Chapter 9 Daily Food Cost Principles of Food, Beverage, and Labour Cost Controls, Canadian Edition

Learning Objectives After reading this chapter, you should be able to: 9.1 Calculate food cost for a single day and for all the days to date in a period. 9.2 Calculate food cost percent for any single day and for all the days to date in a period. 9.3 Prepare a daily report of food sales, food cost, and food cost percent. 9.4 Differentiate between book inventory and actual physical inventory and identify various causes for differences between the two. 9.5 Determine book inventory value.

Introduction If foodservice operations were monitored from monthly cost figures alone, the length of time between monthly reports would present an obstacle. This delay can be very costly. To avoid the delay, better organized foodservice operations calculate food cost daily.

Important Definitions Opening inventory: the dollar value of all food on hand at the beginning of the accounting period Purchases: the sum cost of all food purchased during the accounting period Total Available: the sum of the beginning inventory and purchases Closing Inventory: the dollar value of all food on hand at the end of the accounting period

Important Definitions Cost of food consumed: the actual dollar value of all food used, or consumed, by the operation Employee meal cost: a labour-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.

Determining Daily Food Cost All foods are either directs or stores Find total directs that day, available from the Receiving Clerk's Daily Report Stores are charged to the food cost when issued Determine the value of stores issued on a given day Extends all requisitions for foods issued on that day and total

Determining Daily Food Cost Determine the value of any alcoholic beverages transferred from the bar to the kitchen Determine the value for daily transfers from the kitchen to bar, promotion, etc. Many establishments credit daily food cost for the value of employees’ meals

Determining Daily Food Cost 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 issued + Adjustments that increase daily cost* – Adjustments that decrease daily cost** = Cost of food consumed – Cost of employee meals = Daily cost of food sold *Include transfers from bar to kitchen; transfers from other units **Include transfers from the kitchen to the bar food to bar (directs), gratis to bar, steward sales, promotion expense

Food Cost Today and To Date The daily food cost percent for any one day may not be a very accurate: Directs may be purchased every other day this will make daily food cost artificially higher on the days when directs are received To help overcome the problem most operations 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 food cost percent to date: divide cost to date by sales to date

Simple Daily Cumulative Cost Report AdjustmentsTotal CostTotal SalesFood Cost % DateDirectsStores Added to Cost Subtract from CostTodayTo DateTodayTo DateTodayTo Date 1-Feb$254.20$ $ 57.20$255.30$1, $2, % 2-Feb$326.70$ $ 86.20$253.40$1,103.60$2,137.00$2,919.20$ 5, %37.510% 3-Feb$262.50$1,040.40$ 88.60$177.80$1,213.70$3,350.70$3,056.95$ 8, %38.276% 4-Feb$256.35$ $ $220.00$1,121.65$4,472.35$3,094.20$11, %37.747% 5-Feb$218.75$ $ 90.00$170.00$1,083.30$5,555.65$3,427.35$15, %36.369% Simple Daily Cumulative Cost Report

Daily Reports Daily reports allow management to: accurately assess daily costs and sales compare with similar periods better assess operations and cost-control measures Report should show: food cost, food sales, and food cost percent for any one specific day and for all the days to date in the period compare these figures to those for a similar period

Book vs. Actual Inventory Determine what the value of the closing inventory should be, based on records indicating purchases and issues Compare it with the actual inventory value Maintain daily food cost figures to establish the value of the book inventory

Book vs. Actual Inventory Book inventory value is determined as follows: Opening inventory (closing inventory for the preceding month) + Purchases (total stores purchases for the period, on receiving reports) = Total available (total value of 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

Book Inventory vs. Physical Inventory The value should be identical to the value at the end of the month. Acceptable reasons are: an occasional human error in costing out requisitions use of the most recent purchase price rather than actual purchase price in valuing the physical inventory mismarking of actual purchase prices when that method is used Reasons that are never acceptable include: issuing stores without requisitions allowing meats to age that they must be discarded theft of food.

Key Terms Book inventory, p. 255 Daily cost of food, p. 246 Food cost percent to date, p. 247

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