DIPLOMA IN

FOOD
FOOD COSTING PRODUCTION
YEAR 2022-2023
NOTES
 FOOD COSTING NOTES | DIPLOMA IN FOOD PRODUCTION

UNIT-1 PRICING
MENU PRICING STYLES
Menu pricing refers to how food and beverages served by a restaurant are priced for sale to
the public. There are three basic styles/strategies widely used in the restaurant industry for
pricing menu items.

1. Traditional pricing: Traditional pricing, presented through a variety of strategies, depends

on varied and sometimes unreliable criteria for setting prices. Some of those strategies
include:
 Intuition: Setting prices based on feelings
 Competition: Setting prices based on what your competitors are doing
 Follow the Leader: Setting prices based on what the implied leader in the marketplace is
doing
 Psychological: Setting prices based on a customer’s perceived value
2. Cost plus markup pricing: This form of pricing structure involves adding an additional
amount, or markup, on top of product costs. For example, if a menu item costs $5 to make,
and the desired markup is 50 percent, the new price for that menu item is $7.50.
Cost plus markup pricing is a popular option for restaurants because of its simple formula that
can be applied to each menu item and is based on mathematical data such as the actual costs
that go into preparing a menu item.
3. Product cost percentage pricing: Product cost percentage pricing uses the targeted ideal
cost percentage and potential cost of an item to arrive at a menu price. The targeted ideal
cost percentage is how much an establishment hopes to spend on a menu item. For example,
if the targeted ideal cost percentage is set at 25 percent and the potential cost of the menu
item is $5, the equation would look something like this: 5 / .25 = 20, with 20 being the price
($20).
TYPES OF MENU
WHAT IS A MENU?
MENU DEFINITION
The traditional menu definition is a list of food or drink items available for purchase, or a list
of food or drink items that will be served.
TYPES OF MENU
1.A La Carte
In French, à la carte literally means “by the menu”. In the restaurant industry, àla carte is an
upscale term used in reference to menus that list items priced and
ordered seperately. If you want to give your guests plenty of flexibility, list your
options individually on an à la carte menu. They will pay for each individual
side they select, and entrées such as steak or baked eggplant will stand alone.
2. Du Jour Menu

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Du jour means “of the day, and the term isn’t limited to soups or cocktails. Du jour menus
offer flexibility for small and busy restaurants because they can be
customized every day or even throughout the day. These menus, which are
commonly written on chalkboards or displayed on digital displays, may include
anything from a single special item to a List of that day’s entrée choices. They are usually
presented in conjunction with a standard, static menu.
3.Prix Fixe Menu
French for “fixed price’, prix fixe describes a menu that quite literally has a fixed price. There
may be multiple options for each course, but ultimately, every guest will receive the same
number of courses usually an appetizer, salad or soup, entrée, and dessert and pay the same
standard price no matter which individual selections they choose. Prix Fixe menus could also
be referred to as Special Occasion menus, as they are commonly used only for special
occasions such as Thanksgiving, Christmas, or Easter.
4.Table d’hôte
Another French culinary term, table d’hote means “the host’s table” and describes a menu
similar to a prix fixe menu, but with a more upscale turn of
phrase. The term first referred to meals shared among house guests and their
hosts, who gathered at a single table to enjoy the same courses. However, unlike
the prix fixe menu, the prices of individual entree items may vary. A table
d’hôte menu is also excellent choice for holiday meals and cuisine that
encourages sharing, such as Easter brunch or Spanish tapas.
5.Cyclic Menu
A cycle menu is a menu or part of a menu that has repeated options over a specific period of
time.A sandwich shop that offers a certain sandwich on Monday. Then another sandwich on
Tuesday. And so on for the rest of the week. If they stick to those sandwiches on those days
and repeat that week after week, it’s a cycle menu.
Cyclic menus are often used for two reasons. One is that the cooking operation is relatively
small and doesn’t have the resources to cook-to-order items off a larger menu. The second is
for daily specials, like a happy hour menu. A bar or restaurant may have a static menu that
anchors their offerings, but a cycle menu on top of it. That cycle menu showcases the same
collection of special offers on the same days throughout the week
6.Static Menu
A static menu is a larger menu, typically divided into categories, that doesn’t change very
often. It’s the most widely used menu today, and it’s what you likely think of when you think
of menus.
That’s because the majority of restaurants and bars out there utilize a static menu. They
typically provide the best customer experience because of the amount of options they
provide, their consistency, and their easy navigation.
7.Beverage Menu
If you offer multiple beer, wine, cocktail, or even juice and soda options, you may want to
separate them on to a distinct beverage menu. Guests who start with water may order drinks
later if they have a beverage menu to peruse as they eat. Some beverage menus feature

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pictures of specialty cocktails, extensive lists of craft beer selections, or information about the
ingredients and traditions that inspired each beverage.
8.Dessert Menu
Many standard menus have dessert sections but because servers collect menus after the
entrées are ordered, guests can’t refer to these sections later.That’s why some restaurants
offer separate dessert menus, which may be displayed right on the tables or handed out after
all guests are finished eating.Upscale restaurants may even roll out a dessert cart that
features each item on the menu, which makes it harder to resist sweet treats even if
everyone’s full.

MENU PRICING METHODS

The following are the menu pricing methods
1. Pricing by Portion Cost
A standard portion cost is the cost of serving one item or drink as per standard recipe. In this
method, you determine the portion cost by dividing the purchase cost by the portion.
For example,you buy 50 kgs of chicken at Rs 200 per kilo.So, your purchase cost is Rs 10,000.If
you serve 250 gms Rs 10,000.If you serve 250 gms of chicken per portion, you will arrive for
Rs50 per portion.
2. Pricing By Raw Food Cost Of Item
In this method, you consider the raw food cost of the item and divide it bv the in cost of the
item and divide it by the desired food cost percentage to get the final price. For the same, you
should know the value of every ingredient in your recipe from the meat to the vegetables,
oil/butter, and condiments. You even account for the ketchup, mustard, or any other sauce
served. An account must be maintained for every item that goes on the plate
For example, for a Chicken Curry, you need to know the cost of all the ingredients in the
recipe, including the Chicken,masala, stock,oil, salt,coriander leaves. It will be something like
this:-
Raw Food Cost of Item + Desired Food Cost Percentage = Price Cost Percentage = Price
Also, you need to factor in indirect costs, fluctuations in food prices, and competition. So, if
you want a food cost percentage of 35%, and you allow a difference of 5% for various factors,
you would want to keep a mark up of 30% on your food item
3. Pricing By Competition
In this method, you take the prices determined by your competition as your reference price.
However, you can choose to price your items the same as your competitor, slightly lower to
attract customers who are looking for a bargain or marginally higher to attract customers who
are looking for premium quality. However, as your restaurant needs to function within a
specific price limit.
4. Pricing By Demand Analysis
This concept works on the rule of demand and supply. Restaurants in airports or food courts
at malls charge more for their food as they are the only available source of food. As the
demand is more than the supply, they are willing to get away with it. If your restaurant serves
exclusive or specialty menu items or offers a different ambiance (for instance, the revolving

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restaurant in Ahmedabad-Patang provides a 360° view of the city in its upscale restaurant),
you can charge more for the food and the experience. However, make a study of your market
and customer base before you price your menu items.

UNIT-2 COSTING
FOOD COSTING
DEFINITION
Food costing can be defined as the cost of food to prepare a dish other than labour and
overhead cost. In other words, it is the cost of ingredients of a recipe and does not include
other costs, such as labour and overheads.
IMPORTANCE OF FOOD COSTING
Food costing is an essential tool in determining whether food costs targets are being met. It
has a direct effect on the profitability of a restaurant. It helps in,
 Determining food cost incurred on each recipe. Thus, we can know earning per dish.
 Pricing a dish to achieve desired profit.
 Pricing a dish competitively against an industry benchmark.
 Cost control.
 Finding each menu item’s profit margin and decide which ones to promote through push
selling and promotions.
METHODS OF COSTING
 First In, First Out
Under the First In, First Out (FIFO) method, the oldest costs are assigned to inventory items
used, regardless of whether the inventory items were actually purchased at that cost. When
the number of inventory items purchased at the oldest cost are used, the next oldest cost is
assigned to sales.
 Last In, First Out
The last in, first out method (LIFO) is the exact opposite of the FIFO method, assigning the
most recent inventory costs to food items used from inventory.
 Average Cost Method
The average cost method assigns inventory costs by calculating an average of all inventory
purchase costs.
 Specific Identification Method
The specific identification method perfectly matches inventory costs with units used,
assigning the exact cost of each used inventory item when the specific dish is sold.

