CALCULATIN

G COST OF
PRODUCTION
 Cost of production is the total price paid for
resources used to make a product or create a service
to sell including raw materials, labor, and over head.
It is calculated by dividing the outputs produced
by a company by the inputs used in its production
process. Common inputs are labor hours, capital and
natural resources, while outputs are generally
measured in sales or the number of goods and
services produced.
 To calculate the cost of food production, you
need to know the total cost of your ingredients along
with how much each ingredient is used in a recipe.
This is important to know how much a product costs.
To do this, you multiply per-unit price by the item
you buy.. Add up all these individual prices to find
the total food cost for your dish. Calculating the cost
of food production is important tool in order to
determine the cost of the food produced.
Principles of Costing

In a food business you need to know the total

cost of the product before you will sell it.
The following are the things to consider in
calculating the cost of the product.

1. Markup- is the amount added to the price cost. It

can also be stated as a permanent amount or as
percentage of the total cost.
2. Selling Price- is the price at which a product or
service is sold.

3. Purchase Cost- is the price a buyer pays for the

food bought.

4. Yield- is the amount of usable product after it has

been processed.

5. Total Cost- is the total cost of food production