Calculating Food Cost Part 1 - Simplified

Simplified food cost calculation. Figuring out food cost doesn't have to be difficult, BUT it's a bit more than just adding up how much food you purchased.

Food Cost is actually about USAGE, not necessarily purchases. It can be calculated with the simple formula:

Food Cost = Food Usage / Food Sales

In the above formula, Food Usage equals:
Beginning Inventory
+ Purchases
- Ending Inventory
Food Usage

In the example, I simplified this to say that our purchases resulted in an ending inventory of $2,000, with the remainder completely used.

In reality it would look like this:
$0 Beginning Inventory
+ $5,000 Purchases
- $2,000 Ending Inventory
$3,000 Food Usage

Our food cost would then be 30% = $3,000 / $10,000, much more accurate than if we used the $5,000 of purchases to calculate this.