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COSTING TECHNIQUES
Besides the method of costing management also uses costing techniques for managerial
decisions .Following are the costing techniques :
1. Uniform Costing:
When same costing principles and/or practices are used by several undertakings for common
control or comparison of costs it is called Uniform Costing Technique.
2. Marginal Costing:
It is determining marginal cost by differentiating between fixed and variable cost. It is used to
ascertain the effect of changes in volume or type of output on profit.
3. Standard Costing:
Standard costing is a method where management pre-decides a standard cost for a product
based on various parameters and then actual cost of the product is measured against it. The
result is deviation technically called as variance. The variance/deviation from standard cost is
then analysed for the reasons and corrective action is taken.
4. Historical Costing:
It is a technique of costing whereby costs are ascertained after they have been incurred. It
aims at determining costs actually incurred on work done in the past. It is used to compare
costs over different periods may yield good results.
5. Direct Costing:
It is the practice of charging all direct costs, variable and some fixed costs relating to
operations, processes or products leaving all other costs to be written off against profits in
which they arise.
6. Absorption Costing:
It is the practice of charging all costs, both variable and fixed to operations, processes or
products. This differs from marginal costing where fixed costs are excluded.

UNIT-3 STANDARD RECIPES

What is a standard recipe??
A standard recipe is a method of standardizing recipes in such a way so that there is tight
control on cost and quantity. Standardization should not be allowed to stifle the individual
chef’s flair. A hotel can control quantities, quality and cost more easily. It is most useful to use
a standard recipe in a hotel where there are a number of chefs cooking the food. The
standard recipe lays down all the ingredients, method of production and quantities used. It
indicates the number of portions to be served. This will determine the size of the portion of
production control. A section giving variation can be added to reduce the total number of
recipes required.
Advantages of using a standard recipe
 Provide consistent high-quality food items that have been thoroughly tested and evaluated.

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 It controls portion size which is very important in costing a dish.

 It is easy to determine the food cost of a particular dish.
 It simplifies the pricing of a particular dish.
 It reduces the possibility of error.
 Using standardized recipes supports creativity in cooking.
 The quantity of ingredients needed for production can be easily calculated based on the
information provided on the recipe Standard Recipe Card

Objectives of Standard Recipe

1. To determine the quantity and quality of the ingredient be used.
2. To obtain the yield obtainable from a recipe.
3. To determine the cost per portion.
4. To determine the nutritional value.
5. To facilitate portion control.
6. It helps in costing of dishes, pricing menus for the banquet.
7.It helps in uniform quality and taste.
8. Require less supervision.
9. Less training is required for a newly appointed employee.
10. Establishes food cost control.

Common Recipe Elements in a Standardized Recipe

1.Recipe Name /Recipe Card Number/ Section /Meal Pattern Contribution: Includes
 the name of the recipe,
 the recipe card number,
 the section that the recipe should be classified under(grains, meat and meat alternate, etc.)
and
 the contribution that one serving makes
Example: Pizzeria Pizza Crust, B-48, Grains, 2.5-ounce equivalents per portion.
2.Ingredients: Listed in order of preparation and specifies the type of food used, such as fresh
apples canned corn; macaroni (uncooked); ground beef (raw).
3.Weight and Measures: The weight and measures of each ingredient used in both weight
and volume measure. Note: weighing ingredients is faster, easier and more accurate.
4.Procedure: Directions on how to prepare the recipe. Include directions for mixing, number
and size of pans, cooking temperature and time, and the directions for serving
5.Yield: The yield of a recipe should be recorded as the total weight or volume produced per
50 or 1000 servings (or another specified number of servings).
Example:

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50 servings: 23 pounds four ounces or 100 ounces or 100 servings: 46 pounds eight ounces or
50 servings: one quart 2 1/4 cups.
6.Serving Size: List the number of servings that the recipe yields and the portion size to be
served.
Example:
50-1/2 cup servings.
Consider including the suggested portioning tools to use.
Example: 50-1/2 cup servings (No. 8 scoops).
7.Cost per serving(optional): Determine the total cost to prepare the recipe an divide by the
number of servings prepared to equal the cost of one serving
8.Equipment and Utensils to Use: Listing of cooking and serving tools needed to produce and
serve the food item.
9.Cooking Temperatures and Time: Appropriate temperature and amount of time needed for
the highest quality product.

The format

FORMAT OF RECIPE CARD

Standard Yield
The yield of a recipe is the number of portions it will produce. Yields can also be expressed as
a total volume or total weight the recipe produces.

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Standard yields for the main, often higher cost, ingredients such as meat, may also take into
consideration portion cost and be determined in part by calculating the cost per cooked
portion.
Standard Yield Test
 Trim Test: The trim test determines the excess fat that has been left over by the
butcher.
 Trimming Yield Percentage = Fully trimmed meat/ Meat before trimming
 Ageing Yield: Certain cuts of meat are required to be aged for varying length of time.
Ageing causes to lose weight due to loss of moisture in the meat. Normally 5% to 10%
shrinkage occurs in the first two weeks of age with lesser shrinkage upon further
ageing. There is no convenient method to determine the ageing yield percentage.
 Bonning Yield: This yield gives you the amount of edible meat without bones.
 Cooking Test: All meat product will shrink during the cooking process due to loss of
moisture. The amount of shrinkage depends upon the degree of temperature at which
it is cooked. The method of cooking affects shrinkage.

UNIT- 4 MATERIAL COSTING

Material cost
Material is the first and the most important element of cost. Even a minor change in the
material cost will spell disaster for a manufacturing concern. Therefore, the control of
material cost is very important.
Types of material
Materials can be classified into four categories:
 Raw material: basic material supplied in crude form for production
 Consumable stores such as lubricants, oil, cotton waste, etc
 Tools, pattern, maintenance materials like hammer, screws, etc

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 Components: items that are finished goods but are required to manufacture another
product, eg, batteries, etc
Definition Of Material control
“Material control is a systematic control over purchasing, storing and consumption of
materials, so as to maintain a regular and timely supply of materials, at the same time,
avoiding overstocking.”
Objectives of Material Control
 To ensure uninterrupted supply of materials to the production and service
departments.
 To prevent overstocking and under stocking
 To ensure effective and economic use of the available storage space and labor.
 To minimize the cost of storage.
 To identify and locate storage easily as to issue the materials immediately
 To maintain up to date stores records
 To facilitate stock taking.
 To reduce the risk of spoilage and obsolescence
 To reduce the misappropriation of materials.
Essentials of material control
 Materials Planning
 Materials Purchase/Receiving
 Storage
 Materials issue
 Materials Accounting
Materials Planning
It includes:
 Centralized/ decentralized Purchasing
 Classification and codification
 Standardization and simplification

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 Types of stores: centralized/de-centralized

 Fixation of levels:Reordering level,Minimum level,Maximum level,Danger
level,Economic order quantity
Materials Planning
 Selective control through ABC Analysis
 VED analysis
 Perpetual Inventory System
Material Purchasing and receiving

These are the steps involved in purchasing process in order to ensure food cost control and
avoid pilferage so that food costs does not go high.

a) Aims -

The primary aim in purchasing of food is to obtain the best quality of merchandise, based on
specifications established at the most favorable price.

b) Purchasing staff -

Purchasing is a function concerned with the search, selection, purchase, receipt, storage and
final use of a commodity in accordance with the catering policy of the establishment. The
person responsible for purchase is also responsible for receiving, storing and issuing. In large
hotels, there is a full time purchase manager/officer responsible for all purchases – F&B
commodities and non-consumable. In small hotels, the storeroom items (food) are purchased
by an assistant manager, and perishables (food) such as meat, poultry, fish, vegetables, etc. are
purchased by the chef.

