Food Costing Help

Discussion in 'Professional Chefs' started by plwchef, May 16, 2013.

  1. plwchef

    plwchef

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    Chefs:

    I am hoping someone can help me here. Right now I am a chef of a production kitchen that produces food for multiple restaurant locations. My kitchen is not suppose to make a profit but to only to break even. I am budgeted for a 35% food cost and the restaurants are budgeted for a 28% food cost. 

    So my question is I want to come up with a formula that includes my cost of ingredients plus enough to cover my food cost to find a transfer price that I would charge the restaurants. Then I would like to help the restaurants make sure they are selling the product for the proper price to cover their food cost. 

    What I have so far is this:

    Cost of food x 35% + (cost of packing materials/ # of pieces)=adjusted transfer price

    then I have:

    (Adjusted transfer price x # of pieces per menu unit) + condiments cost= adjusted price x 28%= minimum selling price

    For some reason this just does not look right to me. Am I over thinking it? 
     
  2. petemccracken

    petemccracken

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    FC = Food Cost ($) per portion

    FC%=target food cost percentage

    PC = Packaging Cost per portion

    TP = Transfer Price per portion (needs to cover FC plus labor plus overhead)

    CC = Condiment Cost per portion (includes all additional food and supplies needed by restaurant)

    RFC% = Restaurant target food cost percentage

    MP = Minimum restaurant menu price

    Using FC% calculations (not recommended, this approach ignores labor and overhead costs)

    TP = FC/FC% + PC

    MP = (TP + CC)/RFC%

    IMHO, this process is backwards and may lead to not so profitable or even breakeven results. Food cost percentages are a management tool to analyze actual results, not a tool to predict prices.

    Food production is made up of three cost categories:
    • Food Costs (the ingredients) (FC)
    • Labor Costs (all labor of producing food) (LC)
    • Overhead (fixed (monthly and annual) and variable (utilities, non food supplies, other expenses that vary with production) (OH)
    Of the three, only FC varies with the total production, labor costs fluctuate in stair steps and Overhead is there whether there is any production or not and varies slightly with production.

    Using actual cost calculations (recommended, this approach includes labor and overhead costs)

    FC = Food Cost ($) per portion

    LC = Labor Cost ($) per portion

    OH = Overhead Costs ($) per portion

    FC%=target food cost percentage

    PC = Packaging Cost per portion

    TP = Transfer Price per portion (needs to cover FC plus labor plus overhead)

    CC = Condiment Cost per portion (includes all additional food and supplies needed by restaurant)

    RFC = Restaurant Food Cost

    RFC% = Restaurant target food cost percentage

    RLC = Restaurant labor costs ($) per portion

    ROH = Restaurant overhead costs ($) per portion

    MP = Minimum restaurant menu price

    TP = FC+LC+OH

    FC% = (FC/TP)x100 = (FC/(FC+LC+OH))x100 (a RESULT, not a predictor)

    MP = RFC+RLC+ROH

    RFC% = (RFC/(RFC+RLC+ROH))x100 (a result, not a predictor)
     
  3. david swartz jr

    david swartz jr

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    If you know your customer's COGS target and your own COGS target, an easy way to get a handle on things would be to pretend you're an end customer paying $10 for an item. 

    Simple formula of (Cost / Price = COGS) means that the restaurant wants to buy that item at $2.80 (Cost/$10=.28 ... Cost=$10 x .28... = $2.8) to maintain their 28% COGS.

    That means your situation is a price of $2.80, so if your COGS is 35% then (Cost/$2.80=.35) your cost needs to be 98 cents. 

    Is your kitchen making Iced Tea, french fries or bottled water?