1. What is Food Cost Calculation?

Food cost calculation is a method to determine the cost of goods sold (COGS) in the food industry. It helps restaurants and food businesses track their inventory and calculate profitability.

2. How Does the Formula Work?

The food cost formula is:

Where:

• Beginning Inventory — Value of inventory at start of period
• Purchases — Additional inventory purchased during period
• Ending Inventory — Value of remaining inventory at end of period

Explanation: This formula calculates the actual cost of food used during a specific period by accounting for what was available and what remains.

3. Importance of Food Cost Calculation

Details: Accurate food cost calculation is essential for menu pricing, cost control, identifying waste, and maintaining profitability in food service operations.

4. Using the Calculator

Tips: Enter all values in dollars. Beginning and ending inventory should be physical counts valued at cost. Purchases should include all food items bought during the period.

5. Frequently Asked Questions (FAQ)

Q1: How often should I calculate food cost?
A: Most restaurants calculate weekly or monthly, depending on their inventory turnover.

Q2: What's a good food cost percentage?
A: Typically 28-35% of menu price, but varies by establishment type and menu items.

Q3: Should I include non-food items in this calculation?
A: No, this calculation is specifically for food items. Calculate beverage costs separately.

Q4: How can I reduce my food cost?
A: Through better inventory control, reducing waste, negotiating with suppliers, and menu engineering.

Q5: Does this include labor costs?
A: No, this is strictly the cost of food items. Prime cost includes both food and labor costs.