c) Source of Supply –

A catering establishment depending on its size, type and style and also on the quantity and
quality of commodities required decides on the source of supplies, they may be –

i) direct purchase in cash from market,

ii) through suppliers – on contract & in cash,
iii) direct from wholesalers.
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d) Selection of supplier -

In case of selection of a supplier, a great deal of exercise and detailed enquires have to be made
–

i) details about the firm, to find its reputation,

ii) information from other customers about their product and services,
iii) recent price lists,
iv) trade terms and conditions such as cash discount, trade discount, etc.,
v) sample of products to check quality,
vi) a visit to the supplier’s firm,
vii) minimum order level,
viii) ordering procedures,
ix) delivery procedures,
x) part deliveries or standing orders,

On selection, the suppliers are put on an approved “suppliers’ list” and periodically they are
evaluated on –

i) price performance
ii) quality performance
iii) delivery performance

e) Types of food purchased –

There are 2 categories –

i) Perishables – these are those items that have a short useful life after they are
received. They are best to be procured on a daily basis with 1-3 days stock in hand.
E.g. – vegetables, dairy products, etc.

ii) Non – Perishables - these are those items that have a longer shelf life. They can be
stored for weeks or even months. E.g. – cereals, pulses, etc.

f) Quality Purchasing –
The quality of an item to be followed would be determined by the
Purchase Manager, Executive Chef and the F & B Manager as per
the catering policy, the menu requirements and its price range, which

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should be stated in the Standard Purchase Specification (SPS).

The quality to be purchased should be stated in terms of grade or brand .

E.g. – Tomato Ketchup - Kissan

Prawn – Grade A

Food Quality

Factors for different commodities:

The food quality factor is mainly concerned with the food i.e.:
Texture
Composition
Keeping qualities
Flavor
Smell etc.

The food quality factors for certain commodities are as follows:

A) FRUITS&VEGETABLES
1. Count & weight
2. Wastage in terms of peel.
3. Shape and size
4. Color
5. Firmness
6. Smell
7. Taste

B) CANNED FOODS
1. Drained weight.
2. Density(juices etc)
3. Color
4. Taste and appearance

DEFINITION OF YEILD

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It is the maximum usable amount that is obtainable from a particular product.

TESTS TO ARRIVE AT A STANDARD YEILD

 Usually yield tests are performed on food bought as purchased and need to be converted
to ready to cook.
 Items received already proportioned need not undergo any yield test.(soybean, cashew etc)
 Some foods received ready to cook might need yield tests.

 Yield test tells us:

1. Yield of kg, lts, grams, portions&so on.
2. Cost per kg, lt, gm,&so on.

 Yield tests are pre control technique because we know the cost of the item and we can
adjust the menu selling price before serving the item.

The objective of yield testing is simply to discover the respective yields of whole range of
commodities available for any one purpose and to determine the unit cost concerned.

 Example of test to arrive at standard yield:

a) BUTCHERY TEST
1. Waste
2. Useable meat
3. Bones
4. No. of portions
5. Fat amount and color
6. Color of meat flesh
7. Bone structure
8. Color of bones

b) COOKING TEST
1. Cooking time
2. Cooking losses
3. Taste after cooking
4. Appearance after cooking
5. Flavor after cooking

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6. Shrinkage

The above mentioned points are observed in these tests. These tests can be used to compare
two examples. They form a basis for standard purchase specification.

g) Definition of SPS

Standard Purchase Specification (SPS) is concise descriptions of quality, size, weight or count
factors desired for a particular item.

An SPS must contain –

i) Definition of each item,

ii) Grade or brand name of the items,
iii) Size, weight or count,
iv) Unit against which prices should be quoted,
v) Special note for the commodity,
vi) Photograph of the ideal / standard item, e.g. – table apple, cherry tomato.

Objectives of SPS –

i) to establish a suitable buying standard for a particular commodity for the catering
establishment,

ii) to furnish to the suppliers in writing in specific terms the requirements of the catering
establishment,

iii) to help in deciding the price of a commodity,

iv) to obtain a standard product,

v) to measure the performance against the standard product.

Advantages of SPS –

i) establishing a buying standard of a commodity so that a standard product is

available for the customer,
ii) inform the supplier in writing, by drawing, or with a photograph or describing
precisely what is required,
iii) provides detailed information to the receiving department and store as to the
standard of foods to accept,
iv) makes everyone aware of the differences that can occur because of

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the difference in size, weight, quality and quantity of a product.

v) the specifications act as an aide memoire to all concerned of what
was agreed.

h) Purchase Procedure

The purchase procedure will depend upon he nature, size, standard, location of the
establishment and the forecast of future requirements.

The purchase procedure has the following steps –

i) preparing standard purchase specification

ii) contacting new suppliers
iii) taking quotations from both new and approved suppliers
iv) selecting suppliers
v) discussing and deciding delivery needs with the suppliers
vi) placing purchase order form.

 Sources of supply

 A establishment depending upon its size, type and style and also on its quantity and
quality of commodities required decides its sources of supply.
 It may be direct purchase in cash form market or suppliers on contract basis or directly
from the whole seller.
 In case of selection of a supplier a great deal of exercises and detailed enquires have to
be made on selection, the supplier are put on an approved suppliers list and periodically
they are evaluated on price, quality and delivery performances.

Purchasing Methods –

i) Contract Purchasing

A contract is entered with a supplier for the commodities to be supplied at regular intervals,
usually at an agreed upon price which is advantageous for both.

a) The specific period contract - it determines the source of supply and the price of goods for
a stated period i.e. for 3 to 6 months suitable for items which has fairly stable price like
bread, butter, milk etc.

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b) Specific quality contract - it aims to secure continuity of supply of a given quality of an

essential item of an agreed price over a particular trading period- suitable for fruits,
vegetables etc.

ii) Periodical Purchasing

The requirements of the establishment are periodically estimated and orders are
placed on a weekly / fortnightly / monthly basis. This is suitable for groceries.

iii) Daily Market List / Daily Market Quotation

This method is used for purchasing perishables on a daily basis. A daily market list is prepared
by the executive chef on the basis of quick stock taking of food. On receipt of the ‘Daily
Market List’ the purchase officer contacts approved suppliers for their prices and then orders
for the supplies.

iv) Cash & Carry

It is purchasing from the market at a competitive price, and the buyer can personally check
the quantity and quality of each item. The purchaser has to pay in cash and has also to
arrange for the goods to be transferred to the establishment.

v) ‘Paid Reserve’

In this the caterer buys in advance a large quantity of items like beef, jumbo prawns, etc. to
cover the needs of future months and stocks of which is kept with the supplier, and the
supplier is paid for this. The caterer requisitions his requirements from the supplier.

vi) Cost Plus

In this case, the approved supplier is paid exactly the same price that he has paid for the
commodities plus an agreed percentage to include the cost of handling, delivery charges and
a margin of profit. Suitable for welfare catering establishments.

vii) One Stop Shopping / ‘Total Supply’

There are some suppliers who are able to offer a full supply service of all commodities. The
advantage of this system is that the establishment has to negotiate with one supplier, a
reduced volume of paper work and fewer deliveries.

viii) Centralized Purchasing

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Suitable in chain operations. In this system the requirements of each individual unit is relayed
to a central office. The central office decides the total requirements of all units and then
makes total purchases either, for delivery to the individual units by he dealer, or, for
centralized delivery.

ix) Sealed Bids / Tender Purchase

In this procedure sealed quotations are required from one or more suppliers and orders are
placed where the terms are of best advantage to the buyer, after all elements of price,
quality, yield and service are considered. For a Govt. institute the offer goes to the lowest
bidder.

x) Standing Order

The supplies of certain food items (especially of highly perishables like – milk, ice-cream,
bread, etc.) can be asked for a supply without securing price quotation first. However, it is
very important that the latest prices of these items are available to the person when checking
the bill for these items.

