CHAPTER 5

FOOD COST
At the end of this module, the learners must be able to:

 Understand the importance of standardized recipe in food cost.

 Appreciate the role of food costing in profitability of a business.
 Be equipped with the skills in quantifying recipe and food.

STANDARDIZED RECIPES

A standardized recipe contains a variety of information about the recipe, its yield
and the number of portions it produces. The actual form may vary from one operation to
another, but the information contained is the same.
While it is the menu that determines what is to be sold and at what price, the
Standardized Recipe controls the end product. The standardized recipe ensures that
each time customers order an item from the menu; they get the same item.
Standardized recipe contains, the following information:

a. Item name
b. Total yield
c. Portion Size
d. Ingredient List
e. Preparation/Method section
f. Cooking Time and temperature
g. Special Instructions, if necessary
h. Recipe Cost (optional)

Standardized Recipe
Unit Name: ______________________________
Menu Item: Slow Roasted Beef Belly

Yield: 7 Special Instructions: Serve with steamed

Portion Size: 1000 asparagus, zucchini and roasted tomatoes.
Portion Cost:

Amount Ingredients
I pc (3/4 kg) boneless beef belly or short plate
1/2 cup whole peppercorns (crushed)
1/2 cup rock salt
2 heads garlic
Horseradish Sauce
1 cup prepared horseradish
I cup milk
I tsp chopped parsley salt and pepper (to taste)

Procedure/Method:

1. Preheat oven to 2800F.

2. Combine crushed peppercorns, salt and garlic into paste. Rub on top of beef.
3. Place beef on a rack onto a roasting pan. Place in oven, Cook at 2800F for 4 to 5
hours or until tender. Test for tenderness with a kitchen fork after 4 hours.
4. To make the horseradish sauce, combine all the ingredients and mix well.
5. Once beef is done, remove from oven and rest for at least I hour before slicing.
Serve with horseradish sauce.
6. You may cook beef up to 2 days ahead and keep it in a refrigerator. To reheat,
slice beef while cold into 1/3 inch thick slices. Arrange beef slices overlapping
each other in a baking tray, pour 1/2 cup of stock or water over the beef. Cover
with foil, bake in a 3500F oven for about 15-20 minutes or until heated through.

Many operators refuse to take the time to develop standardized recipes. The
following list contains some of the arguments often used against developing
standardized recipes:

1. They take too long to use.

2. My people don't need recipes; They know how we do things here.
3. My chefs refuse to reveal his or her secrets.
4. They take too long to write up.
5. We tried them but lost some, so we stopped using them.
6. They are too hard to read, or many of my people cannot read English.

Reasons for Incorporating a system of standardized recipes include the following:

1. Accurate purchasing is impossible without the existence and use of standardized

recipe.
2. Dietary concerns require some food service operators to know exactly the name
of ingredients and the correct amount of each.
3. Accurate recipe costing and menu pricing is impossible without standardized
recipe.
4. Matching food consumed to cash sales is impossible without Standardized
recipe.
5. New employees cannot be trained without it. If the chef quits for instance, you
are stuck!
6. The computerization of a food service operation is impossible unless the
elements of standardized recipes are in place.
Reasons why there must be an effective use of Standardized Recipe:

1. Customers dissatisfaction if menu selected is not standard in taste.

2. Producing too many of any of the menu item would create excess products.
3. Profitability level would likely to be in its lowest point due to its food cost.

When adjusting for recipe quantities, the following two general methods maybe
employed:

1. Factor method = Yield desired/Current yield = Conversion Factor

Example: Current recipe is 50 portions, and the number of portion we wish to

make, then the formula applies: 125/ 50 2.5

Ingredients Original Amount Factor New amount

A 4 lbs. 2.5 10 lbs.
B 1 qt. 2.5 2 ½qts.
C 1½T 2.5 3¾T

2. Percentage method:

a. deals with the recipe weight rather than with a conversion factor.
b. sometimes more accurate than using a conversion factor alone.

Example: Assume that an operator has a recipe with a total Weight of 168
ounces. If the portion size is 4 ounces, the total recipe yield would be
168/4 or 42 servings. If the operator wishes to prepare 75 servings, he
or she would need the following total recipe weight:

75 servings x 4 oz per serving 300 oz

Percentage Method

Original % of Total % of Total

Ingredient Oz Total Amount New Recipe
Amount Reqd. Amount

A 6 lbs. & 8 oz. 104 61.9 300 61.9 185.7

B 12 oz. 12 7.1 300 7.1 21.3
C 1 lb. 16 9.5 300 9.5 28.5
D 2 lbs. & 4 oz. 36 21.5 300 21.5 64.5
Total 10 lbs. & 8 oz. 168 100 300 100 300

Terms being used in determining the Cost of Food

 Beginning Inventory is the amount or value of all food on hand at the beginning
of the accounting period. It is determined by completing an actual count and valuation of
the products on hand.

Purchases are the sum cost of all food purchased during the accounting period.
It is determined by adding all properly tabulated invoices for the ac
Goods Available for Sale is the sum of the beginning inventory and purchases. It
represents the value of all food that was available for sale during the accounting period.

Ending Inventory refers to the amount or value of all food on hand at the end of
accounting period. It is also determined by completing a physical inventory.

Cost of Food Consumed is the amount or value of all food used or consumed
by the operation. Again, it is important to note that this is not merely the value of all food
sold but rather the value of all food no longer in the establishment and includes the
value of any meals eaten by employees.

