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FOOD COSTING.pptx

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FOOD COSTING.pptx

  1. 1. Bhavin Parekh 1
  2. 2.  Understanding Food Cost › The Pizza › What does it mean to you and your restaurant?  Basic Definition of Food Cost › The Math › Interpreting the Formula  Using Food Cost › Applying Food Cost in day to day operations › Practical Example 2
  3. 3.  To be able to define Food Cost and express the same mathematically.  To be able to compute Food Cost %.  To be able to interpret Food Cost %.  To be able to apply Food Cost % in day to day operations to maximize profits. 3
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  5. 5. Pizza 1 person gets the whole pizza i.e. 1 person = 100% 2 persons get half a pizza each. i.e. 2 person = 50% 4 persons get only a quarter pizza each. i.e. 4 person = 25% 50% 5 50% 25% 25% 25% 25%
  6. 6. Rs. 300 Rs. 1000 6 Assume that your total sale for the day is Rs. 1000/- Your product is food. In order to produce the food to sell, you incurred a cost of Rs. 300. Your net saving at the end of the day will be Rs. 700 (Rs. 1000 – Rs. 300). This can also be referred to as PROFIT. In order to increase your profit, you will have to reduce the food cost, given that the total sale is a constant.
  7. 7. Food Cost is defined as the cost incurred to produce the food to be sold. This is expressed in percentage (%). Hence, Food Cost % is mathematically defined as the ratio of the cost of food to the total sales. It is mathematically expressed as: Food Cost % = Cost of Food x 100 Total Sale 7
  8. 8.  The food cost is directly proportional to the cost of food. › This implies that the higher the cost of ingredients, the higher will be the Food Cost %. › The higher the Food Cost %, the lower is your profit. 8
  9. 9.  The food cost is indirectly proportional to the total sales. › This implies that higher the sale, the lower is the cost of Food Cost % and vice versa.  What is the impact of Food Cost % on your restaurant’s profit ? 9
  10. 10. Pizza The higher the cost of ingredients used to prepare the dish, the higher is the Food Cost %. The higher the total sale, the lower is the Food Cost % and vice versa. A higher Food Cost % will eat into a larger share of your pizza, leaving you with a smaller piece and vice – versa. 10
  11. 11.  The formula.  The independent and dependent variables.  The impact of Food Cost % on profit. 11
  12. 12. Objective Pricing Methods  If you want to keep your Food Cost as 40% then:  Multiplier = 1 / 40% = 1 / .40 = 2.5 Assume that a Seafood Platter has a Standard Food Cost . Portion of a Seafood Platter is $ 5.32  If a Food Cost % of 40% is desired:  Base Selling Price (B.S.P.) = $ 5.32 x 2.5 = $ 13.30
  13. 13. Assume that a Seafood Platter has a Standard Food Cost / Portion of a Seafood Platter is $ 5.32  If a Food Cost % of 40% is desired:  Base Selling Price (B.S.P.) = $ 5.32 x 2.5 = $ 13.30
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