Additional Methods

Apart from the above mentioned method of food purchase the following methods are also
applicable in hotels:

EMERGENCY PURCHASE
To purchase an item on an emergency basis, a risk purchase form has to be filled up& sent to
the supplier.

TOTAL SUPPLY METHOD

There are some suppliers who are able to offer supply service of all the commodities. The
advantage of this system is that the company has to negotiate with one supplier & there is a
reduced volume of paper work.

PURCHASE ORDER FORMS

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It is a complete record of all orders made and it helps the receiving department to take
necessary action for any foodstuffs arriving late.
The purchase order is made in 1 + 5 copies…

Original copy--- to the supplier

1st copy ------ to accounts
2nd copy ------ to purchase department
3rd copy ------ receiving department
4th copy ------ indenting department
5th copy ------ master copy.

j) Ordering Cost –

it is the cost incurred in placing an order with a supplier, e.g. – stationery, manpower, time,
transportation, etc.

k) Carrying Cost –

It is the cost incurred in making arrangement for the commodities to be delivered to the
establishment, e.g. – manpower, transportation, etc.

l) Economic Order Quantity (EOQ) –

The quantity, which is most economical to order & to stock considering all factors bearing on
the situation. the basis of the EOQ is the usage rate, ordering cost and the time taken. Basically
the focus is on maintaining optimum levels of each units are there in each lot and the speed at
which they are used up from the stores.

E.O.Q = (2A x Cp) / Sc.

Where A = Annual Usage, Cp= Cost of Purchase, Sc=Storage Cost (per unit).

The size of the economic order quantity depends upon

 Inventory Carrying Cost.
 Cost of Purchasing.
 Consumption
 Interest on Capital
 Quantity discount.

Sometimes Economic Order Quantity is called Re-Order Quantity.

18
 FOOD COSTING NOTES | DIPLOMA IN FOOD PRODUCTION

XYZ HOTEL LTD

PURCHASE ORDER FORM

No....... For……..

Date ……. Store dept

Reg.no……….

To (suppliers)
QUANTITY DESCRIPTION PRICE TOTAL

(all deliveries accepted

subject to count, wt., and
specifications)

TOTAL=

ALL GOODS DELIVERED The acceptance of this order is

TO……………….. acceptance of all conditions herein.
ON……………….
SIGNATURE
(Purchase Officer)

19
 FOOD COSTING NOTES | DIPLOMA IN FOOD PRODUCTION

Receiving Control

a) Aims –
To ensure one gets the commodities that one has ordered –
i) in the right quality,
ii) in the right quantity and
iii) receive at the right time.

b) Receiving Staff –

i) In small / medium establishments – it is the same person who does purchasing is

responsible for receiving.
ii) In bigger establishments – there is a receiving personnel / clerk with assistants takes
care of all kinds of receiving.

The Receiving Personnel should –

i) be able to read & understand purchase orders and invoices,

ii) have knowledge of weights and measures,
iii) have good knowledge of quality of food,
iv) be good at performing calculations.

c) Facilities and Equipments –

 There should be a hassle free loading and unloading dock with an inclined plane.
 When the storage area is away or on different floor than receiving then an elevator
is desirable.
 Weighing scale
 Trolleys
 Crates

Records maintained at the receiving department:-

a) Goods received book
b) Daily receiving report
c) Meat tags
d) Credit note

Documents given by the supplier in receiving control:-

a) Bills/invoices
b) Delivery notes

20
 FOOD COSTING NOTES | DIPLOMA IN FOOD PRODUCTION

Receiving Procedure –

i) All goods are received at the centralized receiving department within specified time only,
under the supervision of the receiving clerk.

ii) The receiving clerk checks for quality (against SPS), quantity, price and time (against
purchase order) and matches with the invoice.

iii) When everything is in order he signs on the copy of invoice or delivery note and returns
it to the supplier’s man.

iv) If there is any discrepancy – shortage / goods not up to the set standards – a credit note is
made and handed over to the supplier’s man.

iv) The invoices are posted on the receiving sheet / daily receiving report (DRR) / goods
receiving report (GRR). Then the invoice and the receiving sheet are sent to the F&B
Controller’s office for checking.
v) The goods are sent to appropriate sections – stores or departments.

 When receiving directs / perishables a chef of the concerned kitchen must be present at
the receiving area.

Blind Receiving –

When there is no document (invoice / delivery note) from the supplier, instead it is directly
send to the accounts and a list of articles is send along with goods. the receiving clerk has to do
his job more carefully preparing a Blind Receiving Report, and weighing and counting all good
as per the purchase order and checking their qualities as per SPS with the help of list given by
supplier. the receiving clerk then sends the complete list to the accounts department.

Assessing the performance and efficiency of receiving department:-

a) By strict supervision of the receiving department’s recordkeeping and paperwork.

b) To ensure that receiving schedule are strictly followed.
c) To evaluate the receiving clerk’s performance by blind receiving.

21
 FOOD COSTING NOTES | DIPLOMA IN FOOD PRODUCTION

Frauds in receiving department.

a) Receiving department accepting lower quality commodities which is not acceptable as per
standard purchase specification.

b) Receiving department receiving less quantity of a commodity. Thus not following the
purchase order.

c) Receiving department not following the delivery time schedule.

Brief description of the documents –

a) Invoice/delivery note – a document containing detailed information about the food

deliveries, it is always in duplicate, the duplicate copy is signed and returned by the receiving
clerk to the supplier’s man and the original is sent to accounts for billing.

b) Credit memo/ Credit memorandum / Credit Note -

When there is a shortage or goods not as per SPS, the receiving clerk writes a credit memo/
credit memorandum / credit Note mentioning details and requesting the supplier to remove
the goods mentioned in this from the bill giving the reason for returning along with the
quantity.

c) Meat Tag –

These are the tags put on the butchery items mentioning all details of cuts, weights, price etc.
when the item is issued then the issuing date is put on it and copy is sent to two places one to
f&b control and the other to the stores.

It is required because –

i) To have control over expensive food, like prawns, mutton, etc.

ii) Assists in controlling the stock levels of the items,
iii) Helps in yield testing,
iv) It helps in efficient rotation of stock.

d) Goods received book/daily receiving report:-

22
 FOOD COSTING NOTES | DIPLOMA IN FOOD PRODUCTION

Whatever goods come are registered here and then sent to the stores.

XYZ SUPPLIERS LTD

INVOICE

No. ----------- Date –

To,
ABC HOTELS LTD
Sl Description Quantity Unit Price Amount
No.

Less Discount

TOTAL

23
 FOOD COSTING NOTES | DIPLOMA IN FOOD PRODUCTION

----------------------------------
SIGNATURE

BLIND RECEIVING REPORT

XYZ Hotel Date

No.

Stock no. Quantity Description Unit Remarks

Receiving Clerk
Signature

DELIVERY NOTE
To A B C Supplier
XYZ Hotel Date
No.

Order No. Quantity Description Unit Value Remarks

Delivered by Receiving by

24
 FOOD COSTING NOTES | DIPLOMA IN FOOD PRODUCTION

CREDIT NOTE

To XYZ Hotel

A B C Supplier Date
No.

Please issue credit note for items listed below

Quantity Unit Item Cost (unit) Cost (total)

Delivered by Receiving by

Copy to - F&B Controller

Accounts

25
 FOOD COSTING NOTES | DIPLOMA IN FOOD PRODUCTION

Supplier Delivery Dry Wet stock Subtotal Tax Total

note/invoice stores wet stock
no.
A B C D E F G H

Grand
Total

GOODS RECEIVING SHEET – FOOD

Receiving clerk

A-MEAT
B-FISH
C-POULTRY
D-VEGETABLES
E-FRUITS
F-DAIRY PRODUCTS
G-BREADS
H-BEEF

26
 FOOD COSTING NOTES | DIPLOMA IN FOOD PRODUCTION

MEAT TAG

XYZ Hotel

ITEM NO.
CUT
TOTAL WEIGHT
TOTAL VALUE
COST/KG
SUPPLIERS
DATE RECEIVED
DATE ISSUED

F&B CONTROL COPY STORE KEEPER

……………………………………………………………………………….

