Chapter 9

Daily Food CostPrinciples of Food, Beverage, and Labour Cost Controls,

Second Canadian Edition

Learning Objectives• 9.1 Calculate food cost and food cost percent for a single day

and for all the days to date in a period.• 9.1a Calculate food cost percent for any single day and for all the

days to date in a period.• 9.2 Prepare a daily report of food sales, food cost, and food

cost percent.• 9.3 Differentiate between book inventory and actual physical

inventory and identify various causes for differences between the two.

• 9.4 Determine book inventory value.

Pri

ncip

les

of F

ood,

Bev

erag

e, a

nd

Lab

our

Cos

t Con

trol

s, S

econ

d C

anad

ian

Edi

tion

2

Introduction

• If foodservice operations were monitored from monthly cost figures alone, the length of time between monthly reports would present an obstacle.

• This delay can be very costly. To avoid the delay, better organized foodservice operations calculate food cost daily.

Pri

ncip

les

of F

ood,

Bev

erag

e, a

nd

Lab

our

Cos

t Con

trol

s, S

econ

d C

anad

ian

Edi

tion

3

Important Definitions

• Opening inventory: the dollar value of all food on hand at the beginning of the accounting period

• Purchases: the sum cost of all food purchased during the accounting period

• Total Available: the sum of the beginning inventory and purchases

• Closing Inventory: the dollar value of all food on hand at the end of the accounting period P

rinc

iple

s of

Foo

d, B

ever

age,

and

L

abou

r C

ost C

ontr

ols,

Sec

ond

Can

adia

n E

diti

on

4

Important Definitions

• Cost of food consumed: the actual dollar value of all food used, or consumed, by the operation

• Employee meal cost: a labour-related, not food-related cost. Free or reduced-cost employee meals are a benefit much in the same manner as medical insurance or paid vacation.

Pri

ncip

les

of F

ood,

Bev

erag

e, a

nd

Lab

our

Cos

t Con

trol

s, S

econ

d C

anad

ian

Edi

tion

5

Determining Daily Food Cost

• All foods are either directs or stores

• Find total directs that day, available from the

Receiving Clerk's Daily Report• Stores are charged to the food cost when issued• Determine the value of stores issued on a given day• Extends all requisitions for foods issued on that day

and total

Pri

ncip

les

of F

ood,

Bev

erag

e, a

nd

Lab

our

Cos

t Con

trol

s, S

econ

d C

anad

ian

Edi

tion

6

Determining Daily Food Cost

• Determine the value of any alcoholic beverages

transferred from the bar to the kitchen

• Determine the value for daily transfers from the

kitchen to bar, promotion, etc.

• Many establishments credit daily food cost for

the value of employees’ meals Pri

ncip

les

of F

ood,

Bev

erag

e, a

nd

Lab

our

Cos

t Con

trol

s, S

econ

d C

anad

ian

Edi

tion

7

Determining Daily Food CostThe daily cost of food can be determined in the following way:

Cost of directs (from the Receiving Clerk’s Daily Report)

+ Cost of stores issued

+ Adjustments that increase daily cost*

– Adjustments that decrease daily cost**

= Cost of food consumed

– Cost of employee meals

= Daily cost of food sold

*Include transfers from bar to kitchen; transfers from other units

**Include transfers from the kitchen to the bar food to bar (directs), gratis to bar, steward sales, promotion expense

Pri

ncip

les

of F

ood,

Bev

erag

e, a

nd

Lab

our

Cos

t Con

trol

s, S

econ

d C

anad

ian

Edi

tion

8

Food Cost Today and To Date

• The daily food cost percent for any one day may

not be a very accurate:

• Directs may be purchased every other day

• this will make daily food cost artificially higher on

the days when directs are received

• To help overcome the problem most operations

calculate food cost percent to date.

Pri

ncip

les

of F

ood,

Bev

erag

e, a

nd

Lab

our

Cos

t Con

trol

s, S

econ

d C

anad

ian

Edi

tion

9

Food Cost Today and To Date

• Food cost percent to date is defined as the

cumulative food cost percent for a period.

• It takes into account all food costs and all food

sales for all days so far in the period.

