost %	Pur.	Requis.	Sales	Food cost %
	Total

Proof of inventory

O.S + Purchase – Requisition = Closing stock

Advantage

1. It is simple and easy to follow.
2. It gives the day to day information about business.
3. It records the daily stock level, daily purchase, daily requisition & food cost percentage.

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Factors affecting the food cost

Factors affecting the percentage of food cost are:

1. Food Purchasing
2. Menu Planning
3. Method of pricing
4. Culinary Skills
5. Service Skills
6. Avoiding Wastage

Food purchasing

As a matter of fact, the control starts from this very activity. Skillful buying is quite an art and the proper discharge from this function may result in considerable cost control. The following points doing purchasing helps in reducing food cost:

• Buy the right amount of stock
• Determine the realistic stock level
• Buy according to the standard purchase specification

Menu pricing

It is the most important step in controlling the food cost. This is recognized by the progressive categories. A careless menu planning results in undue wastage of resources hence is responsible for excessive. Most of caterers think that offering a variety of food and adding more items to the list will increase their reputation in the market. But at the same time it increases food cost which is not a healthier item.

• If the number of items is more, the customer gets confused.
• Sometimes the lack of skilled labour.
• Lack of proper equipment.

Method of pricing

A haphazard price of pricing will eventually result in a financial disaster. The price should be realistic and must be based on facts. To keep the desired rates each item of the menu must be carefully considered in terms of its cost and in relation to the selling cost. The market forces must determine the selling price. Hence one of the responsibilities in any food service is an art full working. To keep the desired weights each item of the menu.

Culinary Skills

Cooking skills affect the ultimate cost of food in any establishment. Badly cooked food is a complete write-off. Food preparation loses due to unskilled labour, lack of proper equipment, heat is not properly carried out, careless control of temperature. Normally high temperature causes the shrinkage of food items and hence reduces the yield.

Service skills

• Portion control
• Careful order taker

Avoiding wastage

This particular activity starts with the receiving of food. All the procedures for avoiding wastage is observed at each level i.e. in the store, during transportation, from the store to kitchen, during the preparation of food item and during service.