MEAT TAG

XYZ Hotel

ITEM NO.
CUT
TOTAL WEIGHT
TOTAL VALUE
COST/KG
SUPPLIERS
DATE RECEIVED
DATE ISSUED

F&B CONTROL COPY STORE KEEPER

27
 FOOD COSTING NOTES | DIPLOMA IN FOOD PRODUCTION

Storing & Issuing Control

 Aims of Store Control

i) To ensure that an adequate supply of food materials for the immediate need of the
operation are available at all times,
ii) To prevent losses through spoilage or pilferage,
iii) To have minimum working capital.

 Storing Procedure / Control

After Receiving

----------------------------------------------------------------------------

Directs / Perishables Dry Stores / Non- Perishables

Kitchen Stores

Utilized under the able supervision of Quantities entered into

Executive Chef Storeroom register

Goods are stored in the

appropriate places &
bin cards are updated

Issued to various
departments
on receiving requisition

28
 FOOD COSTING NOTES | DIPLOMA IN FOOD PRODUCTION

 Layout and Facilities in a Storeroom -

The layout of the store should be such that it minimizes the distance walked by the
storekeeper and the inventory list be printed in the same order in which items are placed
in the store. This will facilitate the quick and efficient stock taking. Items, which are issued
daily, must be located near door and remainder being arranged in a logical sequence.
Commodities should be grouped together and each of them arranged into sections.

Facilities in storeroom –

i) Appropriate storing space

ii) Appropriate temperature & adequate lighting
iii) Proper storing equipments, like shelves, containers, refrigerators, cold room, etc.
must be available,
iv) Proper issuing equipments, like weighing scales, measuring containers, trolleys, etc.
must be available,
v) Proper security,
vi) Proper pest control,
vii) Proper sanitation.

29
 FOOD COSTING NOTES | DIPLOMA IN FOOD PRODUCTION

 Arrangements of food –

i) Items, which are issued daily, must be located near door and remainder being arranged
in a logical sequence.
ii) Groceries and canned goods are stored on shelves by groups like –

1. Tea, Coffee, etc

2. Spices
3. Condiments
4. Cereals
5. Nuts
6. Syrups, etc.

iii) Canned goods must be checked for spoilage – one must watch out for swells, leaks,
tampering or improper count – matter must be reported to the
F&B Controller.
iv) Pricing of groceries – all groceries are priced and marked before putting on shelves.
Receiving dates must be mentioned (for FIFO) and some put a special label or a sticker
to stop pilferage.
v) Expensive groceries - like caviar, saffron, truffles, etc. are placed under lock and key.
The keys are with the storekeeper and only a few can access it.

30
 FOOD COSTING NOTES | DIPLOMA IN FOOD PRODUCTION

Job description of store room clerk:-

Job title:-store room clerk

Department:-store
Reports to:-storekeeper
Responsible for:-subordinates equipments
Scope (of promotion):-Asst. storekeeper/Storekeeper

Responsibilities:-

1. To upkeep and maintain the store room register.

2. Assist store-keeper in all his responsibility.
3. Upkeep bin cards to know stock in hand.
4. Assist the store-keeper in proper storing and issuing of goods.
5. Assist the store-keeper in finding the cost of commodities.
6. To ensure hygiene and cleanliness in store.

Location of storage facilities

 It should be located near to both receiving and usage area.

 The store should be at same level as the receiving area.
 Generally the store room is located at the back of building which would enable the good to
come right in.

Security

i) Adequate security arrangements are of utmost importance.

ii) Unauthorized personnel are not allowed.
iii) Keys of the storeroom are issued to individuals designated by the chief accountant after
entering into a Key Log Book.
iv) Proper strong locks to be used to lock the storeroom once it is closed.

Stock Control

 Goods are stored in a manner so that FIFO can be followed.

 Each item stored is entered in the storeroom register, and subsequently the bin card is
updated.
 Each item issued is entered in the storeroom register and issued to authorized person
only, on receiving a requisition, and subsequently the bin card is updated.

31
 FOOD COSTING NOTES | DIPLOMA IN FOOD PRODUCTION

g. Aims Issuing Control -

i) To ensure the proper authorization for the release of merchandise,

ii) To account properly for daily food issues.

h. Issuing Procedure / Control

i) All items are issued against requisitions prepared and signed by authorized person,
ii) The requisitions are pre-numbered and are in triplicate, the copies are distributed as
follows – original – store, duplicate – department, triplicate – book copy,
iii) The storekeeper is intimated about persons who can sign and authenticate requisitions.
iv) The storeroom register is updated after issuing of goods.

Requisition:-

1. All items are issued against requisition prepared by authorized person.

2. The requisitions are in triplicate.
3. The original and carbon copy are in different colors.
4. The top copy goes to store, 2nd copy to the department concern.
5. The third copy is the book copy.

Transfer note:-

 For inter or intra departmental transfers.

E.g.:- 1. Lemon from kitchen to bar.
2. Fish from main kitchen to coffee shop kitchen.
For this transfer note is generated.
 Transfer note is generated in duplicate copy.
 Fist copy goes to supplying department.
 Second copy remains with receiving department.

i. Stock Taking -

There are two types of stock taking-

32
 FOOD COSTING NOTES | DIPLOMA IN FOOD PRODUCTION

i) Perpetual Stock Taking – it is the stock registered in the storeroom register or

the book stock.

ii) Physical Stock Taking – it is stock taking by physically counting all goods
in the storeroom and noting them on a physical inventory sheet.

Perpetual stock taking/perpetual inventory procedure-

It is also known as continuous stock taking. The essential features of this type of stock taking is
that the number of items of ingredients and materials which are used over the past period of
few days or fortnight are counted and checked at frequent intervals and physical balance of
stock is compared with the balance shown by bin cards and stock books. Thus, a perpetual
inventory is an up to date record of all purchases and store room issues along with their balance
for each commodities.

Physical Stock Taking / Physical Inventory Procedure –

It is generally done on the last day of the trading period (a trading period is of 28 days – thus
there are 13 trading periods in a year) or it can be done once a month. It is generally done by
two persons – one from the accounts department and the other from F&B Controls or Purchase,
one of them count the goods and other note it on the physical inventory sheet. This is done to
ascertain the actual value of goods and compare with its book value. A report is generated and
sent to GM, F&B Manager, Accounts, Purchase, Executive Chef and Storekeeper.

Stock levels:-

There are three basic Stock levels.

A) Maximum stock level:- this is the upper level beyond which items must not be stocked.
this level is decided after considering consumption frequency ,durability of items, availability.

B) Minimum stock level:- it is the level of stock to be maintained at all times so that
production and sales do not get obstructed due to want of material and ingredients.

C) Recorded level of stock:- between the maximum and minimum level a, point is set as the
recorded level, at this point the orders for fresh supplies must be placed with suppliers .to
ensure that the stock of ingredients arrive before the existing stock level fall below the
minimum level.

Comparison of actual physical inventory and book value:-

33
 FOOD COSTING NOTES | DIPLOMA IN FOOD PRODUCTION

Sometimes there is a difference between the actual physical inventory and book stock of a
particular item. the causes of difference are as under:

1. Change in volume due to evaporation or absorption of moisture.

2. Impossibility of breaking up or cutting bulk without loss.
3. Shortage in actual inventory due to pilferage and careless handling.
4. Careless measurement at the time of receiving.

j. Records Maintained -

i) Bin Card – kept with the goods on their shelves and updated on receiving & issuing
goods.

ii) Stock Record Card – same as bin card

iii) Food Storeroom Requisition – it is for requisition of goods from store.

iv) Kitchen Transfer – it is for intra or interdepartmental transfer of goods, like from main
kitchen to coffee shop kitchen, from coffee shop kitchen to bar, etc.

v) Physical Inventory Sheet – it is for noting quantity of goods during physical stock taking.

34
 FOOD COSTING NOTES | DIPLOMA IN FOOD PRODUCTION

Bin card

ABC Hotel Ltd

Commodity: Re-order point: Supplier:
Max stock:
Min stock: Bin no. : Code no. :

Date Ref In Out Bal Date Ref In Out Bal

35
 FOOD COSTING NOTES | DIPLOMA IN FOOD PRODUCTION

STOCK RECORD CARD

ABC HOTELS LTD.

