Daily Food Cost

Daily Food Cost

Copyright © 2006 by John Wiley & Sons, Inc. All rights reserved

Learning Objectives After reading this chapter, you should be able to: t o: • 1. Calculate food cost for any one day and for all the days to date in a period. • 2. Calculate food cost percentage for any one day and for all the days to date in a period. • 3. Prepare a daily report of food sales, food cost, and food cost percentage. • 4. Determine book inventory value. • 5. Explain the difference between book inventory and actual inventory. • 6. Identify various causes for differences between book inventory value and actual inventory value.


Determining Daily Food Cost • All foods can be categorized as either directs or stores in food control, the total costs for these two are the two basic components of the daily food cost. • As discussed earlier, directs are charged to food cost as received. Therefore, to determine food cost for any given day, one must know k now the total of directs received on that day. This figure is i s readily available if the Receiving Clerk's Daily Report or a similar form is completed each day. Copyright © 2006 by John Wiley & Sons, Inc. All rights reserved

Determining Daily Food Cost • Stores purchases are added to inventory and charged to the food cost when issued. • One must determine the value of stores issued on a given day, each day, to obtain the second principal component of food cost for that day. • If all foods issued from inventory are listed on requisitions, the determination is not difficult. One merely prices and extends each requisition for foods issued on that day and then adds the totals for all requisitions to obtain the total cost of stores issued.


Transfers • In operations where transfers are made (promotion expense, employees’ meals, and steward sales, for example), values for these should be determined daily and taken into account as well. One would determine their value and then credit the daily food cost for that amount. • The value of any alcoholic beverages transferred from the bar to the kitchen for use in food preparation should be charged to food cost. • Many establishments credit daily food cost for the value of employees’ meals.


Opening inventory is the dollar value of all food on hand at the beginning of the accounting period. 

Purchases are the sum cost of all food purchased during the accounting period. 

Total Available is the sum of the beginning inventory and purchases. 

Closing inventory refers to the dollar value of all food on hand at the end of the accounting period. 


Cost of food consumed is the actual dollar value of all food used, or consumed, by the operation. 

Employee meal cost is a labor-related, not foodrelated cost. Free or reduced-cost employee employee meals are a benefit much in the same manner as medical insurance or paid vacation. 

It is important to note that ending inventory for one accounting period becomes the beginning inventory figure for the next period. 


Food or beverage products may be transferred from one food service unit to another. For example, it is likely that fruit juice, vegetables, and similar items are taken from the kitchen for use in the bar, while wine, sherry, and similar items may be taken from the bar for use in the kitchen. 

Transfers out of the kitchen are subtracted from the cost of food sold and transfers in to the kitchen are added to the cost of food sold. 


Determining Actual Food Expense Cost of food sold is the dollar amount of all food actually sold, thrown away, away, wasted or stolen. It is computed as follows: 

Opening Inventory PLUS Purchases

Less Employee Meals = Cost of Food Sold

= Total Available Less Closing Inventory = Cost of Food Issued PLUS / MINUS Adjustments Copyright © 2006 by John Wiley & Sons, Inc. All rights reserved

= Cost of Food Consumed

Figure 9.1 illustrates a eleven-column form, which you can use for a variety of purposes. One of them is to estimate food cost % on a daily or weekly basis. 1. Purchases Today Sale Sa less To Toda day y = Co Cost st % To Toda day y 2. Purchases to Date Sales to Date = Cost % to Date


The daily cost of food can be determined in the following way: • Cost of directs (from the receiving clerk's daily report) • + Cost of stores (from requisitions or from requisitions • • • • •

and meat tags, depending on the procedure followed) + Adjustments that increase daily cost (transfers from bar to kitchen; transfers from other units) – Adjustments that decrease daily cost (transfers from the kitchen to the bar: food to bar (directs), gratis to bar, steward sales, grease sales, promotion expense) = Cost of food consumed – Cost of employee meals = Daily cost of food sold© 2006 by John Wiley & Sons, Inc. All rights reserved Copyright

Food Cost Today and To Date • By itself, the daily food cost percent for any one day may not be a very accurate figure. Many restaurants restaurants purchase directs every other day, and this will affect daily food cost, making it artificially artificially higher on the days when directs are received and charged to food cost and correspondingly lower on the other days. artificially ially high food • To help overcome the problem of artific cost percent one day and low food cost percent the next, most operations also calculate food cost percent to date.


Food Cost Today and To Date • Food cost percent to date is defined as the cumulative food cost percent for a period. It takes into account all food costs and all food sales for all days so far in the period.

• To determine this cumulative food cost percent (food cost percent to date), one divides cost to date by sales to date.


Daily Reports • 1. Shows food cost, food sales, and food cost percent for any one specific day and for all the days to date in the period, and

• 2. Compares these figures to those for a similar period.


Book Verses Actual Inventory Comparison • Some foodservice operators also determine what the value of the closing inventory should s hould be, based on records indicating purchases and issues. This is defined as book inventory. Those who determine a book inventory value normally do so to compare it with the actual inventory value. • A method of establishing the value of the book inventory is readily available to those who maintain daily food cost figures in the th e manner illustrated in Figure 10.2. This form provides a means for maintaining cumulative book inventory Copyright © 2006 by John Wiley & Sons, Inc. All rights reserved figures for a period, as shown in Figure 10.8.

Book Verses Actual Inventory Comparison • Opening inventory (closing inventory for the • • • •

preceding month) + Purchases (total stores purchases for the period, as listed on receiving reports) = Total available (total value of the stores available for use during the period) – Issues (total stores issues for the period, as listed on requisitions) = Closing book value of the stores inventory Copyright © 2006 by John Wiley & Sons, Inc. All rights reserved

The book inventory value should be identical to the value for the physical inventory taken at the end of the month • Acceptable reasons are an occasional human error in costing out requisition requisitions, s, the use of the most recent purchase price rather than actual purchase price in valuing the physical inventory, and the mismarking of actual purchase prices on items when that method is used.

• Reasons that are never acceptable include issuing stores without requisitions, allowing meats to age to the extent that they become unusable and must be discarded, and the theft of food.


Daily Food Cost

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