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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.
Understanding the basics of recipe costing is important so that you can:
The following tools and calculations are important in deriving your food costs:
How do we apply numbers and costs to each Standard Recipe?
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:
Your selling price should include all costs plus the profit you would like to earn.
To compute the selling price, we need the food cost to only be a certain percentage of the selling price.
The amount varies from one restaurant section to another, and is influenced by other costs, such as labour, overhead, and target profit. It generally falls within the profit of 30 to 45%.
Here is an example to show how to find the selling price of a dish:
Given this number, the establishment can decide on the final selling price considering other factors such as competition, volume and labour costs.