Food costing is important to know as it has a direct effect on the profitability of a restaurant. It is the cost of your ingredients and does not include other costs, such as labour and overheads. Food costing is an essential tool in determining whether food costs targets are being met.
On Basic Recipe Costing
Understanding the basics of recipe costing is important so that you can:
Know how much food cost is incurred on each recipe. This gives you a clear view of how much you can earn per dish.
Understand how to properly price your dishes to achieve a target profit.
Study the way your competitor price their dishes against an industry benchmark.
Know when to reduce a recipe cost. If you keep up-to-date with your costing, and see that you are going beyond your target cost percentage, you can easily plan how to reduce the costs.
Find out each menu item’s profit margin and decide which ones to promote through suggestive selling and promotions.
Food Costing Tools
The following tools and calculations are important in deriving your food costs:
Standard Recipe: Costing based on a standard recipe makes it easy to compute food costs based on the servings that are needed
Up-to-Date Ingredient Costs: Current prices should be the basis of costing, thus the need to do a price check from time to time
Recipe Cost Sheet: For recording data and all information about the recipe such as current unit cost, actual ingredient cost and cost per portion
Calculating Recipe Cost
How do we apply numbers and costs to each Standard Recipe?
Step 1. Fill up the Recipe Costing Sheet with information based on the standard recipe to be based on a current price list.
Step 2. Indicate the latest purchase cost of each ingredient based on a current price list.
Step 3. Compute the actual cost of each ingredient
Step 4. Add actual cost of each ingredient to get the total recipe cost
Step 5. Divide the total recipe cost by number of portions to get the cost per portion
Recipe Cost Sheet
For recording purposes, create a recipe cost sheet for each of your dishes. Here is an example.
As you can see, it’s an extension of the Standard Recipe, providing costing details.
Once you have your food costs, you can figure out the selling price of your dishes. The basic formula is: