Food Cost Tutorial
Introduction
Keeping costs under control and building sales are the only way to make a good profit and stay in business, especially during leaner times. Optimum Control will automatically keep track of your inventory, thus letting you know the Actual usage vs Ideal usage on every item. It also keeps track of your inventory at any given time.
To be able to do this, you need to tell the program about the inventory items you buy and how you use them in your recipes. We have created windows to make this as easy as possible, and will take you step-by-step through each process.
A Short Tutorial on Food Cost Analysis
We will do this illustration in written form, and then we will go to the Item screen to explain your steps for typing in the items you buy in your business.
Even if you have been in the business a thousand years and know pretty much everything there is to know, it would be a good idea for you to read this section. While we couldn’t cover everyone’s way of costing items, we have developed a flexible system that should work quite well for everyone. Reading this section will give you an idea of how we, and your computer, are thinking.
The program will ask you to break down information for Items in three ways:
How you Purchase it? Do you purchase items by the case, bag, kilo etc?
How do you Count it at inventory time? Is it still by the case or bag or do you break down the case into jars or the bag into pounds/kilos? You can, if you like, get more specific and create units of measure like
"cs/24" or "cs/48".
How you use it in Recipes? Do you use it by the oz, or each?
Understanding Food Cost Analysis
A Guided Tour at Joe's Burger Palace
Example of food cost breakdown
Joe’s Burger Palace sells a quarter pound hamburger. Unfortunately, Joe does not know what his burger costs him to make and is having trouble understanding why he is not making enough money. The first thing he needs is to know is how much a burger costs to make.
Joe buys these inventory items from his local supplier
|
Item |
Case Cost |
Case Size |
Units |
|
Buns |
$1.65 |
12 (one dozen) |
each |
|
Beef Patties |
$20.43 |
66 |
patties |
|
Ketchup |
$34.00 |
6/100 oz |
tins |
|
Mustard |
$8.00 |
2/100 oz |
tins |
|
Pickles |
$26.00 |
10000 |
slices(in a pail) |
|
Burger wrap |
$88.00 |
6000 |
pieces |
|
Tomatoes |
$25.00 |
120 |
pieces |
Joe must convert all his item purchases into the units he uses to prepare his products. If he uses buns, he uses 1 bun OR 1 each (ea.). With ketchup, he uses the measurement of ounces (oz). Costs are calculated buy dividing the purchase price by quantity per oz., pack or case. We recommend you break down all your items to the unit of ounces for products that you use in measured form and individual units (each) for items that you use in piece form.
Lets look at Joe’s Costs:
Buns cost $1.65 per package of 12 buns (1.65 ÷ 12) = $0.1375 OR 13.7 cents per bun.
Beef patties cost $20.43 per case of 66 patties (20.43 ÷ 66) = $0.309 OR 30.9 cents per patty.
Ketchup costs $34.00 for six 100-oz tins (600 oz of ketchup). This formula is (34.00 ÷ 600) = $0.0566 OR 5.6 cents per ounce.
Mustard costs $8.00 for two 100-oz tins (200 oz of mustard). This is (8.00 ÷ 200) = $0.04 OR 4 cents per ounce.
Pickles (in this example) sold in pails of 10,000 slices costing $26.00 - (26.00 ÷10000) = $0.0026 OR .26 of a cent each (per slice).
Burger wrap costs $88.00 for 6000 pieces OR 1.46 cents each
(88.00 ÷ 6000 = 0.0146).
Tomatoes cost $28.00 for a case of 120 tomatoes (averaged out - some have more and some less) (28.00 ÷ 120) = $0.2333 OR 23.3 cents each (he approximately gets 12 slices per tomato, so his cost per slice is 1.94 cents) (23.3 ÷ 12).
Food Cost:
|
Food Item |
QTY |
Unit Of Measure |
Cost per Unit |
Cost |
|
Bun |
1 |
each |
13.7 cents |
13.7 cents($0.137) |
|
Beef Patty |
1 |
each |
30.9 cents |
30.9 cents($0.309) |
|
Pickles |
3 |
each |
.26 cents |
.78 cents($0.0078) |
|
Tomato Slices |
2 |
each |
1.94 cents |
3.88 cents($0.038) |
|
Ketchup |
.5 oz. |
ounce(oz.) |
5.6 cents |
2.8 cents($0.028) |
|
Mustard |
.5 oz, |
ounce(oz.) |
4 cents |
2.0 cents($0.02) |
|
|
|
|
|
|
Total Food cost 54.06 cents or $.5406
Joe must also factor a napkin, bag cost, and other condiments that would be served with each average menu product.
The following is a quick review on how he can allow for this:
Paper cost:
|
QTY |
UOM |
Cost per Unit |
Cost | |
|
Burger Wrap |
1 |
each |
1.46 cents |
1.46 cents($0.0146) |
|
Napkin |
2 |
Each |
1 cent |
2.0 Cents ($0.02) |
Total cost of sales 55.52 cents or $.5552
Calculating a Selling Price
Joe wants to achieve a 33% food and paper cost of sales so he needs to take his cost price (57.52 cents) and divide by 33%. E.G. 57.52 divide 33 (then press the % key on the calculator) = 189.81 or $1.89.
If Joe keeps his food cost under control, he is well on his way to making a good profit in his business.