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Friday, May 25, 2012

Daily Food Cost Calculation Question

I'm in the hotel industry and to get an exact food cost every day, I have a point of sale system. From there I have the net cost of purchases, and the net income.

My question is: If I use those parameters (net cost divided by net revenue) is this the true food and beverage cost?

The reason I ask is because of tax, should I calculate the purchase price with tax? The revenue with tax. I think not.

Just want to ask someone else that seems to know allot about F&B cost control.



Pieter, I'm going to start with your term "net cost of purchases" since this is the key term. I would include the taxes paid on goods purchased in my cost of goods sold. If we hadn't purchased stock, we would not have been taxed. The tax is directly tied to your purchases. However, very few operations spread taxes paid over all items in an accurate manner. Most operators expense the tax immediately in the cost of goods sold total. Why is this the case?

If taxes were included in inventory calculations (item by item in the cost per unit used to extend the quantity), the tax would be allocated accurately to the cost of goods sold. By leaving tax out of the cost per item, operators are being conservative since they recognize the expense as soon as they book purchases in their accounts payable journal.

We all need to pay sales tax directly to the various governments. This tax is not available to cover other expenses or profit. Therefore, I would omit the tax on revenue and use net revenue in my calculation.

To get an exact food cost every day, you need to monitor goods leaving your inventory stocks. Closely monitoring purchases is an excellent idea but it won't provide you with the correct numerator in the formula. If you purchased a case of canned tomatoes and only used one can on the day of the purchase, your inventory of canned tomatoes would increase by 5 cans. These cans shouldn't be included in the food cost for the date of purchase.

Most operators do not monitor goods requisitioned from inventory. Many hotels do track transfers but it is very rare in restaurants. The daily transfer recap would provide you with the figure needed to do an exact daily food cost.

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