CoGS & Food Cost Formulas

2. Brand Story and Your Staff

A resource for the lesson Calculating Your Cost of Goods Sold
A worksheet for the video Engaging Your Team

Here’s an overview of all the formulas discussed in the lesson, which you can use to calculate your own food cost.

Item cost

Item cost refers to the cost percentage of an individual menu item.

Production Cost
x100 = Item Cost
Sales Price
For example, if a hamburger costs $2.50 to produce and is being sold for $10.00, this means the item cost
calculation looks like this:
2.50
10 × 100 = 25%
The item cost of this hamburger is 25%.

Food Margin

The food margin is the amount of profit you make on a menu item.

Selling Price Production Cost = Food Margin

For our hamburger, that calculation is:

10 - 2.50 = 7.50
The food margin of this hamburger is $7.50.

Cost of Goods Sold (CoGS)

The cost of goods sold is what’s usually meant when we talk about ‘food cost’, and refers to the cost of all the
food your restaurant has sold over a period of time. The simple calculation of CoGS is the following:

Food Purchases
= CoGS
Food Sales

However, that doesn’t give you the most accurate overview of your food cost because it fails to take inventory
into account. In reality, ingredients purchased in a previous month might still be used in the next. To take that into
account, we have to calculate our usage first:

www.typsy.com © Copyright 2017 Typsy Pty Ltd

Beginning Inventory + Purchases - Ending Inventory = Food Usage

Example: if our food inventory at the start of the month is worth $2000, and our food purchases are worth $10,000,

and we have $3000 worth of inventory left at the end of the month, our food usage is:

$2000 + $10,000 – $3000 = $9000

After we’ve calculated our food usage and know our sales for that same period, we can calculate our actual food
cost or CoGS:

Food Usage
x 100 = Food Cost
Sales

Say our food sales for the same period in our previous example are $36,000, and our usage was $9000.
That means our real food cost is:

$9000
x 100 = Food Cost
$36,000

Or you can use this longer formula to calculate everything all at once:

(Beginning Inventory + Purchases - Ending Inventory)

x 100 = 25% Food Cost
Sales

Tip: When you use these formulas to calculate your own food cost, be mindful that you’re
using the correct input data. Make sure you match the purchases and sales for the same
month in your calculation. Keep on top of your accounting to avoid making mistakes like
entering food purchases on the day the bill is paid instead of the day the food was purchased

CoGS & Food Cost Formulas

A resource for the lesson Calculating Your Cost of Goods Sold

www.typsy.com © Copyright 2017 Typsy Pty Ltd