1. Steps in Monitoring Food-Service Costs 3.2
List and describe the 7 steps of the flow of food & their relation to controlling food costs
Review standardized recipes, portions, and cost control
Apply EP vs AP calculations to food costs
Apply menu pricing techniques to food costs

2. Steps in Controlling Food Costs
Food costs must be controlled during all seven stages of the food flow process:
Refer to pg in the textbook
Purchasing
Receiving
Storage
Issuing
Preparation
Cooking (production)
Service (sale)
3.2
Chapter 3 | Cost Control

3. Determining Food Cost
Food cost is the actual dollar value of the food used by an operation during a certain period.
Food cost includes cost of food:
Sold
Given away
Wasted
Spoiled
Incorrectly prepared
Overportioned
Overproduced
Pilfered
3.2
Chapter 3 | Cost Control

4. Determining Food Cost
Inventory is the dollar value of a food product in storage and can be expressed in terms of units, values, or both:
Opening inventory is the physical inventory at the beginning of a given period.
The closing inventory is the inventory at the end of a given period.
3.2
Chapter 3 | Cost Control

5. Determining Food Cost – Closing inventory = Total food cost
The formula for obtaining an actual food cost accurately is: 
Opening inventory + Purchases = Total food available
– Closing inventory
= Total food cost
May also need to subtract:
Employee meals
Complimentary items to customers
Transferring food to another location (chains/franchises)
3.2
Chapter 3 | Cost Control

6. Determining Food Cost Percentage
Total food cost percentage is the relationship between sales and the cost of food to achieve those sales.
Analyze food cost percentage by comparing it to:
company standards
historical costs
industry standards
3.2
Chapter 3 | Cost Control

7. Determining Food Cost Percentage
To determine the percentage, divide the total food cost by the sales:
Total food cost ÷ Sales = FCP
3.2
Chapter 3 | Cost Control

8. Determining Food Cost Percentage
Food cost is a variable cost
It should increase or decrease in direct proportion to an increase or decrease in sales if all of the standards and food controls are followed correctly.
3.2
Chapter 3 | Cost Control

9. Establishing Standard Portion Costs
Most every operation has standardized recipes that are followed every time a menu item is prepared.
For every standardized recipe, an operation should establish a standard portion cost:
The exact amount that one serving, or portion, of a food item should cost when prepared according to the item’s standardized recipe.
3.2
Chapter 3 | Cost Control

10. Establishing Standard Portion Costs
A recipe cost card is a tool used to calculate the standard portion cost for a menu item.
As with the standardized recipe, a recipe cost card should exist for every multiple-ingredient item listed on the menu.
3.2
Chapter 3 | Cost Control

11. As-purchased versus Edible-portion Costs
The as-purchased (AP) method is used to cost an ingredient at the purchase price before any trim or waste is taken into account.
In the AP method, all ingredient quantities are listed on the standardized recipe in the form in which they are purchased.
3.2
Chapter 3 | Cost Control

12. As-purchased versus Edible-portion Costs
The edible-portion (EP) method is used to cost an ingredient after trimming and removing waste, so that only the usable portion of the item is reflected.
Using the EP method to cost an ingredient, the quantity is listed on the standardized recipe using only the edible portion of that particular ingredient.
3.2
Chapter 3 | Cost Control

13. Recipe Yields
A recipe yield is the process of determining the number of portions that a recipe produces.
To determine how many portions a recipe yields, calculate the total volume of the recipe either by weight or by volume, depending on how the portion size is calculated.
Key to successful food preparation and controlling food costs.
The measurements given in recipes must be followed exactly.
Once a yield is known and properly followed, it’s easier to increase or decrease the size of the recipe based upon the operation’s changing needs.
3.2
Chapter 3 | Cost Control

14. Controlling Portion Sizes
Controlling portions is very important for a restaurant to meet its standard food cost.
Tools that are essential for accurate portion control include:
Scoops
Ladles
Serving spoons
Serving dishes
Ramekins, bowls, cups, etc
Portion scales
Another mechanism for ensuring that portions are the right size is to proportion any item that can be preportioned before serving.
3.2
Chapter 3 | Cost Control

15. Monitoring Production Volume and Cost
When restaurants produce:
Too much =
Food cost goes up
Produce too little =
Sales are lost
Sales history is critical in helping management forecast how many portions of each menu item to produce on a given day.
3.2
Chapter 3 | Cost Control

16. Monitoring Production Volume and Cost
A food production chart shows how much product should be produced by the kitchen during a given meal period.
A well-structured chart can ensure:
Product quality
Avoid product shortages
Minimize waste, spoilage, theft, energy costs, and administrative costs.
3.2
Chapter 3 | Cost Control

17. Food Production Charts
Refer to pg in textbook
3.2
Chapter 3 | Cost Control

18. Menu Pricing
The menu is the primary sales tool in most restaurant and foodservice operations.
There are a number of methods for menu pricing:
Contribution margin
Straight markup pricing method
average check method
Food cost percentage
3.2
Chapter 3 | Cost Control

19. Menu Pricing
A contribution margin is the portion of dollars that a particular menu item contributes to overall profits.
To use the contribution margin method, an operation must know the portion costs for each item sold.
Add contribution margin to the actual food costs.
Refer to pg. 178 in textbook for example
3.2
Chapter 3 | Cost Control

20. Menu Pricing
In the straight markup pricing method, multiply raw food costs by a predetermined fraction.
Food Cost x Straight Markup = A
A + Food Cost = Menu Price
Refer to pg. 178 in textbook for example
3.2
Chapter 3 | Cost Control

21. Menu Pricing
With the average check method, the total revenue is divided by the number of seats, average seat turnover, and days open in one year.
Example:
A restaurant has 65 seats, has an average seat turnover of 1.5, and is open 365 days. Total revenue for the restaurant is $498, What is the average check?
65 x 1.5 x 365
= 35,587.50
498,335/ =
$14.00
3.2
Chapter 3 | Cost Control

22. Menu Pricing Item Cost = Menu Price FCP Refer to pg. 179 for example
The food cost percentage is equal to the food cost divided by food sales.
FCP menu price determined by:
Item Cost = Menu Price
FCP
Refer to pg. 179 for example
3.2
Chapter 3 | Cost Control

23. Section 3.2 Summary
Food costs must be controlled during all seven stages of the food flow process, from the actual purchasing of food items to how they are served to customers.
Food cost is the actual dollar value of the food used by an operation during a certain period.
Food cost percentage is the relationship between sales and the cost of food to achieve those sales.
Most operations have standardized recipes that are followed every time a menu item is prepared.
3.2
Chapter 3 | Cost Control

24. Section 3.2 Summary (Cont.)
Two methods used to determine the cost of ingredients in a standardized recipe are the AP method, which means “as purchased,” and the EP method, which stands for “edible portion.”
A recipe yield is the process of determining the number of portions that a recipe will produce.
Controlling portions is very important for a restaurant to meet its standard-food cost.
The menu is the primary sales tool in most restaurant and foodservice operations.
3.2
Chapter 3 | Cost Control

25. Assignment Cost Control Packet 3.4: Costing & Pricing Gazpacho
3.5: Case Study- The Cost Control Caper
3.7: Menu Markup
11/3/2014