BIN NO-
SUPPLIER-
COMMODITY-
REORDER QUANTITY-

REORDER LEVEL-
DATE REF UNIT RECEIVED ISSUED BALANCE
COST NO. RS. NO. RS. NO. RS.

36
 FOOD COSTING NOTES | DIPLOMA IN FOOD PRODUCTION

PERPETUAL INVENTORY CARD

ABC HOTELS LTD.

ITEM- COST-
SIZE- PAR STOCK-
SUPPLIER- RE-ORDER POINT-
DATE ORDER NO. IN OUT BALANCE

37
 FOOD COSTING NOTES | DIPLOMA IN FOOD PRODUCTION

FOOD STORE ROOM REQUISITION

DELIVERY DATE- INDENT NO-

DEPARTMENT-
SL NO. STOCK ITEM SIZE QNTY QNTY UNIT TOTAL
NO. REQUIRED ISSUED COST COST

REQUESTED BY- INDENT MADE BY- (CONTROLLER)

DELIVERED BY - RECEIVED BY-

38
 FOOD COSTING NOTES | DIPLOMA IN FOOD PRODUCTION

KITCHEN TRANSFER NOTE

NO-
DATE-
FROM-
SL NO. ITEM SIZE QNTY COST
TRANSFER
UNIT TOTAL

REQUESTED BY- INDENT MADE BY-

DELIVERED BY- RECEIVED BY-

(COST CONTROLLER)

39
 FOOD COSTING NOTES | DIPLOMA IN FOOD PRODUCTION

Material Accounting-
It Includes:
 Receipt of materials
 Issue of materials
 Losses and surplus of materials
Function of Purchase Department
 What to purchase
 When to purchase
 Where to purchase
 How to purchase
 At what price to purchase
Procedure followed by purchase department
 Receiving a purchase requisition
 Exploring the source of supply
 Choosing the best supplier
 Preparation and execution of Purchase Order
 Receiving and Inspecting Materials
 Checking and passing of bills for payment.

40
What is Purchase Requisition?
Document generated by a user department or storeroom-personnel to notify the purchasing
department of items it needs to order, their quantity, and the timeframe. It may also
contain the authorization to proceed with the purchase. Also called purchase request or
requisition. It is a form used as a formal request to purchase department to purchase
materials it needs.
Format of Purchase Requisition

What is Purchase Order?

A purchase order (PO) is a commercial document and first official offer issued by a buyer to
a seller, indicating types, quantities, and agreed prices for products or services. It is used to
control the purchasing of products and services from external suppliers. It is the document
which gives the authority to the department that will receive the materials and to the
accounting department to accept bills from the supplier.
Format of Purchase Order

41
 Store Records-BIN CARD
 A document that records the status of a good held in a stock room.
 A typical retailing business with a large stock room will use a bin card to record a running
balance of stock on hand, in addition to information about stock received and notes about
problems associated with that stock item.
 A Bin card makes a record of the receipt and issue of materials and is kept for each item of
stores carried.
 Receipt and issue column of the bin card records movement of stores.It is placed right next
to the specific material.
 It is maintained by the storekeeper and he is responsible for it.
 For each stores, minimum, maximum and ordering quantity is written in the bin card which
helps the storekeeper to control the stores.

Sales Control

a. Factors to be considered while fixing selling price –

i) it should cover all costs,

ii) it should be reasonable for the guest in terms of Value For Money (VFM),
iii) It should generate reasonably good amount of profit.

b. Calculation of Selling Price / Menu Pricing

42
The various ways of determining Selling Price / Menu Price are-

i) Cost Approach –

 Cost Plus – Is determining the Food Cost (FC) and multiplying it two & half times or it is
250% of food cost –

Selling Price = FC x 2.5 or FC x 250% or FC + 150% of FC

 Gross Profit (GP) Method –

Selling Price = FC + GP (Where GP= Labour Cost + Overhead Cost + Net Profit),
Calculating FC and taking it to be to be 40%, then GP is 60%

 Return on Investment – The total investment is calculated and a mark up is decided on it,
e.g.: 20% on the investment, and now pricing is done in a way that the investment and
the mark up is brought back / recovered within a specific period of time.
E.g., if the investment is Rs. 1,00,000 and 20% mark up being Rs. 20,000, one must now
calculate a return on Rs. 1,20,000.00 within a specific period of time.

ii) Market approach –

 Copying Competitors’ Price – copy the menu price of the competitors of the same grade.

 Going Rate / Customary Rate – it is pricing the commodity according to its current
prevailing rate in the market, e.g. - soft drinks are priced Rs. 10 for 300 ml.

 Pricing Policies-

 Psychological Pricing – this is pricing the commodity at that price buying at which the
customer would feel he / she has paid less than the real value, e.g. – pricing at Rs. 99/ Rs.
499

 Loss Leader – these are items which are sold below or at par with their cost price to attract
customer towards it and then the customer ends up buying other products.

 Skimming Pricing - in this case the product is sold with large profit margin, the idea is to
make as much as profit possible in a short period. Generally done by established brands
with innovative / new product.

 Market Penetration Pricing - in this the product is sold with a little profit margin, the idea
is to get into the market and make the product known to the buyer. Generally done by
new companies when introducing their products and gain market share.

43
c. Matching Costs with Sales –

Reconciliation of food cost is a summary of food cost and sales made from the monthly
closing. It is submitted to the management and is send to the head office in case of the chain
hotels.

ABC HOTELS LTD.

MONTHLY COST RECONCILIATION
Date -

Rs. P Rs. P

44
 xxxx xx
Gross Food Revenue aaa aa
Less Rebate
Net Food Revenue yyyy yy

Add : Opening Inventories -

Add : Storeroom bbb bb
Add : Production ccc cc
Add : Purchase ddd dd
Total Available eee ee

Less : Closing Inventories - fff ff

Less : Storeroom ggg gg
Less : Production

Gross Cost of Food Consumed hhh hh

Less Credits iii ii

Net Cost of Food Sold

jjjj jj
Food Cost % = (jjjj.jj / yyyy.yy) x 100

d. Billing Procedure –

i) Cash Sales – customer pays in cash, a copy of the bill is sent to the accounts along with the
K.O.T., the K.O.T. is then forwarded to F&B Controls.

ii) Credit Sales –

45
 Customer pays through credit card, a copy of the bill is sent to the accounts along with
the K.O.T. and the credit card charge slip (which is to be realized later), and the K.O.T.
would be forwarded to F&B Controls.

 For a house guest, he / she signs on the bill, which is sent to the front office to realize from
the guest while he / she is checking out.

e. Cashier’s Sales Summary Sheet –

It is taken out during closing / at end of the day which gives details about total sales and also
does the K.O.T. analysis.

ABC HOTELS LTD.

CASHIER’S SALES SUMMARY SHEET
DATE -
Sl. Bill No. KOT No. Amount Remarks
No.

Total

f. Computation of Staff meal –

Costing of staff meals can be considered as follows –

i) Having a separate staff kitchen which has separate requisitions for staff meals.

ii) If there is no separate kitchen for staff then, having a fixed amount dedicated towards
the cost of staff meals (for e.g. – Rs. 10 per employee per lunch / dinner) and the
employee contribution can be subtracted from it ( for e.g. an employee has to pay Rs.
5 per lunch / dinner).

