UNIT 7COSTS

o   Determining Standard food Cost

o   Calculating Portion cost

o   Calculating Dinner Cost

 

TOPIC-DETERMINING STANDARD FOOD COST

 

  • 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 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. See in example

Ingredient Cost Per Portion in Rs. Sales Report of portions sold Standard cost in  Rs
Chicken 320 10 3200
Fish 550 20 11000
Pasta 270 10 2700

 

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.

TOPIC-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

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

Unit purchase

Cost

Yield Actual Unit Cost Serving unit Unit serving cost Portion size Portion 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.

 

TOPIC-DINNER COST

 

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.