Employee Meals is a labor related not food related cost. Free or reduced cost
employee meals are a benefit much in the same manner as medical insurance or paid
vacation. Therefore, thc value of this benefit, if provided should be transferred and
charged not as a cost of food but as a cost of employee benefits.

Cost of Foods Sold is the actual amount or value of all food expense incurred
by the operation except for those related to employee meals. It is not possible to
determine this number unless a beginning inventory has been taken at the start of the
month followed by another inventory at the end of the month.

Comparing Similar Periods

Daily reports allow management to accurately assess daily costs and sales, but
management often wishes to compare these costs and sales with similar periods. Doing
this allows management to better assess operations and cost control measures. The
following report can be a useful tool in identifying food cost, food sales, and food cost
percent for any specific day and for all the days to date in the period.
 Eight E's Food Cost Report
Date: March 8, 2014

Same Day Last To Date This To Date Last

Today
week Week Week

Food Sales 15,467.00 14,423.00 126,000.00 118,316.00

Food Cost 5,028.00 4,923.45 32,785.00 29,756.00
Cost % 32.51% 34.14% 26.20% 25.15%

VARIATIONS ON THE COST OF FOOD SOLD FORMULA

One of the most important point to remember; however, is that all of these
formulas should seek to accurately reflect actual cost of food sold by the operation for a
given time period.

Formula for Cost of Food Sold:

Cost of Food Sold

Unit Name: ____________________________
Accounting Period: _____________________

Beginning Inventory P xxx.xx

Plus

Puchases + xxx.xx
Goods Available for Sale xxx.xx
Less

Ending Inventory - xxx.xx

Cost of Food Consumed xxx.xx
Less

Employees Meal - xxx.xx

Cost of Food Sold P xxx.xx
Table 1: Cost of Food Sold

Unit Name: ____________________________

Accounting Period: _________ to _________

Beginning Inventory P xxx.xx

Purchases + xxx.xx

Goods Available for Sale xxx.xx

Ending Inventory - xxx.xx

Cost of Food Consumed xxx.xx

Employees Meal - xxx.xx

Cost of Food Sold P xxx.xx

Once Cost of Food sold is determined, we may now compute for the % Food
Cost using the Formula:

Cost of Food Sold

% Food Cost x 100 = x 100
Sales

Table 2: Cost of Food Sold hen products arc transferred from one unit to another

Unit Name: ____________________________

Accounting Period: __________ to ________

Beginning Inventory P xxx.xx

Purchases + xxx.xx
Goods Available for Sale xxx.xx
Ending Inventory - xxx.xx
xxx.xx

Transfer Out - xxx.xx

xxx.xx
Transfer In + xxx.xx
Cost of Food Consumed xxx.xx
Employees Meal - xxx.xx
Cost of Food Sold P xxx.xx
Table 3: No Employee Meals are Provided

Unit Name: ____________________________

Accounting Period: ___________ to _______

Beginning Inventory P xxx.xx

Purchases + xxx.xx
Goods Available for Sale xxx.xx
Ending Inventory - xxx.xx

Cost of Food Sold P xxx.xx

Table 4: If there are wastages or spoilages

Cost of Food Sold

Unit Name: ____________________________
Accounting Period: _____________________

Beginning Inventory P xxx.xx

Puchases + xxx.xx
Goods Available for Sale xxx.xx
Ending Inventory - xxx.xx
Wastage and Spoilage - xxx.xx
Cost of Food Sold P xxx.xx

Problem No. I

Determine the % food cost of an Ice Cream store with Sales of P98,00() given
the following conditions:

Beginning Inventory P22,500

Purchases 39,000
Ending Inventory 27,500
Employees meals 725
Solution:

Cost of Food Sold

Unit Name: Ice Cream Store
Accounting Period: June 1 to 7

Beginning Inventory P 22500

Purchases + 39000
Goods Available for Sale 61500
Ending Inventory - 27500
Cost of Food Consumed 34000
Employees Meal - 725
Cost of Food Sold P 33275

Therefore:

Cost of Food Sold

% Food Cost x 100 Sales = x 100
Sales

P33,275.00
= x 100
P98,000.00

= 34%
ESTIMATING COST OF FOOD SOLD

Many operators would like to know their food usage on a much regular basis than
once per month. When this is the case, the .4 physical inventory maybe taken as often
as desired. Counting food and beverage inventories have traditionally been a very time-
consuming task; however, because of the technology, counting has become easy
nowadays.

Shown below is a Six Column Form which can be utilized to estimate daily or weekly
Cost of food.

Sales Purchases Cost

To
Day Today Today To date Today To date
date

Monday 850.40 1,106.20

Tuesday 920.63 841.40
Wednesday 1,185.50 519.60
Thursday 971.20 488.50
Friday 1,947.58 792.31
Saturday 2,006.41 286.20
Sunday 2,404.20
Total 10,285.42 4,034.21

Six Column Food Cost % Estimate:

Purchases Today
1. Cost % Today = x 100
Sales Today

Purchases To date
2. Cost % To date = x 100
Sales To date
 Question like How will I determine the Inventory Value of the food items may be
asked by food service operator. The table below may answer this question.

Inventory Value Sheet

Inventory Date:
Unit Name: Tree Grill Sunday, January 21
Extended by: Demy Moore

Counted by: Barry Low

Inventory
Item Unit Item Amount Item Value
Value
Straw Packs 2.5 packs P 345.00/pack

Plastic Bag Packs (1 pack = 3 packs & 45

P 235/pack
(Small) 100 pcs.) pcs.

Case (1 = 5 4 cases & 2

Noodles P1,980.00/case
packs) packs

Chocolate
Kilograns 750 grams P350.00/kg
chips