46
 UNIT-5 FOOD COST CONTROL
Food cost control is an exercise carried by catering establishments like restaurants, hotels,
cafes, food chains, to adhere to pre-determined objectives of the unit.It is basically to
minimize cost to maximize profit.
It is different from other establishments because it concentrates more on material cost
rather than labour cost and overhead cost which are more or less fixed and considered as
uncontrollable as compared to materials(food)cost.
OBJECTIVES OF FOOD COST CONTROL
The single most important element of cost ,in a catering establishments ,is food cost be it
for welfare catering or profitability. Thus, maintenance of food cost is of utmost importance
to maintain a pre-determined standard food cost. The main objectives of food cost are as
under,
1. To establish standard operating procedures.
2. For menu pricing and quotations for banquets, outdoor catering etc.
3. Prevention of wastage of raw material and inefficiencies in processing, labour, overhead
costs, time etc.
4. To prevent frauds and theft by staff.
5. To generate management information/records.
6. Establishing standards
7. Analysis of income and expenditure
8. Cost analysis
9. Preparing budget
10. To take corrective actions to improve the inefficiencies ,if any.
HOW TO CONTROL FOOD COST IN A CATERING ESTABLISHMENT?
1. INVENTORY-Track and Manage Inventory On Daily Basis
Most essential part of food cost control is the daily tracking of Stock-In and Stock-Out and
the actual consumption of materials throughout the day. Monitoring the Variance between
the Ideal Stock and actual physical stock helps in identification, if too much wastage is
happening at your restaurant.
A Variance of 3-5% is standard; however, anything above that means that too much
wastage. may be occurring at your restaurant.
Under stocking and over stocking or over-ordering or under-ordering can be prevented
ultimately preventing wastage and fraud.
2.PURCHASING ON CREDIT-Raw materials can be purchased on credit
Purchasing the raw materials on credit allows to first run the establishment, generate
revenue, and then pay off the credit for the money made.This minimizes cash transaction.
Since the cost of material is to be after revenue earned, it becomes safe tool of controlling
cost. However, ground rules of credit purchase should be very clear and adhered to.
3.YIELD MANAGEMENT-Analyzing stock requirements through yield management
If the raw material is purchased according to the yield, yield management becomes an
integral part of food cost control as it gives an idea of how much quantity of raw materials

47
 would be used to prepare a particular food item. The raw materials are purchased keeping
the yiels in mind.
4.PORTION CONTROL-Wastage can be controlled through portion control.
Portion control is the process of determining that how much food is to be served to the
guest according to the menu price. This tool prevents over production and controls cost of
food at various levels namely purchasing, production and serving. Portion control
equipments like scoops, ladle, bowl,jigger etc. and portion size are important tools for
controlling food cost.
5.CONTROLLING THEFTS AND PILFERAGES-
There are many ways in which internal thefts happen in catering establishments, and
owners are not able to find where the theft is occuring. For example, dishonest staff
members can alter the number of sales that happened on a particular day and pocket the
billed amount for themselves, or keep certain inventory items for themselves. To control we
can assign roles and permissions for each activity.We can also keep a strict view of the daily
reports.
6.REPORTS-Generating daily and weekly reports
By keeping track of the movement of material from purchasing to production and by
generating relevant reports regularly, food cost control can be exercised. Areas of revenue
leakage can also be identified.For example purchase-sales report or monthly sales reports
are important reports to control food cost.
Essential Food Cost Formulas
1.TOTAL COST=Total Food Cost+Total Labour Cost+Total Overhead Cost
2.NET LOSS=Total Cost-Total Sale
3.NET PROFIT=Total Sale-Total Cost
4.GROSS PROFIT=Total Sale-Total Food Cost
5.GROSS PROFIT PERCENTAGE= Gross Profit*100/Total sale
6.FOOD COST=Total Food Cost/Total Sale
7.FOOD COST PERCENTAGE=Food Cost*100/Total Sale
LABOUR COST CONTROL
Labour Cost
It is the total labour cost calculated as basic pay/wages/salaries and the additional benefits
given to employees
Labour cost control
It is a process by which managers direct and control employees to obtain desired results
from employees at an appropriate cost.
Labour Cost Control Methods
1.Cross Training The Staff
2.Conducting Staff Audits
4.Precise Scheduling
5.Avoiding Over Satffing
OVERHEAD COST CONTROL
Overhead Cost
Overhead cost is any expense incurred to support the business while not being directly
related to a specific product or service.
Overhead Cost Control Methods
1. Decreasing Working Capital

48
2. Implementing Total Quality Management
3. Controlling Sales Costs
4. Studying Maintenance Costs
5. Decreasing Transportation Expenses
MISCLLANEOUS COST CONTROL
Miscllaneous cost examples include clothes, a computer, equipment, a work uniform and
work boots, with some exceptions. Miscellaneous expenses are defined by the IRS as any
write off that doesn’t fit into one of their tax categories. Small business owners can claim
these expenses to reduce their taxable income.Controlling the cost of such items by various
means is called Miscllaneous Cost Control

UNIT-6 YIELD
Yield
Definition
Yield is the amount of food material that is available for consumption after the food is
prepared and processed and turned into the final product.Yield test is a testing process to
determine accurately the amount of raw materials needed to produce a certain amount of
final processed product.
For example, to make pomegranate juice, yield testing helps provide an estimate of how
much juice can be produced from 10 pomegranates after the outer shell
and seeds are removed
Standard Yield
The yield of a recipe is the number of portions it will produce.
Yields can also be expressed as a total volume or total weight the recipe produces. Standard
yields for the main, often higher cost, ingredients such as meat, may also take into
consideration portion cost and be determined in part by
calculating the cost per cooked portion.
Standard Yield Test
Trim Test: The trim test determines the excess fat that has been left over by the butcher.
Trimming Yield Percentage =Fully trimmed meat/ Meat before trimming
Ageing Yield:
Certain cuts of meat are required to be aged for meat are required to be aged for varying
length of time. Ageing causes to lose weight due to loss of moisture in the meat. Normally
5% to 10% shrinkage occurs in the first two weeks of age with lesser shrinkage upon further
ageing. There is no convenient method to determine the ageing yield percentage.
Bonning Yield:
This yield gives you the amount of edible meat without bones.
Cooking Test:
All meat product will shrink during the cooking process due to loss of moisture.The amount
of shrinkage depends upon the degree of temperature.

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Butchers Test/Yield:
EXAMPLE
Suresh is a butcher at the local grocery store. He periodically performs a butchers yield test,
which involves meat, poultry, or fish, to determine the amount of chicken that needs to be
processed for 20 gallons of chicken soup he makes every Wednesday.
The process involves:
1. Taking the weight of the whole chicken and any with skins and bones before any
processing is done.
2. Cutting the chicken, and separating the skin, bones, and gizzards
3. Determining the weight of the cooked chicken pieces in the final, ready-to-eat product,
which is the soup.
The butchers test helps planning in advance to have a more accurate estimate of how much
chicken has to be processed for the 20 gallons of chicken soup. It also helps the him
determine the cost of the soup per 8- ounce cup as the he includes in its calculations the
total cost of the chicken it takes to make the soup, including the cost of the parts that were
not added to the soup.
Cooking Loss Test:
Example
Sunita makes homemade jams and jellies that she distributes to local farm stores. She uses
the cooking loss test to determine how much fruit to purchase to get the number of jars.
Terminology
The following terms are commonly used in the process of yield testing.
As Purchased, or AP weight
This is the initial weight of the food materials weighed as is, after they are purchased.
Edible Product, or EP weight
This is the weight of only the usable parts of the food materials after all the unusable
portions are removed. For cooked items, this is the weight of the final processed food
product after the cooking processes are completed on the usable parts of the food. For
sellable items, this is the unit weight per quantity of the food as it is finally served.
Yield Percentage, or YP
This is the percentage of final yield or usable portions of the food.
This will be different for different food items, and it can change depending on the nature of
the processing.
The yield percentage can be calculated using the formula: (EP/AP)*100.
Portion size and portion cost:
Portion size is determined by management; in this example,
individual portions of the pork loin weigh 250 g (or 0.250 kg).
The portion cost is determined by multiplying the cost of a usable kg by the
portion size.
That is, portion cost = portion size x cost of usable kg
Using the correct units is very important. The portion size should be converted into
kilograms as the cost per usable kg has been found.
Portion size equation
portion cost = portion size x cost of usable kg
0.250 kg x Rs,200/kg = Rs 50
Cost factor:

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If the price of pork loin changes, the monetary values entered on the meat cutting yield
sheet become invalid.
An appropriate selling price should be.
The cost factor per kilogram is determined by
dividing the cost per usable kg by the original cost per kilogram (see below)
Cost factor equation
Cost factor per kg =cost per usable kg+ original cost per kg
The cost of a usable kg if the wholesale cost changes with the following formula.
Finding the cost of usable kg if wholesale cost changes
new cost of usable kg = cost factor per kg * new wholesale cost

Yield Testing
Yield in culinary terms refers to how much you will have of a finished or processed product.
Professional recipes should always state a yield;
for example, a tomato soup recipe may yield 15 L, and a muffin recipe may yield 24 muffins.
Yield can also refer to the amount of usable product after it has been processed (peeled,
cooked, butchered, etc.)
For example,
you may be preparing a recipe for carrot soup.
The recipe requires 1 kg of carrots, which you purchase.However,In order to do accurate
costing, yield testing must be carried out on all ingredients and recipes.
When looking at yields, you must always consider the losses and waste involved in
preparation and cooking.
There is always a money value that is attached to vegetable peel, meat and fish trim, and
packaging like brines and syrups. Any waste or loss has been paid for and is still money that
has been spent. This cost must always be included in the menu price.
Sometimes, this “waste” can be used as a by-product. Bones from meat and fish can be
turned into stocks. Trimmings from vegetables can be added to those stocks or, if there is
enough.

UNIT 7 COSTS
o Determining Standard food Cost
o Calculating Portion cost
o Calculating Dinner Cost

DETERMINING STANDARD FOOD COST

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 WHAT IS FOOD COST?
Food cost is the total expenditure on food and beverage items to sell various dishes available
on a menu card.It does not include cost of labour and overheads.
 IMPORTANCE
The food cost is important due to the following reasons:
1.it is the direct cost that goes into preparing a dish.
2.It helps to determine selling cost of a dish.
3.It is the major chunk of money that goes into running a restaurant.
4.It majorly affects profit and revenue of a food business.
5.It helps to control the food business.
6.It gives insight into the standing of your food business at a given point of time.
 STANDARD COSTING
Before working on standard food cost one should understand its basis and need of.Also ome
should know from where this data has originated.It has come from cost accounting
where,there is a term called Standard costing which is determined for all the types of cost
whethether it is labour cost,material cost or overhead cost.
Standard costing is the practice of substituting an expected cost for an actual cost in the
accounting records.It is then periodically recorded and variances are determined by
showing the difference between the expected and actual costs. This is a simplified
alternative to cost layering systems, such as the FIFO and LIFO methods, where large
amounts of historical cost information must be maintained for items held in stock.
Standard costing involves the creation of estimated (i.e., standard) costs for some or all
activities within a company. The core reason for using standard costs is that there are a
number of applications where it is too time-consuming to collect actual costs, so standard
costs are used as a close approximation to actual costs.
 WHAT IS STANDARD FOOD COST?
Standard food cost can be defined is the attainable,expected or potential cost of food
incurred as a result of selling various food items on the menu.
 TO DETERMINE A STANDARD FOOD COST WHAT WE SHOULD KNOW
We should have sound knowledge the following values to determine standard food cost,
1. Standard Purchase specification
2. Standard yields
3. Standard portion size
4. Standardized recipe
5. Standard portion cost
6. Per unit cost of each food items

To calculate per unit cost of each menu item one should understand the relationship
between standardized recipe, standard portions and standard yields. Standard purchase
specification clears all doubt about the quality/specifications of ingredients to be purchased.
The food items are generally not used as is received by weight instead lot of waste is
generated in terms of peels, scrapes and cutting & chopping to shape. For example to cut a
dice of certain size from a potato you need to first cut it into neat block. This will in turn
generate scrapings, which may be used for mashed potatoes. Therefore, yield tests help us
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 to determine exact cost for each menu item along with determining the yield. Standard
portion size helps in determining the standard portion cost by making use of standardized
recipe.
 HOW TO DETERMINE STANDARD FOOD COST?
Working with the entire above values one can determine selling price as well as cost of each
food item on the menu. Having written that to run a food business one must have excellent
command on the above values.
The standard food cost in rupees is determined by multiplying the number of items sold as
obtained from the sales report by the cost of the item sold as obtained from a standardized
recipe. Then sum up all the costs of all the items sold.
In mathematical term,
STANDARD FOOD COST PER UNIT = Number of food items sold x Cost price of each item
Sum up of this cost for all the menu items sold is the STANDARD FOOD COST as used by a
food business. This is calculated on a daily ,weekly and/or monthly basis.

Cost Per Portion in Sales Report of

Ingredient Standard cost in Rs
Rs. portions sold

Chicken 320 10 3200

Fish 550 20 11000

Pasta 270 10 2700

See in example

Adding the fourth column will give the Standard Food Cost per day/week/month as
required.
 USES OF STANDARD FOOD COST
It is majorly used for
1.Cost Controlling- The standard food cost gives your business a mirror to know how your
business is performing, and to judge that one has to monitor the cost, Standard Food Cost
functions as a yardstick for the same.
2.Budgeting-Bugdet is pre plan to run a business in terms of sales forecast and thus deciding
about the cost incurred in advance according to the sales forecast.The cost which will incur
in future is determined according to standard food cost.
2.Pricing-Standard food cost also helps to price a product item on the menu.
3.Variance Analysis-Measuring against the actual cost incurred and finding the deviation if
any and thus taking corrective action.
CALCULATING PORTION COST

 PORTION SIZE
Portion size is the amount/volume of food we serve to a guest against a pre-decided selling
price .It can be in counts,size,value,volume or weight.
 STANDARD PORTION SIZE

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 Standard portion size is the portion size of a food which is considered as one unit to be sold
to a customer against a standard selling price for the given item.A customer can have
unlimited amount of food till he can pay for the food.However,in one unit of any food
served to a customer one cannot give it in as many counts,weight or volume.A certain fixed
amount of portion size has to be pre-decided such that per unit selling price of the dish can
be decided.And for a given selling price we have to serve only one unit of the respective
food item.
It has to be worked out for all the food items on a menu card.
Objectives of Standard Portion Size
1.To serve enough food to the guest for a given selling price.
2.For determining and controlling food cost.
3.For pricing a food item
4.It also helps in budgeting and inventory control.
 STANDARD PORTION SIZE EQUIPMENTS
Measuring glasses,spoons,jugs,mugs etc.
Weighing scales,Ladles,Scoops,Jigger,Food Dishers,Spoodles,Serving spoons,Moulds etc.
Portion cost is especially important for buffets,cafeterias and other businesses where
individual portions are served in place of meticulously composed dishes.

 CALCULATING PORTION COST

Create a recipe costing template
Ingredient Purchased Unit Yield Actual Serving Unit Portion Portion
Unit purchase Unit unit serving size cost
Cost Cost cost

Heres’s the breakdown for how to calculate portion cost

1.Ingredients-The full list of ingredients to make a dish.
2.Purchased unit-The unit of measurement that the ingredients were purchased
in,kg,gm,litre,mililitre,count etc.
3.Unit purchase cost or per unit purchase cost-The price per unit of the ingredients as is
available from suppliers invoice.
4.Yield-Expressed as percentage,it is the usable amount of ingredient after processing.
5.Actual Unit Cost-The true cost after subtracting usable yield from purchased units.
6.Serving unit-The unit of measure used in the recipe.
7.Per Unit serving cost-Cost per serving(Column 5 x Column 6)
8.Portion/Serving size-How much of each ingredient goes into a dish which is served to the
guest e.g.25 gms of flavoured butter,150 gms of beef steak
9.Portion Cost-It is the cost of the serving size for a particular ingredient , calculated using
the following formula
PORTION SIZE x PER UNIT COST OF SERVING SIZE
Now,the total of 9th column will be Standard Portion cost of a dish.

DINNER COST

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Dinner cost is the cost per pax for a dinner or similar food service.
Generally a dinner consist of starters/appetizers, main course, accompaniments and
dessert. Now number of food items under each category may vary.
Every catering business has their own price list and dinner cost is worked out accordingly.
It is the total selling price per units of food item sold for a particular catering
acitivity.Generally associated with mass catering,parties etc.

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