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:
• 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 the total of
directs received on that day. This figure is readily
available if the Receiving Clerk's Daily Report or
a similar form is completed each day.
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 food-
related cost. Free or reduced-cost 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, wasted or stolen. It is computed as follows:
Opening Inventory Less

PLUS Employee Meals
Purchases = Cost of Food Sold
= Total Available
Less
Closing Inventory
= Cost of Food Issued
PLUS / MINUS
Adjustments
= 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
Sales Today = Cost % Today
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
purchase directs every other day, and this will affect
daily food cost, making it artificially higher on the
days when directs are received and charged to food
cost and correspondingly lower on the other days.
• To help overcome the problem of artificially high food
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 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 manner
illustrated in Figure 10.2. This form provides a
means for maintaining cumulative book inventory
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
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 • Reasons that are never
occasional human error in acceptable include
costing out requisitions, issuing stores without
the use of the most recent requisitions, allowing
purchase price rather than meats to age to the extent
actual purchase price in that they become
valuing the physical unusable and must be
inventory, and the
discarded, and the theft
mismarking of actual
of food.
purchase prices on items
when that method is used.

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