• To determine food cost percent to date:

• divide cost to date by sales to date

Pri

ncip

les

of F

ood,

Bev

erag

e, a

nd

Lab

our

Cos

t Con

trol

s, S

econ

d C

anad

ian

Edi

tion

10

Simple Daily Cumulative Cost ReportAdjustment

sTotal Cost Total Sales Food Cost

%

Date Directs StoresAdded to Cost

Subtract from Cost Today To Date Today To Date Today To Date

1-Feb $254.20

$ 977.30 $ 57.20 $255.30 $1,033.40 $1,033.40 $2,778.00 $ 2,778.00 37.199% 37.199%

2-Feb $326.70

$ 944.10 $ 86.20 $253.40 $1,103.60 $2,137.00 $2,919.20 $ 5,697.20 37.805% 37.510%

3-Feb $262.50

$1,040.40 $ 88.60 $177.80 $1,213.70 $3,350.70 $3,056.95 $ 8,754.15 39.703% 38.276%

4-Feb $256.35

$ 965.30 $ 120.00 $220.00 $1,121.65 $4,472.35 $3,094.20 $11,848.35 36.250% 37.747%

5-Feb $218.75

$ 944.55 $ 90.00 $170.00 $1,083.30 $5,555.65 $3,427.35 $15,275.70 31.608% 36.369%

Simple Daily Cumulative Cost Report

Pri

ncip

les

of F

ood,

Bev

erag

e, a

nd

Lab

our

Cos

t Con

trol

s, S

econ

d C

anad

ian

Edi

tion

11

Daily Reports • Daily reports allow management to:

• accurately assess daily costs and sales• compare with similar periods• better assess operations and cost-control measures

• Report should show:• food cost, food sales, and food cost percent for any

one specific day and for all the days to date in the period

• compare these figures to those for a similar period Pri

ncip

les

of F

ood,

Bev

erag

e, a

nd

Lab

our

Cos

t Con

trol

s, S

econ

d C

anad

ian

Edi

tion

12

Book vs. Actual Inventory

• Determine what the value of the closing inventory should be, based on records indicating purchases and issues

• Compare it with the actual inventory value

• Maintain daily food cost figures to establish the value of the book inventory

Pri

ncip

les

of F

ood,

Bev

erag

e, a

nd

Lab

our

Cos

t Con

trol

s, S

econ

d C

anad

ian

Edi

tion

13

Book vs. Actual InventoryBook inventory value is determined as follows:

Opening inventory (closing inventory for the preceding month)

+ Purchases (total stores purchases for the period, on receiving reports)

= Total available (total value of stores available for use during the period)

– Issues (total stores issues for the period, as listed on requisitions)

= Closing book value of the stores inventory

Pri

ncip

les

of F

ood,

Bev

erag

e, a

nd

Lab

our

Cos

t Con

trol

s, S

econ

d C

anad

ian

Edi

tion

14

Book Inventory vs. Physical Inventory

• The value should be identical to the value at the end of the month.

• Acceptable reasons are:• an occasional human error in costing out requisitions• use of the most recent purchase price rather than actual

purchase price in valuing the physical inventory• mismarking of actual purchase prices when that method is

used

• Reasons that are never acceptable include:• issuing stores without requisitions• food spoilage that must be discarded• theft of food.

Pri

ncip

les

of F

ood,

Bev

erag

e, a

nd

Lab

our

Cos

t Con

trol

s, S

econ

d C

anad

ian

Edi

tion

15

Key Terms• Book inventory, p. 252• Daily cost of food, p. 244• Food cost percent to date, p. 245

Pri

ncip

les

of F

ood,

Bev

erag

e, a

nd

Lab

our

Cos

t Con

trol

s, S

econ

d C

anad

ian

Edi

tion

16

Chapter Web Links• Silverware POS: www.silverwarepos.com

• Compeat: www.compeat.com

Pri

ncip

les

of F

ood,

Bev

erag

e, a

nd

Lab

our

Cos

t Con

trol

s, S

econ

d C

anad

ian

Edi

tion

17

Copyright © 2014 John Wiley & Sons Canada, Ltd. All rights reserved. Reproduction or translation of this work beyond that permitted by Access Copyright (The Canadian Copyright Licensing Agency) is unlawful. Requests for further information should be addressed to the Permissions Department, John Wiley & Sons Canada, Ltd. The purchaser may make back-up copies for his or her own use only and not for distribution or resale. The author and the publisher assume no responsibility for errors, omissions, or damages caused by the use of these programs or from the use of the information contained herein.

Copyright

Pri

ncip

les

of F

ood,

Bev

erag

e, a

nd

Lab

our

Cos

t Con

trol

s, S

econ

d C

anad

ian

Edi

tion

18